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Why Did Google Buy Fitbit? The Rise and Rise of Wearable Technology - YouTube
Channel: How It Happened
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As the world's fastest growing tech
innovation
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wearables are expected to be on a
billion wrists by 2022.
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Fitbit has been at the forefront of the
industry for over 10 years from what was
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originally a glorified pedometer to a
smartwatch that they claim could help
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transform people's lives.
But how did the Nintendo Wii lead to the
[19]
gamification of exercise?
Why has Fitbit's value fallen more than
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75% in the last five years? And what made
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Google part with more than two billion
dollars to acquire Fitbit?
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Here's how it happened.
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Fitbit's co-founder, James Park,
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arrived in America at the age of just
four from South Korea.
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His parents were small business owners
managing a wig shop in Cleveland, Ohio
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and as you might suspect they had very
high expectations for their son.
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Park met these expectations at
school enrolling at Harvard in 1995 to
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study computer science
He completed an internship at Morgan
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Stanley during the summer following his
junior year and using the skills he'd
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learned decided to abandon his studies
to start his own business:
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an electronic wallet that could be used
to make purchases online.
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The new business, called Epesi, from the
Swahili word for quick, hired Eric Friedman
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as its first employee and
raised several millions from venture
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capital firms during the late 90s.
Unfortunately the bursting of the
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dot-com bubble in 2001
spelt the end for Epesi. Park and Friedman
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followed this up with the launch of
their next startup
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HeyPix one of the earliest social photo
sharing apps.
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They sold the business to CNET in 2005
for several millions
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and consequently moved to San Francisco
to remain the directors of their product.
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It was in December the following year
that Park purchased the newly released
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Nintendo Wii
and felt inspired by the idea of turning
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physical activity into a game
in which users could participate and compete.
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Enter Park and Friedman's latest idea:
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Fitbit. A device that would make exercise
a fun and social activity
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encouraging its customers to take on
their friends in various
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fitness-related challenges. After pulling
on some contacts in the tech and design
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industries and with the help of
Singapore-based manufacturer,
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Racer Technology
Fitbit developed a prototype and raised
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two million dollars in a funding round
in the Autumn of 2008.
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Around that time, the first Fitbit product was unveiled
at a TechCrunch conference
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with Park and Friedman receiving 2000
pre-orders that day.
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Due to the unforeseen demand and current
limitations on the product, they soon
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realized that their release date would
not be before Christmas.
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In response, Park started writing a blog
providing honest updates on the
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manufacturing process for everyone who
had made a pre-order which proved a
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popular move.
Following the eventually successful
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release of the first Fitbit
the company continued to raise more
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money from venture capital firms.
Fitbit's revenue grew from 15 million
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dollars in 2011 to 76 million dollars in
2012.
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Wearable tech had become a fast-growing
industry with big players like
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Jawbone and Nike starting to enter the
market. By 2014,
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Fitbit had a majority market share of 67%
and in 2015 their IPO market cap reached
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10 billion dollars.
However within one year their valuation
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had been slashed to just
two billion dollars in 2016 which Park
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attributes to the launch of the Apple Watch
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and Fitbit's failure to enter into the
more lucrative smartwatch market.
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Fitbit soon reacted by launching the
higher end Versa and Ionic models,
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eventually joining the software market
too, offering a subscription service in
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2019 called Fitbit Premium which for
9.99 a month
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includes features like advanced insights
and customized programs.
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November 2019 saw Google's parent
company, Alphabet Inc declare that an
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agreement had been reached
to acquire Fitbit for $2.1 billion.
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So why did Google invest so heavily in the
world's fifth biggest wearable tech company?
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Firstly, as the only specialist fitness
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brand in the top five most popular
wearable firms,
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Google will be able to make use of
Fitbit's unparalleled commercial partnerships.
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Thanks to its health-focused outlook,
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corporate wellness programs have been
established with giants like Adobe and Domino's,
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even joining forces with sportswear firm
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Adidas to launch a special edition Ionic
smartwatch.
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Possibly even more crucially, these
partnerships extend specifically into
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the healthcare industry.
Fitbit has reached agreements with the
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likes of Vitality Health in the UK
and Blue Cross and Blue Shield in the US,
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which insures over 100 million
Americans.
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A partnership has even been formed with
the state of Georgia's Medicaid program
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offering the custom-made Fitbit Inspire
to diabetes patients.
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Fitbit's singular focus on health gives
them a unique image amongst their competitors.
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Secondly, considered the next major
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battleground in the tech sphere, it's the
data collected by Fitbit that could
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provide the blueprint for Google's
future strategy.
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Combining Fitbit's user data with
information from Google's other health
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acquisitions
like Verily and Calico could pave the
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way for the little known Google Fit to
become a much bigger
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player in the industry. Fitbit's data
could also be incorporated into Google Assistant,
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as the company seeks to become
the dominant force
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in ambient computing while also
extending the reach and engagement of
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Google's wider ecosystem.
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And finally, Google simply intends to
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make use of Fitbit's highly rated hardware
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currently on the wrists of 28 million
customers worldwide.
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Google's loyal followers have been
waiting patiently for the rumored
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release of the Pixel Watch
while ownership of the Apple and Samsung
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counterparts continues to grow.
Other Big Tech firms like Facebook and
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Amazon have struggled to integrate into
the wearables market
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with Facebook reportedly having a bid
for Fitbit turned down before Google's
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purchase was agreed.
Therefore the acquisition of Fitbit
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could provide a unique stepping stone
for Google to get ahead in the hardware stakes.
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With the wearable tech industry set to
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be worth 54 billion dollars
by 2023, Google's purchase of Fitbit
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could prove a shrewd one.
Google's CEO Sundar Pichai has tried to
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calm fears that they would misuse the
data his company inherits,
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especially while the EU still holds
reservations over the acquisition's
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potential to monopolize the industry.
Let's wait and see if Fitbit's hardware
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and Google's software can combine to
transform healthcare.
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And that's how it happened.
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