Fitbit banking on new watch
By Catherine Ho
Two years ago, Fitbit was flying high, hitting its peak stock price and reporting record revenue as the indisputable market leader in wearable fitness devices.
Since then, the San Francisco company has struggled to maintain its dominance and carve out new areas of growth, as competitors such as Apple, Garmin and Chinese mobile phone maker Xiaomi gained traction with consumers hungry for fitness wearables and smartwatches.
“The market was really starting to take off, there were only a handful of vendors, and none flexed their muscle as hard as Fitbit did at the time,” said Ramon Llamas, an analyst who tracks wearables for the research firm International Data Corp. “The market has moved on.”
Fitbit’s release Sunday of its first smartwatch, Ionic, comes amid mounting pressure on the company to develop new products. But the Ionic will run squarely into the market leader — the Apple Watch, a new version of which went on sale last month.
“I don’t think we’ve been behind,” Lindsay Cook, Fitbit’s vice president of product marketing, said about the company’s foray into smart-
watches. “We feel we’re in a great position offering this product to the market. We know consumers are interested in more full-feature devices.”
Fitbit has invested tens of millions of dollars as it has developed the Ionic watch, acquiring three companies over the past 18 months — Coin, Pebble and Vector Watch — and incorporating components from each into the new device. The $300 smartwatch will have mobile payment processing, GPS tracking, the ability to store and play music, and a heart rate monitor. It will not have a cellular connection, unlike one version of the new Apple Watch. The other significant difference between the Ionic and the new Apple Watch — which starts at $399 with cellular, $329 without — is that the former has longer battery life and is compatible with Android and Windows.
Ionic will support third-party apps, and developers can submit apps for review before the end of the year.
Analysts say the success of Ionic is critical to Fitbit’s future, as global demand for the breadand-butter fitness trackers that Fitbit is best known for continues to decline. Consumers are increasingly demanding watches that not only track their fitness goals, but can also deliver email, stream music and perform other functions more similar to that of a smartphone.
“If you think about the category they’re in today, it’s a shrinking category — the basic activity tracker market,” said Charlie Anderson, an analyst at Dougherty & Co. “The smartwatch market, on the other hand, is growing. So it’s very important in the sense that if they have any hope to grow in the future, they need to be successful at smartwatches.”
Fitbit’s market share in the worldwide wearables market fell to 13 percent at the end of the second quarter from 24 percent a year earlier, according to IDC data. Global Fitbit shipments dropped 40 percent, from 5.7 million to 3.4 million, during the same period.
Fitbit, however, still has a strong position. It shipped 3.4 million devices during the second quarter of 2017 — roughly the same number as Xiaomi and slightly below Apple’s 3.5 million. The three companies have virtually the same market share, around 13 percent each.
Fitbit, which went public in 2015, declined to disclose sales projections for the Ionic.
“It’s not a bet-the-farm kind of thing, but it’s a significant turning point for the company,” Llamas said. “This is not going to be the end-all of Fitbit’s smartwatch aspirations. It’s a starting point, not an end point.”
The company is also set to release new Bluetooth-enabled, sweatproof headphones, called the Fitbit Flyer, on Sunday.
Analysts said wearables manufacturers including Fitbit are working toward getting insurance reimbursement for their devices. The Food and Drug Administration’s recent selection of Fitbit for a pilot program — which is meant to expedite regulatory approval for digital health applications on mobile devices — could bode well for Fitbit, which is examining whether the hearttracking algorithm in its watches can detect atrial fibrillation. Eight other tech companies, including Apple, Samsung and Verily Life Sciences of South San Francisco, were also selected for the program.
Catherine Ho is a San Francisco Chronicle staff writer. Email: cho@ sfchronicle.com Twitter: @Cat_Ho