Fitbit's second act: Can the original fitness band maker stage a comeback with healthcare?

Fitbit arguably started the trend towards consumer health-tracking hardware. Now the market it created has moved on and left it behind, can Fitbit turn things around?

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Fitbit started life in 2007, with its founders touting a circuit board in a box as a way to lure investors. After selling its vision to consumers -- it managed to convince 5,000 people to pre-order the first version of its fitness tracker -- and venture capitalists, it began selling devices in 2009. By 2015, it went public with a multibillion dollar IPO, and by 2016, one in two fitness trackers sold were Fitbits.

But by 2017, sales started to fall off, as consumers shifted to fully-featured smartwatches rather than lower-tech fitness bands and its revenue and stock price began to tumble. Its sales were eventually surpassed by Apple's, which was able to sell more wearables despite devices prices that were often over $100 more than Fibit's. 

Since then, Fitbit has begun to focus heavily on healthcare as it seeks to restore its fortunes -- a move that should allow it to address a much broader market than it has historically been able to. 

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"Healthcare is a much broader category than fitness. It's more generally appealing in terms of people that are going to get onboard with it -- it's relevant to pretty much everyone, whereas programmes to get fit are something that you have to have a particular mindset to do, whereas everyone wants to get healthy," says James Moar, senior analyst at tech analyst Juniper Research. 

"From a business perspective in terms of what Fitbit can offer, they can get corporate customers involved, as well as address the other side of things to do with health insurance and reducing premiums," he adds.

Moving into healthcare is a path that Fitbit's competitors are also treading, and for the same reasons: the likes of Samsung and Apple have also retooled their smartwatches to focus as much on medicine as wellness. By moving away from purely consumer to consumer-plus-enterprise, companies are hoping to find a way of generating repeat revenue from services, rather than simply making one-off revenue from a hardware sale. 

Fitbit CEO James Park told ZDNet last year: "We're in the process of transitioning our business model from one that's purely device-centric today to one that's more of a balance between the two and much more focused on developing recurring revenue streams."

The first signs of its strategy shift came with Fitbit Wellness, a unit within the company that aimed to sell Fitbit devices and services to organisations with corporate wellness programs. Since those early efforts, the company has created Fitbit Health Solutions, a unit that works with both insurers and companies trying to nudge individuals into adopting healthier behaviours. 

It's been building out its services portfolio accordingly. In September, it debuted Fitbit Care. The platform is aimed at employers and health insurers, and is designed to help the companies' staff or customers to improve their health and prevent and manage disease. The capabilities that it acquired when it bought health-coaching company Twine became part of Fitbit Care -- companies can offer their staff coaching on losing weight or quitting smoking for example -- and the platform signed up insurer Humana as a customer. The company is looking to build one of its key strengths, its active social community, into Care with private social groups and challenges to encourage healthy behaviour in users. 

By targeting insurers and corporates with a software and services play, the company could also potentially see an uplift in sales of its devices, as employers and healthcare payers subsidise the cost of hardware for employees and customers, using Fitbits to inspire people to get more active or eat better -- potentially saving on healthcare costs for those users down the line. It's a rich area: according to analyst IDC, around 60 percent of healthcare providers currently have wearable tech plans for health and wellness that are either in pilot phase or in production. The numbers are similar for wearable devices for medical conditions.

And, despite its recent ups and downs, Fitbit still has a powerful pull among the device-using public. "Fitbit has a relentless focus on health, including chronic disease management, and fitness. It has a strong brand recognition to the point where Fitbit has become a proprietary eponym for wearable fitness trackers. It has formed partnerships with payers, providers and employers to offer its health solutions for fitness and chronic disease management," Lynne Dunbrack, research VP for health insights at IDC, told ZDNet.

There's one problem, however: having come from a background of selling low-cost, low-functionality fitness bands, Fitbit's competitors have snapped up insurers with smarter devices that may appeal more to consumers. "In terms of corporates, [Fitbit] has been doing reasonably well, but it's not the biggest, flashiest thing in the market any more. Insurers like John Hancock and Vitality are leaning more to offering Apple Watches and Garmin, and that sort of thing. Fitbit it starting to lose ground there. it's something that the company needs to focus on and up its game in order to remain competitive," Moar said.

Fitbit has made some moves to sharpen up its hardware range, launching full-on smartwatches alongside the trackers it was initially known for. In 2017, it debuted the Ionic, followed in 2018 by the Versa, and the more affordable Versa Lite followed this year. By making more feature- and sensor-packed devices, Fitbit can not only make the devices more useful to users, but also to the insurers and corporates that it hopes will eventually buy them. 

It's this shift of buyer that may end up shaping Fitbit's hardware designs in future. "It's clearly starting to use its corporate side as a growth engine going forward in several ways, which means once it has executed the full turn into providing corporate wellness programs and working with health insurers, that will start to influence the consumer side rather than the other way around," Moar said.

IDC's Dunbrack points out that Fitbit will need to rely on its corporate wellness business for a little longer, due to the time consuming FDA approvals process, which medical devices need to meet before they can be put on the market. However, Fitbit is one of nine companies signed up to the FDA's Pre-Cert for Software Pilot, which it's hoped will speed up the approval process.

"This lengthy process has been a barrier for consumer wearables companies that rely on constant innovation and new products to attract and retain customers. Anytime the underlying technology is changed, it must go through the FDA clearance/approval process. The corporate wellness program will be the mainstay of its business, while Fitbit pursues FDA clearance for the SPO2 sensors, which measure blood oxygen levels," she said.

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Looking further out, the company is looking to where it can expand its healthcare play using the device line up that it already has. For example, Park believes that its activity sensors could be used by healthcare workers to track the mental health or medication adherence in wearers. While the CEO may be optimistic on how accurately activity levels correspond to a change in a person's mental health or how often they've taken their meds, that doesn't mean there isn't a greater role for Fitbit hardware -- and services -- to play in helping people stay on track with their health. 

Ultimately, the Fitbit could be more than just a way of keeping on track of exercise, sleep, or weight, and instead could be "a mass screening tool–a check engine light for the body, a background scanner", Park told Fast Company. It's a strategy that could not only improve its standing with insurers, but also give it in an 'in' to the medical community. With millions of users already owning one of Fitbit's bands or watches, the medical profession could potentially tap into a data stream running 24 hours a day. And for consumers, many of whom stop using their Fitbits after a few months, it would be an incentive to make themselves acquainted with their devices again.

Accordingly, Fitbit is working on making it easier to submit data from users' devices to their medical records. Last April, it announced a partnership with Google, which would allow users to share their data with their doctor through Google's Cloud Healthcare API.

Data is one of Fitbit's continuing strengths, and one that could serve it well when it comes to healthcare. By using Google's cloud (the company shifted to Mountain View's infrastructure as part of the April deal), Fitbit has added computing power to analyse its data pool, potentially helping to shape our understanding of population health in aggregate -- something that could appeal to both insurers and medical companies. (Hundreds of clinical trials have already used data from Fitbits, thanks to its Fitabase API, which allows researchers to interrogate its data.)

Fitbit's health reimagining appears to be bearing some fruit. Fitbit has said it expects the Health Solutions unit to deliver $100m in revenue in 2019. It's still a small slice of Fibit's financials -- by comparison, the company's full year revenue for 2018 was $1.5bn. When it comes to healthcare, there's no question that the company has chosen the right industry and is making some of the right decisions to better position itself to appeal to those it needs to appeal to. However, it's up against some stiff competition, with more medical-grade sensors, broader ecosystems, and more links into electronic patient records. Fitbit's fight back has just begun.