This series explores the variety of ways established companies and incumbents adapt digital business models for devices and hardware.
“The wearables market is not the real prize,” says a team of economists (Bourreau et all 2020) in a position paper directed at The European Union in their evaluation of the Google acquisition of Fitbit. The big news this morning comes from the House Subcommittee report on the monopolistic overreach of tech giants. But monopolies are still defined by markets and pricing and power, and prices are no longer just about cash transactions.
The wearables market never seemed to be the big prize even for wearables startups. The socks in my drawer concur. This is where my dead wearables live, most of which I received as free swag at tech events. The Fitbit version 1, The Misfit version 1, and the Jawbone, one of the first unicorn-to-bankruptcy companies of this era, then multiple versions thereafter. My own mini Museum of Jurassic Technology.
Those early versions didn’t do much. They counted steps, laps, and distances. After I tracked my daily moves around my walk to work I saw that I got my steps without trying. NYC FTW. I had my epiphany, but no more insights or benefits seemed forthcoming, so I let the batteries run out and tucked the little objects away. I keep them to remind me of how innocuous and inconsequential technology can seem when it first appears on the scene.
Now Fitbit, the Apple Watch, the Ōura ring, and others combine hardware, data, and software apps promise to improve my running performance, track signs of arrhythmia, and coach me how to sleep. The wearables of today are completely different. The value is in continuous use and not in the object itself.
The wearables of today promise to collect valuable data about me so that I can get valuable information from their screen, ambient, and haptic interfaces. The wearable is a data talisman: a digital object that becomes sacred in a globally connected society, serving as an emblem for how we orient and organize our interactions with each other through the giving and receiving of data.
They will likely know things about me that my close family does not know. They may learn things about me that I do not know, do not want to know, nor do I want you to know. The give/get value exchange may not be worth it, meanwhile, the risk of data exposure is now higher.
A tech optimist would tell me the risk is worth it. The value is in the flow of information and knowledge, not just between me and the company that makes the wearable, but between me and the population of people that give their data; the healthcare companies that access this data to understand us in our natural habitats; the digital innovators who create apps; and other services that help us prevent and manage chronic disease. We will all get better and we get to be better people with behavioral nudges at the personal level and better policy and systems at the population level.
The prize for the company creating these wearable talismans is in the population of people using the things, exchanging their data for a service, and that data connecting to all of the other potentially useful data controlled by the company. It’s not the wearables market that is the prize, it is the total addressable market for all of healthcare, therapeutics, clinical trials, and insurance.
Wearables = < .1% of US GDP
Healthcare = ~17+% of US GDP
The prize of wearables is the future option value on the market(s) the wearables can unlock when combined with existing or future data sets, algorithms, and technologies.
The price of the object is no longer the marker of value. The price + data received and value from insights delivered is the new calculus for these data talismans. As the end customer one has to factor in the contribution of all the active data (meals eaten, headaches suffered) with passive data (steps counted, hours of sleep) and the risk of particularly sensitive information that might be revealed or used to nudge us towards Amazon’s will (hormonal status, anxiety levels).
Take Amazon’s new Halo wearable which starts to play with the pricing model in new ways.
Amazon Halo will Tell You “Maybe You Thought You Sounded Affectionate, but Instead, You Sounded Bored” According to the Promo Video
Services are wrapped into a perpetual recurring revenue model or a wearable watch-like device: the $64.99 early bird price includes “body composition, tone of voice analysis, sleep & activity tracking, and more — free for 6 months. Auto-renews at $3.99/month + tax.” That means the value of the thing, the wearable, is shifting over time to the value of the insights you receive, and that Amazon expects that you will just see this as part of your recurring revenue relationship with the borg.
For the ongoing recurring revenue option, I get to submit myself to experiments. “Labs – Science-backed experiments and challenges from experts like the Lifesum, SWEAT, and Headspace.” I get to learn how people perceive me. “Tone – Analyze qualities of your voice like energy and positivity to help strengthen communication.” Sort of like having a French existential detective on my wrist, trailing me, taking notes, telling me how I could be more likable, more positive, maybe even more lovable!
This may be what the economists, Bourreau et al, from Europe, Australia, and the UK are warning about in their position paper about the real size and prize of the wearables market. There is future harm that will befall us if the Google acquisition of Fitbit happens without concessions. The $2.1 billion deal was announced last year, 2019, but has yet to complete. While the US Justice Department and Australia’s competition authority review the deal, the EU had launched an in-depth probe in August.
The prize is not in the wearables. Economists warn of “platform envelopment,” or extension of monopoly power, and consumer exploitation that comes from a combination of Fitbit health data with Google expansive stranglehold on all our other data. Further combined with major investments in health, insurance, and therapies through the company’s “Other Bets” Verily, Calico, Deepmind, GV, and Project Nightingale Google is already making hundreds of millions in healthcare and spending even more.
“Following the merger… it may be often the case that Google/Fitbit can better predict what diseases a consumer is likely to develop than the consumer herself.”
If this information is bartered for or baked into insurance prices, the fear is that predicted costly health conditions will result in higher prices and worse deals. We’re now back in the scope of what anti-trust and anti-competitive legislation is meant to protect: monopoly power leading to higher prices.
In the end, these types of deals are likely to get more scrutiny. Yesterday a Democratic-Led House Panel weighed in on the tech giants in their call to break them up:
“These firms have too much power, and that power must be reined in and subject to appropriate oversight and enforcement…. Our economy and democracy are at stake.”
The Google/Fitbit deal may still go through, but future potential acquisitions are more at risk with a different administration. Additionally, antitrust regulators have no purview over what grows inside of the tech giant products like Amazon Alexa and the Halo. Healthcare is also proving a harder market to disrupt through slippery shapeshifter tech giant moves. Clinical workflows and billing cycles are protected and defended and recent shifts to suddenly adopt telehealth may further entrench the more powerful payers and providers.
But we need more options. We need more than just 4 tech giants to choose from when selecting the operating and behavior system you want to guide your health, your home, and your social interactions. We need emerging players with cohesive, transparent, and conscientious options including startups, data co-ops, distributed ledger solutions, and other new forms of commoning and caring that we cannot yet imagine.
If you’re developing a wearable or hardware device and thinking through the price and data value exchange, please connect. I’m here to help us design better business models for how we give, receive, and share our data so that we have more options for our future.