Smart watch market collapses in on itself

11 December 2016 by Steve Blum
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Once upon a time, $700 million ago…

Full featured smart watches are heading for the dustbin of fads. Pebble, the early darling of the market, is being bought by FitBit, another player that was fast out of the gate, but stumbled down the stretch. The purchase price is the first clue that something is drastically wrong with the segment. FitBit is picking up Pebble for $40 million, which, as a story in ReThink IoT explains, is a just shoot me price tag…

For Fitbit, snapping up Pebble removes a real competitor in its segments, but for Pebble, it will rue the day that the company apparently turned down a $740m takeover bid from Citizen – the Japanese watchmaker.

With the buy, Fitbit gains access to a team that designed the Kickstarter success, which saw Pebble raise around $30m from backers looking to snap up one of its designs. Pebble has turned its attention to activity tracking in recent quarters, expanding on its initial focus on notifications, although it appears that its heart-rate monitoring is not as accurate as it should be.

According to IDC figures quoted in the ReThink article, FitBit is doing okay, shipping 5.4 million gizmos in the third quarter of this year, blowing Apple out of the water – Apple Watch shipments crashed to 1.1 million units, about 5% of the market, in the third quarter, a huge year-on-year decline from 3.9 million and an 18% market share.

The current generation of smart watches and operating systems have overcome many of the early problems with battery life and limited functionality. The real problem is the lack of killer apps. Vertical apps like activity trackers and heart rate monitors fit really well into cheaper, one trick pony devices, as FitBit’s increasing sales figures show. And the all-in-one crown still belongs to smart phones. The gap between the two categories is closing, and in the process squeezing out smart watches.