The smartwatch market is mature and consolidated. Smartwatch prices range from less than $10 for undifferentiated products to more than $1,000 for luxury brands. The innovations in this segment will incorporate the transition from wellness to health using digital tools and enabled by emerging biosensor technologies. For smartwatch manufacturers and software platform providers, these innovations offer lucrative opportunities to collect consumer data and support other business revenue models – though data privacy treatment will be an increasing differentiator.
While there will still be regional options like the Huawei smartwatch and the Mi Watch by Xiaomi and specialty products like athletics-focused Whoop, the smartwatch market growth will largely be shared by established giants Apple, Google, Samsung, and Amazon. However, Facebook has recently declared its intention to enter the wearables market – this insight provides an update on the recent strategic moves by these established leaders and considers whether the social media platform will reach its wearables goal.
Apple launched its wearable product line in 2015 on the existing market of nascent but stable activity trackers. To date, the company has sold more than 100 million Apple Watch units and expanded functionality with additional activity modes, sleep tracking, ECG, heart rate variability, and other features that feed the data into a broader Apple Health app, which aggregates data including external apps and digital health records. Apple consistently iterates the design of the Watch series to improve display quality and power performance and add new sensors and tracking functions – while emphasizing privacy protection as a key value. Apple also invests in long-term R&D to commercialize sensing modalities appropriate for noninvasive and unsupervised consumer market applications with significantly greater healthcare impacts, such as glucose monitoring (relying on a silicon photonics approach). While the Apple Watch is an insightful and popular wearable, users must rely on an iPhone to take advantage of the full spectrum of the watch's functionalities even if the watch operates via LTE connectivity as well.
Google's initial involvement in the wearable market occurred with Wear OS. Similar to the Android operating system enabling Google's services on third-party mobile devices, Wear OS focuses on serving as a software platform for smartwatches and aims to enable a developer ecosystem to create smartwatch apps compatible across a range of hardware vendors. Google's internal hardware design was less successful, so the company acquired Fitbit to leverage its hardware IP and manufacturing supply chain. Fitbit smartwatches are being used by more than 30 million users, and while the tracking performance is highly competitive, it is the merger with the Google software platform that will enable building a comprehensive health data platform for Android-based users. It is noteworthy that the acquisition is the second consolidation round, as Fitbit acquired another pioneering wearable developer, Pebble, in 2016.
Samsung is the third-largest smartwatch manufacturer, with around 10 million units sold in 2020. The company designs consumer electronics as part of a suite of connected devices: Its Galaxy smartwatches are natively integrated with a line of Galaxy smartphones and feed the data to the Samsung Health Monitor app to aggregate personal health and behavioral data. The company pioneered consumer wearable-enabled blood pressure monitoring authorized in South Korea. While this feature could help push the company ahead of competitors, the requirement to calibrate the measurements against an approved incumbent cuff-based blood pressure monitor and likely high variability impede approvals internationally and limit adoption. Samsung recently announced the transition from the proprietary smartwatch operating system Tizen to Google Wear OS, which should improve Galaxy smartwatch performance and battery life and unify app development for smartwatches integrated with Android-based smartphones.
Amazon extended its portfolio of consumer devices with an activity tracker, Halo. Its health and wellness band lacks a display or other data feedback, perhaps logically, given that company doesn't have a branded smartphone to leverage the full potential of connected consumer devices. However, Amazon incorporated two highly lucrative, though risky from a data privacy perspective, features: Body and Tone. The former can infer a 3D body shape from 2D self-image reflections the user occasionally takes against a mirror – ostensibly for health and wellness now, but the reconstruction of consumers' body shape is a highly sought-after tool for virtual-try-on experiences, which would give it an edge in apparel e-commerce. The second, Tone, uses a built-in microphone to capture speech sentiment and provide insight on social and communication habits. Extending user tracking to such individual characteristics and dynamics can lead to much more granular and personalized consumer engagement. Unlike other leaders in smart wearables, whose products serve as a valuable tracking extension of smartphones, Amazon pursues a membership model.
As for Facebook, recent publications mentioned its plans to release a smartwatch product that should serve as an entryway to the consumer electronics segment for the social media platform – and, along with the Oculus VR headset, be a predecessor of AR glasses. The strategic reasoning is sound, but Facebook is likely to fail.
Currently, Facebook users connect primarily via mobile devices that are partly controlled by Apple and Google (iOS or Android) app stores and data sharing policies. It sees its future as depending on building consumer AR gear and breaking free from Apple and Google platform dependence. Thus, the anticipated Facebook smartwatch will have LTE connectivity, health and wellness tracking features, and camera(s) to function as a miniaturized smartphone and is tasked with bringing about the transition toward independent user access. However, the tiny display won't substitute for the smartphone experience people are accustomed to, and will still be used, regardless of the maker's wishes, in combination with incumbent iOS or Android under a single network provider. Unless Facebook acquires or launches its own mobile phone and convinces its user base to switch providers, the oversight by the two rivals will persist and intensify. Furthermore, data privacy concerns will be a large barrier, with consumers having less-than-favorable views of the company on this count; entrusting it with more personal and health-related information may be too much to ask of Facebook's users.
What strategy should Facebook – or other players hoping to enter wearable electronics – pursue? The smartwatch is too weak a lever to pry incumbent mobile device leaders' grips off their established platforms for now. However, offering unique functionality, like Amazon has with Body, that offers benefits in the company's existing ecosystem has a chance of gaining Facebook a foothold that could offer an advantage as more sophisticated devices like consumer AR glasses begin to emerge. With health and wellness remaining a key use case, look to emerging sensor functionalities as a way to offer a differentiated experience.