Google will pay $2.1bn to acquire Fitbit, the second largest company in the wearables market, inserting itself into a world increasingly dominated by Apple – and continuing the mass consolidation of consumer technology by the Big Three corporations; Amazon being the third party.
Offering $7.35 a share, Google was prepared to pay a 70 percent premium to take control of the company, although the overall valuation is not even twice Fitbit’s annual revenue, serving to illustrate the company’s recent struggles.
It is Google’s fifth largest acquisition, more than it paid for YouTube or Waze back in the day, and illustrates two things: first, that Google is increasingly focused on hardware following its Nest and Motorola acquisitions; and second, that wherever Apple or Amazon go, Google follows.
For years, Apple has been investing heavily in the wearables market with its Apple Watch. Despite an initial jump with its first-generation Watch, the shortcomings of the device meant that Fitbit continued to control a quarter of the market. That changed in 2017 when Chinese competitors and the third version of the Apple Watch entered the market.
This year, Apple has continued to refine its Watch and the fifth version is showing signs of reaching a broader market. At the same time, despite almost single-handedly creating the smart-watch market, Fitbit has declined thanks to slow and lackluster hardware updates and buggy software updates.
Google’s efforts to repeat its approach to the mobile phone market with WearOS took a hit last year when Huawei ditched it in favor of its own home-grown operating system. Google clearly decided it needed to control some hardware in the market and so guarantee a foothold - and a $2bn acquisition of Fitbit was the answer.
And what about the data?
The biggest concern about the acquisition, given Google’s business model, is what the web giant will now do with the vast amounts of personal data it will now acquire.
The biz addressed this point directly in its acquisition announcement. “To get this right, privacy and security are paramount,” its senior VP of devices and services Rick Osterloh said in a blog post: “When you use our products, you’re trusting Google with your information. We understand this is a big responsibility and we work hard to protect your information, put you in control and give you transparency about your data.
“Similar to our other products, with wearables, we will be transparent about the data we collect and why. We will never sell personal information to anyone. Fitbit health and wellness data will not be used for Google ads. And we will give Fitbit users the choice to review, move, or delete their data.”
This is familiar language and will not alleviate concerns about the use of personal data. While Google will not sell databases of identifiable data, it will gather and analyze it and aim to monetize it as far as possible.
Fitbit users can expect the information from their smart-watches, including location, activity, heart rate, as well as any additional information on things like nutrition, weight, and so on that they input in order to receive recommendations, to be connected to other personal data that Google may hold on them.
That can encompasses everything from your emails (Gmail) to your search results (Google), web activity (Chrome), home activity (Nest) to your location and frequently used apps (Android phones). All that data will then be packaged in 100 different ways and sold to advertisers looking to target specific individuals.
Google’s frequent promises to give users control of their data has also consistently fallen short, with the company misleading consumers in order to retain access to valuable data. For example, if you go into Google setting and turn off an option called “location history” it doesn’t actual turn off the gathering of location data. To do that, you have to go to the "Web and App Activity" setting and "pause" all activity there, even though that setting makes no mention of location data.
Nothing means what you think it does
In addition, even if you hit “pause” on the gathering of your location data, the setting still doesn’t apply to Google’s Maps and Search apps which will continue to track you even when you specifically choose to halt such monitoring. Just this week, the Australian Competition and Consumer Commission sued Google over this approach saying it had broken consumer laws by misleading Android users about how their location data was collected and used.
In the US, where the laws are weaker and consumer protection regulator, the FTC, takes a far more lenient approach to large corporations, consumers should assume that regardless of what Google says in a blog post, a big incentive for its acquisition of Fitbit is to receive huge amounts of additional personal data to feed into its systems.
Google also has a spotty record on acquisitions. Perhaps the clearest parallel to the Fitbit purchase is the company’s $3.2bn acquisition of Nest. Like Fitbit, Nest was the leading company and brand in its market - smart home technology.
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Over time, Google has slowly subsumed Nest into its systems with largely negative results: there are been growing hardware and software problems as Google attempts to move Nest’s platform into its Google Assistant platform. Google was forced to briefly back down in its effort to force all Nest customers to migrate to a Google account, requiring them to create a Gmail account at the same time, but it has made it plain that it is only a temporary hold.
Fitibit is a little different in that respect in that its customers have been complaining for years about declining quality of its products and software so Google’s inevitable migration to its system will probably result in a better user experience over time.
Looking at the bigger picture, however, the acquisition of Fitbit will only add to arguments by governments and regulators that the Big Three - Google, Apple and Amazon - have too much power and are reducing competition across a whole range of markets.
In the UK, the Labour Party has already written to the competition regulator arguing that the acquisition should be halted until a larger inquiry into Google’s anti-competitive practices is completed.
“I have long been concerned about the data monopolies that dominate our tech market, including Google,” said shadow digital secretary Tom Watson in a statement.
“These companies hold and gather an unprecedented amount of data on users which is then monetised through micro-targeting and advertising to amass huge profits and power. Meanwhile, the digital giants themselves remain unaccountable, unregulated, and see themselves as above the law.” ®