Google’s (GOOGL) deal to purchase Fitbit (FIT) isn’t sitting well with Fitbit customers. According to a November 17 CNBC report, some Fitbit customers have started replacing these fitness trackers. Their reasons for replacing their Fitbit trackers center on privacy concerns now that Fitbit would be part of the tech titan.
On November 1, Google offered assurance that it would not use Fitbit data for advertising purposes. However, some Fitbit customers aren’t convinced. Nest, the other hardware business that Google bought, is also losing some of its homebuilder customers after Google tightened its hold on the service.
Google agreed to purchase the fitness wearable manufacturer for $2.1 billion. Fitbit’s fitness trackers help people measure their steps, heartbeat, sleep length and quality, and other health-oriented metrics. However, the company also makes smartwatches, a fast-growing wearable device category.
The global fitness tracker market was worth $17.9 billion in 2016 and could grow to $62.1 billion by 2023. The global smartwatch market was worth $9.3 billion in 2017 and could reach $31.1 billion by 2025.
Google looking to Fitbit to accelerate its business diversification push
Presently, advertising comprises the vast majority of Google’s revenue. For example, advertising contributed 84% of Google parent Alphabet’s total revenue in the third quarter. Alphabet relies on its Google business for more than 99% of its revenue. As Google’s grip on the advertising market weakens, the company has sought to diversify its business outside the advertising market.
Making hardware products has turned out to be an attractive business for Google. Google makes smartphones, smart speakers, and a range of smart home devices such as programmable thermostats. So, the Fitbit acquisition should help launch Google in the lucrative fitness tracker and smart speaker markets. Subsequently, that should boost Google’s revenue diversification efforts.
Privacy groups press regulators to block Google from buying Fitbit
Customers ditching their Fitbit devices isn’t the only challenge Google faces in its bid to acquire the wearable device maker. Several privacy groups have also urged regulators to block the Google-Fitbit deal. Moreover, US and UK lawmakers have raised concerns over Google’s interest in Fitbit.
David Cicilline, who chairs the antitrust subcommittee of the House Judiciary Committee, took issue with this acquisition. He noted, “The hubris of the executive team to pursue an acquisition of this size while under federal and state antitrust investigations is astonishing.”
As we noted on November 5, the UK’s Labour Party wants the country’s antitrust regulators to review the Google-Fitbit deal thoroughly.
Although Fitbit could be a great fit for Google, it isn’t in great shape at this point. For example, the company’s sales have been sliding in recent years. In light of this, the exit of its customers over privacy concerns could further soften Fitbit’s competitiveness and its value to Google.