On November 1st, Google (GOOGL) announced it would acquire smart wearables company Fitbit (FIT) for $2.1 billion. This price represents a considerable discount from the $10 billion market cap that FIT was trading at following its IPO in mid-2015. This stock has done nothing but break down since, as consumer demand for the product faded. Below you can see how FIT has traded since it went public 4 years ago.
Fitbit watches were all the hype in wearable technology before the Apple (AAPL) Watch release in 2015, which seemed to shift consumer focus. The Apple Watch was a device that seamlessly integrated with the US’s favorite smartphone (the iPhone) and has been taking a substantial amount of market share from Fitbit.
So the question remains, why would Google acquire a firm with a dying product? Some think this is a play for Google to gain more consumer data on anyone wearing one of these devices. This idea has caused quite a few people to set down their Fitbit watches for the last time.
This is following Google’s promise to customers that they would never sell anyone’s personal or health information.
At the end of the day, Google is a data business and is likely purchasing Fitbit to collect data from users. Whether this is good or bad for consumers remains to be seen.
I personally think that this is going to make Fitbit products cheaper and more functional. Their use of my data will likely improve functionality.
Google and The Internet of Things (IoT)
Google has been building out its IoT capabilities with its Google IoT platform, which “provides a complete solution for collecting, processing, analyzing, and visualizing IoT data in real time to support improved operational efficiency,” according to the company’s site.
Alphabet also provides developers with an easy to use platform called Android Things (formerly known as Brillo), which offers innovators with “a turnkey solution for building devices.”
Google has now been purchasing IoT device companies like Nest and Fitbit to entrench itself into the space. IoT has an enormous amount of potential future profitability with its integrative capabilities being pushed even further with the rollout of 5G, which is unraveling over the next few years.
Companies like Google, Facebook (FB), and Amazon (AMZN) are under the regulatory microscope as they all dominate the space they operate in, with no close competitors. Regulatory bodies have been investigating these large tech conglomerates for years, searching for some ill practice they can use to break these giants up.
The more these companies acquirer and the larger they get, the more regulatory bodies will focus on them. Google has been slammed with a combined $9.5 billion in fines from the EU since 2017 for antitrust violations, with most of these having to do with anti-competitive behavior.
US regulators have been much more lenient on their Silicon Valley stars, as these firms have been driving innovation and propelling the US economy. This is all about to change as US regulators begin to redefine the antitrust laws.
Who will prosper from these regulatory changes? Will the new laws inhibit only the big players’ ability to control more of the market, or will it also impede new entrances from being competitive in the tech space. There is a balance that these regulators must reach.
Fitbit is just one more small piece in the giant Google puzzle that may be getting too large. Google is well-positioned to take on 5G’s next wave of IoT tech, but will regulatory efforts inhibit its potential returns?
Keep an eye out for any regulation news regarding these tech companies, as this may have a material effect on your holdings.
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