How Healthy Is Fitbit's Future?

SMITH BRAIN TRUST -- Fitbit is riding high: When the wearable fitness device company went public last week, its stock closed the day 48 percent over its IPO price, which puts the company's value at $4.1 billion. But critics see some vulnerabilities. Asian competitors like Xiaomi are selling cheaper bands, and the specter of the Apple Watch looms. Some analysts suspect the features of a Fitbit will soon be subsumed by the Apple Watch or its Android rivals, much as smartphones absorbed standalone MP3 players.

Smith alumna Elana Fine, managing director of the school's Dingman Center for Entrepreneurship, thinks analysts have been too quick to impose the winner-take-all model that exists in a few business niches, notably social media, onto other markets. "I think there is a lot of room for growth for Fitbit, given that the wearables market is still so new and they are a current market leader," she says. (Last year, Fitbit had 68 percent of the fitness-tracker market in the U.S.) Fitbit has shown it serves the needs of many people at a price point well below that of the Apple Watch, making it a viable competitor. 

But several strategic questions confront the company, she says. First, does it want to frame itself as a health company, in which it will have to improve the precision of the information it provides as well as show measurable improvements in customers' lives, or does it want to become more of a fashion brand? The identities aren't mutually exclusive, but the statement a Fitbit projects — "I'm taking charge of my health" — may be the company's greatest marketing strength, and that's more about identity than data.

Another question Fitbit must answer, says Fine: "Are they a customer-acquisition company — do they have to find 100 million new customers — or are they a loyalty company, selling to the same people frequently?" It's unclear if rapidly improving technology will inspire frequent updates (see: smartphones), or if people are content to buy one and hang on to it (see: ordinary sports watches).

Fitbit might also find room to grow in the business-to-business market; companies already distribute the bands as part of wellness programs. But, overall, she'd like entrepreneurs to resist the idea that consumer markets can't support numerous players, even if one player is an Apple-style behemoth. "That attitude keeps people with good ideas on the sidelines," Fine says. With the $732 billion it just raised, Fitbit has a nice cushion as it figures out the future.

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