[Hidden Business Story] Korean-American Harvard Dropout Founded Wearable Device Company Fitbit
Leading Market and Listed on Nasdaq in 8 Years... Fell to 4th Place in 2015 After Xiaomi's Rise
IT Giants Facebook and Google Competed to Acquire Fitbit... Ultimately Became Part of Google
Fitbit's smart band products.
[Asia Economy Reporter Shinwon Yoon] In November last year, Alphabet, Google's parent company, acquired the wearable device company 'Fitbit.' After a fierce competition with Facebook in the $4 to $5 range, Alphabet ultimately offered $7.35 per share, totaling $2.1 billion (approximately 2.45 trillion KRW), securing Fitbit for Google. Why did these two companies, known as the 'Big 4' in the information technology (IT) industry, engage in such intense competition over Fitbit?
Fitbit was founded in 2007 by James Park, a Korean-American who dropped out of Harvard University's computer science program, and Eric Friedman, after seeing the growth potential of wearable devices. The company produces devices that collect and provide health-related data such as users' step counts, heart rates, calorie consumption, exercise amounts, and sleep patterns. Over 100 million units have been sold worldwide, with more than 28 million active users.
Fitbit Opens the 'Wearable Market'
James founded Fitbit because of Nintendo's game console 'Wii.' Having worked at a software company and even running one himself, James decided to develop an innovative device like the Wii while playing console games. However, James was unfamiliar with hardware, and at that time, the pedometer caught his attention. Inspired by the pedometer, the two founders made wooden cases at a hardware store and attached the circuit boards they developed to create a fitness wearable device.
The first Fitbit prototype was unveiled at 'TechCrunch 50' in 2008. Considering that Apple had just introduced the iPhone and was pioneering the smartphone market at the time, it was an innovative item. Fitbit immediately attracted market attention upon its release, with pre-orders reaching 2,000 units.
The business entered a successful trajectory, achieving $76 million (approximately 8.86 billion KRW) in sales five years after its founding in 2012, and growing about tenfold to $745 million (approximately 868.5 billion KRW) in 2014. The following year, Fitbit became the first wearable device company to be listed on NASDAQ. James, who had faced bankruptcy seven times to create Fitbit, transformed into a young billionaire at age 38 with assets worth $660 million (approximately 769.5 billion KRW).
Xiaomi Mi Band 1S
Wearable Pioneer 'Fitbit' Overtaken by Xiaomi
Fitbit led the global wearable market?until China's Xiaomi launched the 'Mi Band.' According to global market research firm IDC, Fitbit's wearable market share was 37.9% in 2014, but from the third quarter of 2015, Xiaomi surpassed it. Subsequently, Apple and Huawei took the second and third places, and by the third quarter of last year, Fitbit's market share had fallen to the 8% range. Although shipments increased due to overall growth in the wearable market, Fitbit's market share declined.
Fitbit's problem was losing both the price and product quality battles. Fitbit's cheapest product was priced in the $100 range, while Xiaomi's Mi Band was priced around $15, giving Xiaomi a price advantage. Moreover, Apple built a smartwatch ecosystem through iPhone users. Although Fitbit could be used in conjunction with Apple's iOS operating system and Android-based smartphones, it did not have enough features to compete with the ecosystem Apple had built. In other words, Fitbit found itself in an ambiguous position.
Will Google Be Fitbit's 'Masterstroke'?
At this point, Google appeared. Fitbit, whose market share had declined over several years due to competition from Xiaomi and Apple, also saw its stock price plummet. However, Google recognized Fitbit's capabilities and decided to acquire it at $7.35 per share, a 19% premium over Fitbit's stock price. Initially, Google had offered $4.59 per share in the letter of intent, but when Facebook entered the competition with a $5.9 offer, the acquisition price rose to the $7 range. Facebook CEO Mark Zuckerberg verbally offered up to $7.3 per share, but Google ultimately won the bidding by offering $7.35 per share.
Could this acquisition be a beacon of hope for Fitbit, which has been experiencing a decline in market share? Experts respond positively. CNBC in the U.S. predicted, "If Google acquires Fitbit, it will instantly become a strong player in the wearable device market," and "Google's move could be a 'masterstroke' rivaling Apple." Google's acquisition of Fitbit is expected to be completed this year. Attention is focused on what new paths Google will find through Fitbit, and what opportunities Fitbit will discover through Google.
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