Google is jumping into the fitness-tracker business, buying Fitbit Inc. for about $2.1 billion.
The deal could put the internet giant in direct competition with Apple Inc. and Samsung Electronics Co. in the highly competitive market for smart watches and other wearable gadgets. But it also raises questions about privacy and Google’s dominance in the tech industry.
The announcement Friday came with a promise that Google won’t sell ads using the intimate health data that Fitbit devices collect.
San Francisco-based Fitbit is a pioneer in wearable fitness technology, making a range of devices that have become pop-culture accessories, from basic trackers that count how many steps you take each day to smart watches that display phone messages and notifications.
They can track activities such as running, cycling and swimming and record heart rates and sleep patterns. Fitbit typically asks for date of birth, gender, height and weight to help with such things as estimating calories burned. Some people use Fitbit’s app to record what they eat and how much water they drink, or to track their periods.
Fitbit has 28 million active users worldwide and has sold more than 100 million devices.
Google, meanwhile, makes software for use in other manufacturers’ wearable devices, but those products haven’t gained much traction. And Google doesn’t sell a device of its own.
The deal to buy Fitbit could give Google a boost.
“Google doesn’t want to be left out of the party,” said analyst Daniel Ives of Wedbush Securities. “If you look at what Apple has done with wearables, it’s a missing piece of the puzzle for Google.”
Google’s pledge not to sell ads using Fitbit health data is a continuation of promises previously made by Fitbit.
Privacy experts, though, were skeptical.
Consumer Reports health privacy expert Dena Mendelsohn expressed concern that people enrolled in wellness programs through their employers that use Fitbit devices could lose control over their data.
“While a person may not have had concerns about Fitbit holding their data, they may have concerns over Google holding their data,” Mendelsohn said.
Google’s promise is also unlikely to stop it from gathering other information from Fitbit devices.
For example, Fitbit has GPS models that could track users’ locations. That could help Google know, for example, that a runner stopped at a coffee shop after a workout. Google could then display ads for rival coffee shops.
More important, having a Google device on the wrist could drive wearers to use Google services even more, giving the company more ways to sell ads.
The deal is likely to face scrutiny from state and U.S. Department of Justice antitrust authorities, who are already investigating Google and other big tech companies over whether they have abused their market power.
“Why should Google be permitted to acquire even more companies while they’re under [Justice Department] antitrust investigation?” tweeted Sen. Josh Hawley (R-Mo.).
Still, analysts at equity research firm Cowen said they believe regulators are unlikely to block the deal because of Fitbit’s relatively small size and its focus on hardware.
Although Fitbit all but created the field, it has been shredded by the competition. It was worth nearly $10 billion after it went public in 2015. But its value this week is well below $2 billion.
When rumors of a potential buyout by Google surfaced this week, Fitbit stock soared almost 30%. On Friday it jumped an additional 15.5% to $7.14 a share.
Google agreed to pay $7.35 a share. Shares of Google’s parent company, Alphabet Inc., rose 1.1%.
“With Google’s resources and global platform, Fitbit will be able to accelerate innovation in the wearables category, scale faster, and make health even more accessible to everyone,” Fitbit co-founder and Chief Executive James Park said in a statement.
Fitbit has been expanding its partnerships with major healthcare companies such as Humana Inc. to encourage healthier living.
Life insurer John Hancock announced incentives last year on its insurance policies for people willing to share data gathered by health-monitoring devices. It offers free Fitbit devices to participants.
Last year, Fitbit acquired a health coaching business that helps people manage conditions such as diabetes and high blood pressure.
Fitbit ranks fourth in global shipments of digital watches, fitness trackers and other wrist-worn devices, according to research firm IDC. Chinese companies Xiaomi and Huawei were No. 1 and No. 3, Apple was No. 2, and Samsung came in fifth.
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