Google announced plans on Friday to acquire Fitbit, the world’s leading maker of wearable fitness activity trackers.
The deal, worth about $2.1 billion, is one of Google’s (GOOGL) largest acquisitions. The wearable market is growing quickly. Although Google makes some hardware, including Pixel phones and Nest devices, it hasn’t made much headway into smartwatches and other wearable devices.
“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 CEO James Park said.
The market reacted favorably to the announcement Friday morning with a momentary surge in stock price for Google’s parent company Alphabet (AB100MOM). That leveled out by Friday afternoon. Fitbit’s (FIT) price remained virtually unchanged throughout the day.
Analysts weren’t surprised by the acquisition, which comes a couple years after rumors first surfaced of Google launching its own smartwatch to compete with the Apple Watch.
The 2015 launch of Apple’s (APPLE) venture into the largely uncharted sector of wearable biometric tracking devices came with much anticipation and positive speculation after the success of the iPhone and the iPad, a creation that spawned an entire new category of computers known as tablets.
But the Apple Watch so far has failed to match the extremely high adoption bar set by its innovative predecessors and experts say there’s still a question of how many people are willing to pay a premium for a wearable data collecting device.
“Having a little computer on your wrist, that’s cool, but how much extra value is that for most people?” tech analyst Alan Antin told CNN Business on Friday.
There’s also a question of data privacy, which wasn’t as big an issue when the Apple Watch first launched four years ago.
Advisory firm Gartner questioned how much customers trust companies like Google and Fitbit not to sell the information they collect to third-party business without permission.
“The vast majority of users see the benefit they get from having their data go into these devices and how they improve their lives, but there’s going to be a group of skeptical consumers that are just not going to trust that,” he said.
In a press release, Fitbit emphasized its commitment to data privacy, saying it will remain transparent about the data it collects and why. The wearable fitness tracker company also said it never sells personal information and that its health and wellness data will not be used for Google ads.
Tech research director Ramon Llamas of International Data Corporation credited the company with tackling the issue of privacy head on right out of the gate, but noted that Fitbit may have already boxed itself in.
“If you take a look at some of the services Fitbit has put together, a lot of that incorporates your personal data in order to provide some insights - how much you’ve been working out, your intensity, how much sleep you have gotten,” he said.
“Data has been a key part of Fitbit’s story to push forth a lot of services they’ve had. Now you introduce Google into the mix and people say, ‘Oh Google, they make a lot of money off advertising revenue.’ … It’s good [the companies] are getting out there right from the get-go and saying your data will still be private. The proof is going to be in the pudding later on.”
The acquisition deal is expected to be finalized in 2020.
Earlier this year, Fitbit lowered the price on some of its devices and launched a new subscription offering called Fitbit Premium, which provides more in-depth insights about sleep, fitness and overall health. In July, Fitbit slashed its outlook for the full year following disappointing sales of its Versa Lite smartwatch.