Fully understand Fitbit's growth strategy with this chart.
 | | Digital Health Chart | | How Fitbit changed its strategy to post 10% YoY revenue growth after a 3-year free fall… In Q1 2019, Fitbit reported its third consecutive quarter of positive year-over-year (YoY) revenue growth for the first time since 2016, signaling a potential turnaround from its prolonged nosedive. Fitbit revenue ticked up 10% YoY to $272 million in Q1 from $248 million in 2018. Growth hasn't been the norm for Fitbit prior to recent quarters: The wearable device maker had seen a steady decline in revenue growth and stagnating device shipments since early 2015 — when Apple released its first smartwatch.
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Here's how Fitbit tweaked its strategy amid declining revenue growth and market share: - Fitbit built out its health services segment to tap into enterprise demand for health coaching. Fitbit's made a number of moves to expand its Health Solutions division, including acquiring chronic disease management platform Twine Health in February 2018. Fitbit also launched a connected health platform in September 2018 that enables payers and health systems to deliver personalized coaching to users in order to lower healthcare costs.
- The wearable maker diversified its wearable portfolio with a move into smartwatches. Likely anticipating that smartwatches will continue to cannibalize demand for trackers, Fitbit released its first smartwatch in August 2017 and added another smartwatch to its lineup since then.
- Fitbit broadened its fitness tracker lineup — and sells its devices for a far lower price tag than rival Apple. Fitbit unleashed a slew of new trackers in the last year, including a tracker released in August 2018 that boasts functionality that can aid in detecting conditions like sleep apnea, asthma, allergies, and heartbeat irregularities, which could help Fitbit capitalize on the trend of consumers using wearable devices more for health-focused applications as opposed to general wellness. Moreover, Fitbit continues to undercut Apple: Fitbit Ionic — Fitbit's most expensive smartwatch — is priced at $230, versus $400 for the latest Apple Watch.
Here's why Fitbit's Q1 2019 earnings report indicates this strategy is paying dividends: - Fitbit's health services segment is growing rapidly. Fitbit Health Solutions revenue grew 70% to $31 million in Q1, accounting for 11% of Fitbit's revenue. Fitbit Health Solutions also works with more than 100 US insurers — and it indicated plans to pursue additional health plan partnerships in the company's Q1 earnings call.
- Fitbit's smartwatches are playing an increasingly important role in its device portfolio. Fitbit's smartwatch revenue grew to 44% of total revenue in Q1 2019 — up from just 30% in Q1 2018.
- New products introduced in the last 12 months represented 67% of revenue in Q1 2019, boosting sales of tracker devices up 17% YoY and reversing a decline that's persisted since Q3 2016. This may be in part because — unlike in the contentious smartwatch market — Fitbit faces less competition from rivals like Apple in the US fitness tracker market. Moreover, as prices of smartwatches continue to creep up, price-sensitive consumers may favor cheaper trackers.
Fitbit's longterm success is tied to the strength of its... |
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