Did Google offer $2.1 billion for healthcare data?

Google has just announced the acquisition of Fitbit. They offered to pay US$ 2.1 billion for a data rich company, the deal still needs approval by regulators, but we can expect that in 2020, Fitbit will be part of the Google Family. Now at first sight, it might look like Google is acquiring a wearable company, but as I try to dig deeper into this, as I assume Google is more interested in the data treasure as in the wearable division.

to build the Pixel Watch for wear OS?

At the beginning of this year, google announced an agreement, and later on acquired Fossil Group’s secret smartwatch and a portion of their R&D team for US$40 million. With the bid to acquire Fitbit, Google might push the development and release an official Pixel Watch with its own internal design. This acquisition could accelerate innovation in the wearables category. But comparing the price of US$40 million for smartwatch tech and a group of R&D experts with the US$ 2.1 billion offered for Fitbit, the price isn’t justified.

to scale the wear OS platform faster?

Currently wear OS, the operating system of Android, previously known as Android Wear has a 17% market share (majority Samsung) of the wearables OS market, while Apple has nearly 25.8%. But the market share of Fitbit is only 5.9% (from 44.7% in 2014), which means that Fitbit plus wear OS, still do not beat the market share of the Apple Watch. Fitbit’s smartwatches, Versa do not even use wear OS, which mean the platform and data needs to be migrated. Rick Osterloh, Senior Vice President, Devices & Services at Google noted that this “an opportunity to invest even more in Wear OS well as introduce Made by Google wearable devices into the market. But, looking closer, this deal doesn’t seem to be about google buying market share. Google does not have a good track record on hardware acquisitions either. For example, they got rid of their Motorola acquisition (2008), just 2 years after the acquisition. Google isn't well know to be a hardware company. Their pixel phone has less as 1% market share. Android has been a massive success for Google, but its phone hardware business "Pixel" is barely a blip on the radar. Why would this be different with Fitbit?

to support profitable growth?

Well that’s an easy one. Google definitely did not buy Fitbit, as it’s a flourishing company. Fitbit’s sales fell from USD$2.17 billion in 2016 to USD$1.51 billion in 2018. Analysts expected the company’s sales to reach USD$1.56 billion in 2019, USD$1.60 billion in 2020, and USD$1.605 billion in 2021. Fitbit struggled with profitability and posted non-GAAP losses for the last 2 years.

So why did google buy Fitbit?

Yes, you probably guessed it: DATA. Fitbit as a unique data pool that if leveraged well could create unique insights. Fitbit worked with 200 research institutes, and activity trackers where part of great research projects. The Dana-Farber Cancer Institute, ran a 2 year randomised first-of-a-kind study, to find a link between key behavioural changes and breast cancer with over 2000 participants. Fitbit brings to the deal partnerships it has struck with some large drug companies. In October, Fitbit announced a collaboration with Bristol-Myers Co and Pfizer Inc on early detection of irregular heartbeat, or atrial fibrillation, on its devices. 

If the identity of the Fitbit and Google users can be matched, the raw data of both data spheres of the 100 Million of registered Fitbit users withholds much more information, and becomes extremely valuable, which justifies the price. This could prove troubling to all users who ever used Fitbit's service, and whose personal data will be transferred to one of the world’s largest and most powerful tech companies. Fitbit records very personal information, such as your activities, nutrition, weight, sleep. The data alone offers some meaningful information about the private life of a person, but once this data is linked to the data Google tracks of their users, it creates very new insights of the fitbit user existence. Fitbit users did not want to share with Google, and the hopefully get the option to give their consent prior to the acquisition.

Fitbit's privacy terms mention that in case of an acquisition, or sale of assets, they will continue to take measures to protect the confidentiality of personal information and give affected users notice before transferring any personal information to a new entity. It seems like Fitbit included a restricted “Business Transfer Clause” where users can delete their data prior to entering into the Google hemisphere. Rick Osterloh, Senior Vice President, Devices & Services at Google mentioned that “Fitbit health and wellness data will not be used for Google ads. And we will give Fitbit users the choice to review, move, or delete their data.” One doesn’t have to be a data scientist, that the raw data combined with the personal data google has, is much more valuable as the profits it would create from more personalised advertisement. 

But yes, I am eager to receive an email from them for a Fitbit account I used in 2013, and will keep my readers updated. As if I do not receive such an email, it will be a violation of their privacy terms.

Yes, it’s easy from my side to pick this very visible acquisition to generate more readers, so yes I plead guilty for this. Nearly all startup acquisitions in digital health have been about data transfers. The most famous one in Germany was MySugr by Roche. And the largest one, Flatiron Health, which was acquired by Roche for USD$ 1.9 Mio.

During a conference panel discussion last month organised by the Süd-Deutsche, I brought up the question who patients can bring to court, when the by a physician prescribed App, gets acquired by FAANG companies.

PS: For my German readers, this highlights questions related to the DVG fasttrack and the upcoming requirements from BfArM.