Tuesday, June 9, 2020

Whatever Happened to Fitbit?

I noticed an uptick in hits on an article I wrote a few years back about Fitbit.  I'd forgotten all about Fitbit, and, as I predicted when I bought the damn things, they would end up in a drawer somewhere, unused with the batteries dead.

I bought them is a birthday present for Mark as he wanted them, sometimes you do things like that for someone you love.  And they were fairly inexpensive, so I figured why not.  But like so much else, electronic toys promise the moon, but deliver far less.

As I noted in my previous posting, the things basically didn't work. Well, they worked, sort of, but they were wildly inaccurate and really didn't log your activity.  Either they would log things that were really not activity such as moving your arm, or they would fail to log real activities such as riding a bicycle. They were less accurate than the $20 accelerometer-based pedometers that I bought at the drugstore. And don't get me started on the Aria scale, it's a worthless piece of garbage. It barely tells you your own weight.

Of course, wearing a piece of electronics on your arm all the time is problematic. I like to work on cars and things and tend to abuse jewelry as it is. So as you might expect, my Fitbit was beat up pretty quickly and the lens on the case cracked and the strap broke. So I stopped using mine before Mark did. Eventually Mark got tired of his as well and it ended up in a drawer somewhere.

He briefly revived using it, and then it died for some reason.  I think the battery went dead. I managed to take the lens cover off of his and snap it onto mine and put together some straps so he could use it again.  He tried wearing it for a little while, and then it ended up back in that drawer.  Over time, the battery held less and less of the charge.

The funny thing was that the people we saw who wore these things, which gave Mark the idea to get them, either stopped wearing them entirely, or switched over to Apple i-watches. The Apple iWatch  (now called just "Apple Watch" I guess) was initially a big failure in the marketplace as it had very limited functionality. But once they started adding Fitbit-type functionality to it as well as other features, it started taking off, at least among the Apple faithful.

Other friends of ours went with less expensive Garmin devices which aren't as chic is an Apple Watch or Fitbit, but an awful lot cheaper.  If you're going to buy electronic junk, sometimes it pays to buy the cheapest brand, which is why I pay $100 for a used Samsung phone instead of $1,000 for brand new Apple.   That's a 10x delta in cost right there!

Anyway, I started looking into how Fitbit was doing, and realized that they really are in a lot of trouble. When they did their IPO – and IPOs are the sole reason any tech company exists, to make money for the founders - the share price spiked to nearly $50 a share, and is now languishing around five or six bucks a share.  Google has offered to buy them out for $7 a share, but regulators are skeptical about approving the deal, thinking correctly that Google is already collecting way too much information about us as it is, to also know where we are, how much were exercising, and what our heart rate is.

If you look at the stock price chart above, it is a classic shape - the "IPO Cash-Out Curve" - spiking in price after the "drop" and making a lot of money for insiders but taking a little bit from a lot of little people - and never earning a damn penny in profits (and it goes without saying, never paying a dividend!).

Without this buyout from Google, it looks doubtful that Fitbit will survive. Like most of these tech companies, it has yet to earn a profit after many years and doesn't look like it ever will.  People who paid nearly $50 a share for the stock are crying in their soup right now.  Even those who paid $20 at the IPO price have lost more than half their money after many years. If you just put your money in an index fund you would have come out far better, even with the Corona Virus crash.

Anyway, this entire thing was predictable. As I noted going into this, I knew these things would end up in a drawer somewhere after a few years, and not "change my life" as so much tech promises to do, but fails to deliver. If nothing else, the batteries stop taking a charge or won't hold a charge as long, and then we would get tired of constantly recharging them, and they sit on the charger for days. Like any New Year's resolution, the idea that we would wear these things perpetually, fades from the scene.  You'd think after so many techno-gadgets in my life, I would have learned, but the siren song of tech is hard to resist.

But the biggest problem for Fitbit is the classic problem in marketing anything. The first person to the market is often the last of the marketplace. We see this all the time in technology. DeHavilland had the first jet airliner to hit the market, and discovered the hard way that being on the bleeding edge of technology is a very painful and expensive process.  It took them an awful long time and many lives to discover that you can't put square windows on a pressurized aircraft.  Boeing, McDonnell Douglas, others got a free lesson from DeHavilland, whose commercial aircraft industry largely faded into obscurity.

In almost every market, this seems to be the pattern. Today we drive Fords and Chevys and Chryslers in America, but none of these were the first automakers in the marketplace in the United States. Myspace was one of the first social media platforms, but was eclipsed by Facebook which learned from Myspace's costly and stupid mistakes. Blackberry developed a smartphone long before Apple or Samsung, but it's largely extinct from the market.

Today, others are learning from the mistakes of Fitbit.  Apple struggled with its initial i-watch, but succeeded because they have a lot more money behind them and could afford to fail for a longer period of time and play the long game.  Others, such as Garmin, could learn from Fitbit's mistakes and offer a product at a much lower price that works as well, if not better.

Of course, the real problem for Fitbit was the damn things just didn't work as advertised. And as I noted my previous posting, when you complained about these things not working, not only do they not help you out, they basically shut you down.  Unless you were one of the Fitbit faithful, you were expelled from the cult.   And that sort of behavior is a sure sign that a company has a flawed business plan and a flawed product.

There are, of course, lessons to be gained from this. Whenever somebody comes out some new gadget or product and claims it will change your life forever, remember Fitbit.  I am sure the next time Mr. See asks me to buy some new gadget that his friends are all raving about, I'll quietly ask him whatever happened to the Fitbit.  Or maybe I'll take it out of that drawer somewhere and just put it on his nightstand to get the message across.  Because owning money is better than owning things - and the former will really change your life forever while the latter will not (and never will).

The other lesson, is not to invest in IPOs of tech companies. Granted, some things eventually will take off and make money. Facebook stock was hemorrhaging cash for quite a long time until it became a stable and profitable company.  Of course, this doesn't mean it will remain stable and profitable forever.  And that's because of the third lesson....

The third lesson is that fads don't necessarily last forever.  Facebook seems like an impenetrable wall right now, the largest social media company and a behemoth in the marketplace. But then again so was IBM.  Today I can't even tell you what it is they do for a living.   Things that seem permanent can end up turning out to just be passing fads, over time.

A fourth lesson is to diversify your investments  and certainly not put all your money into any one thing. There was a news article today based on a Reddit posting, which is never a good source of news, as people can fake up and make up the stuff on Reddit all the time. Anyway, the fellow claimed he invested his life savings in Luckin Coffee, the fraudulent Chinese Coffee Company. His logic was that since the price and shot up between November and January, it can only go up further. As I noted before, what shoots up in value usually has one way to go - down.  Anyway, he lost it all - like $800,000 or so.   Too much for us plebes to be losing.

The same is true with Fitbit. The price shot up right after the IPO, and then it went in only one direction after that.  Why would anybody invest in such a thing? And yet the people who pour money into this sort of nonsense are usually the small investors who end up losing their shirts.  Even if they don't invest their life savings in something like this, they end up losing money, perhaps each a little bit, but cumulatively, an awful lot of money.

Again, the middle class is slipping down the economic ladder or not because somebody took away their money, but because they've willingly gave it away. And these sort of IPOs and tech stocks are a classic example of how the middle class is giving away its wealth, one tech gadget, one IPO, one tech stock, at a time.