The Bill of Health 💵🤒
WHOOP challenges the giants and proposes a new angle for fitness tracking devices💉 while the giants just get bigger💰
WHOOP-WHOOP
Most early adopters of the quantified self trend stop at buying smartwatch products that are commercially easily accessible and look kinda good. After that, the decision is simple: if you’re invested in Apple’s ecosystem you buy their Watch, otherwise, you go for either Samsung or one of the Chinese manufacturers, depending on how much you care about privacy.
WHOOP is a fitness technology company based in Boston that creates fitness trackers worn by many a pro athlete and they recently raised around $100M in Series E funding.
The company’s product and business model couldn’t be further from that of smartwatch manufacturers. The hardware in the band itself is not remarkable in any way —if iFixit ever decide to make a teardown of it I’m sure they’ll find components you can buy of the shelf in a market in Shenzhen —, instead it’s the software that makes the product worthy of consideration. Their focus on fitness means no multimedia or phone call functionality but, instead, you get a focus on health with sensors that help wearers optimize their eating habits, sleep, recovery and exercise strain.
Since these are ‘the ones that pro athletes wear’ you’d think the device is expensive. And you’d be wrong…and right at the same time. You can get the wristband for FREE but the company relies on a subscription model for monetization. At the expensive end of the spectrum, you’ll be paying $30/mo for the service if you renewed every six months, or, almost a new Apple Watch every year. Unless you’re one of the few that can already afford to buy such a device every year, this is STEE-EP!
If you could move past the pricy subscription model, WHOOP have an interesting product on their hands that’s made even more compelling by the accessories they offer that have the potential to make the device invisible in day-to-day use. That’s a pretty big if right there. With the current functionality being way above and beyond what the average consumer needs —and what they’re willing to pay for—, the company will soon find itself in a position where they’ll need to fight for consumers at the bottom end of the pricing spectrum in order to increase their market share. As the ongoing fitness trend is bound to decelerate over the coming years the total addressable market will slowly shrink due to saturation, and the only way to expand will be down.
And in order to differentiate that cheaper product from the more expensive one, they’ll need to give it fewer features, making it not unlike, you’ve guessed it, cheap fitness bands on offer right now. And you know who makes good fitness bands? FitBit. And you know who will soon own FitBit? Google. And what’s Google really good at? Gathering user data and using AI algorithms to extract insight from it. Which makes up for most of WHOOP’s USP right now. That’s one way this could go for WHOOP right now, being driven out of business by either Google or Amazon with their Halo line.
Another, more positive, way it could go is an acquisition. The company’s strict policy on the privacy of its members’ data will make it a good acquisition target for any of the big tech companies looking to get into, or expand their reach into ‘personal health’. Amazon or Google are good candidates but, with their newly-found affection for subscription-based everything, Apple would also be a good fit. If we have a Watch SE why not a Band SE in the future?
If you’ve read my ramblings in the past you’d remember that with every new Apple Watch that comes out I’m out here ranting about a screen-less, longer battery, less-visible —maybe less expensive— device that does more than a basic FitBit for a while now. Tying health monitoring to a vanity object that we traditionally wear on our wrists in order to tell time doesn’t make any sense at all but it’s easy to understand how this situation evolved into what it is today.
Building on top of a product that already existed made sense since all new mediums borrow the metaphor of previously-used solutions, in reality, our computers don’t have a ‘desk top’, they’re icons displayed over a background image. I see WHOOP’s accessories ecosystem as a potential pioneer in encouraging a move away from the wrist-tied health device, proving to others that there’s a bigger interest in decoupling health from fashion before we move to a device that’s completely inside the body.
Show Us the Money
That time of the year again, let’s go through the most interesting aspects of last week reported quarterly results…
Apple beat estimations for Q4 —I knwo, shocker, right?— earning $64B in revenue despite a 20% drop in sales for the iPhone division due to the delay of 12 this year. The top performer was —again, shocker— Services, a division that brought in 14.5 of those billions above. With the sales of all the new model iPhones going into Q1 of 2021 plus the subscriptions to Apple One and Fitness+ launching soon, it’s looking like a new record quarter for the house that Steve built. Add to that the rumored search engine development effort and the three trillion mark is already in sight.
An interesting chirp from the expenses category was the annual run rate on Research and Development, Apple alone spends $20B on the category, plus what’s being spent by third party suppliers. As Pete Tong would put it, that’s massive.
Amazon was one of the companies favored by the various degrees of home isolation conditions implemented across the world and reported $96B worth of revenue, with net sales increasing 37% year over year.
Net sales of AWS still increased by 29% YoY generating $12B of operating profit despite the hard competition and market saturation, showing us that if regulators would mandate the company spin the service in the future, we’d probably see the combined value of the resulting parties worth more than they are today.
The ‘Ads and Other’ division generated over $18B in revenue, so their profit numbers should not be that far off of those coming from AWS over the past year, further solidifying the point above related to splitting off Amazon Web Services, but also making it clear to anyone who doubted it that AWS isn’t footing the bill for the rest of the company’s operations.
While Google saw a drop in advertising spend at the beginning of the pandemic, the re-opening of most businesses from last quarter resulted in a 14% jump in revenue year over year for a grand total of $38B for the period between July and September. Revenue from both Cloud and Youtube has gone up compared to last year, +41% for the former and +32% for the latter, with the cloud business slated to be broken out in future reports.
X, Alphabet’s now-famous research and development lab that gave birth to Waymo, amongst other things, is still in the red with $178M in revenue and losses of $1.1B. So, yes, in case you were wondering, R&D is still a high-risk endevour that torches money but if yo uhave enough funding to get you to that big hit, it’ll all be worth it in the end.
Not a lot of breath was wasted talking about the ongoing lawsuit the US government has filed against the company, Sundar just said that ‘we believe that our products are creating significant consumer benefits‘, showing a glimpse into the angle the company will take in defending themselves: we do more good than bad and a world without Google is worse than one with it.
It’s been an obscene amount of time, almost two entire weeks, since I last wrote about a new TV series being announced that uses a gaming IP, so here it is: Netflix is producing a live-action series based on the Assassin’s Creed universe and yes, that is Ezio’s theme music you’re hearing there🕹️📺
I’ve written in previous editions about Tilt Five’s product, I’m glad to see it’s getting some traction from the capital market, the $7.5M will do well to boost the production of the most important success-determining factor of all gaming hardware: good games🎮
The Oculus Quest 2 has proven to be a hit even beyond Facebook’s wildest dreams, with five times more pre-orders than the original device the next milestone for the product line is to reach ten million active units according to Zuck. Once this objective is reached, the flywheel we were talking about last year will be put into motion, making it a lot harder for developers to ignore the platform as a reliable revenue stream🎮👓
In a world where the likes of Uber and Glovo keep trying to categorize their workers as self-employed and detach themselves from all responsibilities involved with their welfare, Airbnb is looking to make partners out of all of their hosts during these harsh times for the tourism industry. The new approach gives renters more control over how they host and more insight into the wants and needs of guests, and extending the ‘Superhost’ status for more people. While other companies that rely on this business model use the umbrella term of ‘capitalism’ in order to extort their collaborators, Airbnb is, rightly, realizing that a rising tide lifts all boats. You love to see it and I’d love to see it implemented more in the future🏠💰
Go ahead, take a guess on what kids are spending their monthly allowance these days, what’s your Top 3? Candy? Books? Gifts? If this were your guesses and this was 2019 your guesses would be bang-on, in 2020 however it’s Roblox, Fortnite, LEGO and Minecraft at #4. The fewer opportunities to spend due to being locked inside also means that kids are saving 41% of their money these days, it would be interesting to track these habits into adulthood later in the future and adjust economic models accordingly🎮🎮
If this was a decade ago and you were looking to start a company in the self-driving area, the safe approach would have been to look for the least complex environment and start there. Airport zones with harsh speed limits, retirement communities, highways with not a lot of turns, that sort of thing. The problem with that is that the big, for-profit companies that entered the field then were going for just that: profits; the market with the biggest potential for growth, to be exact. That’s why it’s taken so long for the likes of Waymo to launch a solution into a kind environment despite their tech being tested in a lot harsher places. Still, it’s better to see it later than not at all🚗🤖
George is making himself screen-scarce these days but this looks like a worthy show of face🧔🏻
The ‘Uncharted’ movie has wrapped filming last week, here’s a preview of Sully
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