Quick Thoughts: You are What You Wear


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–          The “next big thing” du jour seems to be wearable computing, with separate lines of rumor linking both Apple and Google to electronic wristwatches as smartphone adjunct accessories.

–          It’s hard to imagine a “smartwatch” as a big opportunity – a low price is a given, the “killer apps” cited are pedestrian, battery life is an issue, and many smartphone users no longer wear watches.

–          More interesting: wearable devices could add sensors – e.g. vital functions, proximity, pace, vibration, ambient sound, visual field – to enable new applications.

–          Google Glass is particularly intriguing as a heads up display where relevant information could be interpolated onto the field of view.

At the recent Consumer Electronics Show in Las Vegas, Pebble Technology, attracted a buzz for its E-Paper Smartwatch. This connected electronic wristwatch is the product of the biggest fundraising campaign in the history of the Kickstarter crowdsourcing service, generating more than $10M in pre-orders at $99 a piece. Pebble began shipping the E Paper on January 23 with a handful of pre-installed apps for its FreeRTOS based low power OS and Bluetooth connectivity to both iOS and Android devices. The watch allegedly runs for 7 days on a charge, and features a magnetic charger that does not compromise the product’s water tight casing. In all, it is just enough technology and nerdish good looks to justify the $150 retail price. With more than half a billion iOS and Android smartphone users out there, the addressable market for a start-up like Pebble is exciting. Those 100,000 units preordered on Kickstarter could easily turn into a million or two and revenues in the hundreds of millions of dollars. Great – for Pebble Technologies and its founder, Eric Migicovsky!

The weeks since have seen rumors that Apple and Google may take on mighty Pebble Technologies with smartwatches of their own. An article on Business Insider unearthed a Google patent filing from October for a smartwatch with a flip-up screen that can retrieve information like directions or product data based on objects in the field of view of its camera. Earlier this week, Nick Bilton of the NYT blogged that Apple was pursuing its own smartwatch, based on its iOS platform and employing an innovative flexible material from Corning dubbed “Willow Glass”. Bloomberg has followed with a story that as many as 100 employees are dedicated to the smartwatch project, suggesting that the product could be closer to reality than many had surmised. The often imprudent Apple fanboy blogosphere has begun its predictable fawning over the unannounced product, with some going so far as to project it as the next big thing that can recharge growth for the company.

Let’s take a step back. If Apple sold one “iWatch” for every ten iPhones sold in 2012 at a 33% premium to the Pebble E Paper, its revenues would have been less than 2% higher. Nice – particularly if the business could ramp quickly with better than average margins – but hardly a big thing for Apple and probably a stretch estimate at that. Wristwatches are in cultural decline, victims to the very smartphones that smartwatches aim to augment. Given that global unit sales of Bluetooth headsets, another convenient extension of a pocket bound smartphone, have never topped 50 million a year despite prices plummeting well below $100 and an addressable market of Bluetooth equipped phones topping 1 billion users, the penetration of a pricey smartwatch accessory could be tepid.

Why then should Apple and Google care? I think the best explanation is experimentation. Building an attractive smartwatch will take innovations to make the electronics small enough, power efficient enough and flexible enough to fit comfortably on a wrist, run familiar apps and relay information from a smartphone for at least a full day. In this context, a connected smartwatch need not be a multi-billion-dollar business to be valuable.

Longer term, the real benefits of wearable technology are less likely to be saving users the trouble of pulling their smartphone out of their pocket, and more likely to be from deploying sensors to feed new data to new applications. Vital sign monitors could provide an early insight into potential health care red flags. Climate control systems could be informed by personal thermostats. Ambient sound sensors could adjust the volume of home electronics automatically. The most interesting thing about Google’s sci-fi Glass project may be its ability to monitor the visual field of the wearer and project relevant information directly in line of sight. For example, a shopper wearing Google Glass could see price comparisons or nutrition statistics for the products on the shelf. Navigation applications could highlight proposed routes as the wearer looks ahead. Facial recognition could cue a party goer with the names and contact information for the people he meets.

I think most of this is still a few years from mattering, at least at the scale that would matter for companies the size of Apple or Google. Meanwhile, the opportunity is just the right size for Pebble Technologies.

For our full research notes, please visit our published research site.

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