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Wearable Tech - A Market Explosion Happening Right Before Our Eyes!

TMCnet Feature

October 16, 2013

Wearable Tech - A Market Explosion Happening Right Before Our Eyes!

By Tony Rizzo
TMCnet Senior Editor

Every day our Google (News - Alert) Alerts tracker provides us with sometimes 8 to 10 articles that mention wearable technology as the next big thing, or maybe as a next possible big thing. Sometimes we get one - albeit rarely - that suggests the market is overhyped. For those of us who have been covering wearable technology for an extended period of time, it is quite amusing to see these articles. They often speak in odd terms of wonderment and mention now long-standing products such as the Nike+ FuelBand as if they have only just emerged.

These articles typically cite some "research of the day" that either mentions how many wearable tech devices are likely to ship over the next five years or the likely dollar value of these shipments. To say the least, predicting how wearable tech will go is not an exact science yet. In fact it is about as inexact as one can get.

The most recent research report we've seen on it, "Smart Wearable Devices: Fitness, Healthcare, Entertainment & Enterprise: 2013-2018," was released yesterday by Juniper Research (News - Alert). New findings lead Juniper to believe that the retail revenue from smart wearable devices, including smartwatches and glasses, will reach $19 billion 2018, as compared with what Juniper estimates to be a $1.4 billion for all of 2013. The company further notes that wearable technology revenue will be driven by a combination of high price points for wearable tech devices and anticipated strong market demand.

In this new report Juniper has revised upwards the adoption of devices in two key segments of consumer electronics: Multimedia & Entertainment and Multi-functional devices. Juniper underscores our earlier observation on the inexact nature of wearable tech projections in noting that revisions such as those provided in its new report "are common in the early years of a new technology category, and reflect the latest announcements from vendors across the sector." 

Image via Shutterstock

Will Wearable Tech Become an Overly Crowded Market?

Juniper certainly believes that the answer to our subhead question is a resounding yes. It contends that the overall emerging market attractiveness of wearable technology has led to the perhaps inevitable emergence of a host of both large, small and startup players competing against each other. It goes without saying that competition is expected to intensify.

Those are all certainly fair statements to make. There is no doubt that the wearable fitness market in particular is, based on numbers from certain very large vendors, skewing wearable tech popularity - by which we mean a great many consumers are indeed now aware of these health tech devices and plenty of them are getting on board with the idea.

Just yesterday, for example, Nike announced its new next generation Nike+ FuelBand SE, and the company noted as well that it now has 20 million users in hand. Those 20 million users of course aren't all active users but those that are definitely serve to highly recommend the device and its attendant ecosystem of iOS and Web apps and the growing social network around them. In addition newer and small players such as Basis and Misfit Wearables are creating strong awareness with their own very intense wearable technology-centered products. And as we write today adidas has just announced that it is bringing a specifically runner-oriented smarwatch to the market on November 1, 2013. Adidas is completely focused on fitness and the company's new watch (as yet there are no real details on it) is entirely focused on this market segment. We look forward to hearing much more on it.

Juniper analyst and report author Nitin Bhas adds, “It is worth observing that this change in adoption levels can also be attributable to heightened consumer awareness of wearable technology and a better visibility of product adoption, especially in the smart watch segment."

Well, we're not going to agree with Nitin that the smartwatch segment is responsible for the consumer awareness. Yet. We'll stick with our belief that the health and fitness devices are the keys to the kingdom at this point in time and for the next several years.

Yes, Pebble Technology has certainly created awareness for smartwatches, but to date we have not seen Pebble create a real and substantial "market" for smartwatches. Even deep-pocketed Sony hasn't cracked the code yet with its own SmartWatch 2. And Samsung (News - Alert) has discovered that simply getting a smartwatch out the door isn't enough to drive a market (much as it thinks it can replicate its Galaxy S III and S4 market success).

The smartwatch phenomenon is far from assured. Skooks Pong, SVP of Technology at Synapse, a company that has been involved with Nike's Fuelband, was a panelist on our featured smartwatch panel session at our recently held Wearable Technology Expo and Conference. His position was one of devil's advocate on the panel - the others were all smartwatch vendors. He wasn’t convinced that he saw any players make the case for a huge smartwatch market. We're paraphrasing here but in essence he noted to us that, "I simply do not see a level of functionality that will, beyond a number of people who just love the stuff, develop into a substantial market."

Given the current crop of smartwatches, we aren't going to argue with Skooks. Yet. However, once Apple (News - Alert) comes out with its own collection of wearable devices - one of which will be the fabled iWatch, the market will change substantially. We'll be covering our thoughts on Apple and what the company will mean for wearable technology in a separate article, but we can say here that it will eventually lead to huge additional consumer awareness and will drive a huge desire to acquire.

Wearable Opportunity for Service Revenue

The Juniper report further anticipates that over time several changes will occur in the smart wearable device market, partly as a result of developments in the app model, and partly due to the increasing use of embedded cellular connectivity within devices. Subscription revenues will be possible for certain sectors within the market.

Juniper notes that companies such as Fitbit and FiLIP are seeking to develop recurring revenues through premium services - facilitated via the smart wearable device or through commission for a service rendered by virtue of the device. Subscription service models are a key part of this.

For example, FiLIP is an FCC (News - Alert) approved app-based communication watch for children which combines GPS, Wi-Fi and cellular capabilities to keep parents and kids connected via two way voice calling, messaging and location functionalities. The company’s service model is expected to include an up-front device price and an on-going monthly plan. In part this also suggests that significant opportunities will emerge for app developers as well – across the health, fitness, sports and communication segments.

There are as well substantial implications here for how wearable tech will also extend into cloud computing, machine to machine (M2M) tech and the entire Internet of Things (IoT) world. These will all lead to many additional avenues of wearable tech revenues (the discussion however is beyond the scope of this article).

How About $50 Billion?

So then… leaving aside the issue of smartwatches and the likely enormous underlying revenue possibilities associated with cloud computing, M2M and IoT, it is possible that Juniper's projections for a $19 billion wearable tech market by 2018 are not at all far off. It is accurate enough for as far as it goes today.

Factoring in what Apple will bring to the game, as well as the other indirect markets (Cloud, M2M and IoT) - and we are leaving out of the discussion entirely here several other related markets, those for smart materials/fabrics  and those for wearable tech in the home, which will tie into the other markets we've noted and are market segments Apple itself is likely to tap into in significant ways - we ourselves strongly believe we're likely to see a market by 2018 that will be, at a minimum, twice what Juniper is projecting and potentially ranging up to $50 billion.

That's right - $50 billion. Wearable tech is hugely exciting today - but the heady days for it are yet to come. We believe Apple will deliver in 2014 and will start a far-ranging trend that will lead to a rapid acceleration of what Juniper is seeing today. $50 billion - you heard it here first.

A complimentary whitepaper, "Smart Wearables…Beyond Mobile," is now available to download from the Juniper website together with further details of the full report.

Edited by Alisen Downey

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