Google acquires Fitbit — adding another device, ad platform, and data tracker
Start company. Get acquired by Google 12 years later... Not a bad way to go out for Fitbit. It's joining the Alphabet family after Friday's announcement that Google will drop $2.1B for it. That's a fraction of the almost $10B it was worth after IPO-ing in 2015, but Google's wizardry will help Fitbit take on Apple — Apple Watch sucked away anyone else's smartwatch sales like a dementor.
What's in it for Google?... Then-Google (the parent company is called Alphabet now) paid $12.5B for Motorola in 2011, $3.2B for Nest in 2014, and $1.1B for part of HTC in 2017. It doesn't have much to show for any of this hardware since then. Here's what Fitbit can contribute:
- Sneaky ad sales: 84% of Alphabet's 3rd quarter revenues came from ads. Fitbit could become another platform for Google to slip in paid suggestions when you ask your wrist "Hey Google..."
- Fancy device sales: The tiny wedge of Google's biz that's not related to ads is growing faster, led by Pixel phones and Google Home.
- Data. Lots of it.: Now Google will know your mid-jog blood pressure. Its press release promised it won't use health/wellness data for better-targeted ads (anti-BO antiperspirant?). We'll see.
If you want to buy an entire company, you've got to pay extra... When one company acquires another, it typically splurges about 33% more than the stock price of the company it's buying. Alphabet paid 71% more:
- Sept. 20th: $4.10. That was the price of Fitbit shares before word it was open to selling itself.
- Nov. 1st: $7.35. That's how much Alphabet is paying for each and every Fitbit share that exists — aka it's paying $2.1B total.
That's why you often hear of a company's stock rising when investors believe it could get acquired — they want to ride the stock higher, like some did with Fitbit's.