The Wearables War Was Never About Hardware

In the mid 2010s, wearables was the hottest trend in venture.

Apple announced the Apple Watch in 2014. Google pushed Google Glass. Fitbit, Jawbone, and Pebble were all heavily funded and culturally prominent. Investors believed wearables could become “the next smartphone platform.”

There were a few winners, yes, but largely, you could argue that that vintage of wearables funding was constrained by the classic chicken-and-egg problem. The tech was mostly good, but it didn’t quite take off in the way investors thought it would.

In fact, and this is a fun exercise with many tech trends, go back and read articles from late 2014 or 2015 to see what the tech publications we know and love were saying about wearables at the time. Here’s a relic from Jan. 14, 2015, from PitchBook: “With Apple Watch rumored to debut in March, the wearables space is growing increasingly competitive.”

But this is not the story of wearables broadly.

No, this is the story of a very specific problem, and a reminder of just how important scale is in distribution, manufacturing, and data infrastructure. We’re of course talking about Google’s Fitbit Air, a direct competitor to WHOOP, priced at $99 without the subscription model.

Google already competes with Apple Watch through its Pixel Watch. But it does not care about margins on a $99 band. They want to own the health data layer across both ecosystems.

Just like Oura and WHOOP, the hardware is just the entry point. The actual product is the platform, and more importantly, the data interpretation.

WHOOP and Oura, the two leading wearables companies, both charge meaningful subscription fees. Not cheap.

And that is the problem for every wearable startup running on subscriptions. WHOOP and Oura now have to explain to new buyers why their subscription is worth paying for when Google offers most of the tracking for free and is moving deeper into AI coaching, medical records, and preventive health.

I was looking at wearables this past holiday season for my girlfriend, who is equally as obsessed with health and fitness, and for both Michael and myself at Venture’s Edge. Even then, I couldn’t justify the Oura Ring’s subscription model, especially when competitors like Ultrahuman exist without one.

And this is an important case study, because we are not the type of consumers you would assume are price-sensitive when it comes to health. I don’t think twice about my gym membership, my girlfriend’s Pilates classes, supplements, physio, or hell, even blackout curtains for optimized sleep. But for someone who already deeply sees the value in health, this move by Google completely takes the bottom out of the wearables industry.

The more interesting question is still what happens after the data lands.

Most wearables now measure roughly the same things. Tracking is the easy part. The hard part is interpreting it. And then actually changing your behaviour because of it. For two weeks, sure. But changing your habits for two years?

So how on earth does an, albeit well-capitalized, startup compete? Spoiler: the answer may be that they don’t.

The age-old example you learn in business school is the Starbucks one. They enter a market, undercut local mom-and-pop coffee shops because they can afford temporary margin compression, and operate with economies of scale that smaller competitors simply cannot match.

If a competitor like WHOOP wants to survive, the answer is not a race to the bottom. In fact, that should be avoided at all costs. Interestingly, we’re getting to watch this play out in real time, as WHOOP confirmed on May 8 that live video consultations with licensed clinicians are coming to the app this summer.

The response is differentiation, and perhaps an even further move upmarket.

The same way a clothing retailer cannot compete with SHEIN manufacturing clothes for pennies on the dollar, so they instead manufacture in North America and position themselves as the premium alternative, WHOOP and others may have to reposition accordingly. There are parallels everywhere.

And the timing is obvious. These two announcements happened almost simultaneously: WHOOP adding physicians and Google launching a $99 Fitbit Air with an optional $9.99 per month Gemini AI health coach.

So where does Google win? I think it’s obvious: the data.

Owning incredibly valuable health data is the real moat. This is not about who can manufacture a silicone band and sensor for cheaper. In fact, the hardware margins matter very little. It’s all about the data layer, the intelligence layer, and eventually the healthcare layer.

And unless wearable startups are able to meaningfully differentiate and prove that differentiation to investors in subsequent rounds, the entire category could quickly run out of collective runway, especially if Apple joins the party more aggressively under incoming CEO John Ternus, a noted product-first thinker and mechanical engineer who many speculate is eager to make bigger moves in physical products. Those of us with mechanical engineering friends will absolutely confirm this.

For now, the question is simple, when and where can I get my hands on a Fitbit Air? Because I certainly don’t need to add another subscription.