Jawbone's story has been a long and twisted one. The company that rose to fame with its Bluetooth speakers and Up fitness bands has since fallen from grace.
The company is now fighting a two-front war, battling ongoing reports of poor customer service on the one, while skirmishing in the courtroom with Fitbit (NYSE:FIT) over copyright infringement and trade secrets on the other. Reflecting those issues, Jawbone saw its worth drop by half last year, when it raised fresh capital at a valuation of $1.5 billion, down from the previous funding round, which valued it at $3 billion.
Amid these tumultuous waves of uncertainty, an undercurrent of speculation that the company would transition out of the consumer wearables market and into the more lucrative clinical wearable devices segment has persisted. According to a new report by TechCrunch, that speculation has proven correct.
The report, citing unnamed Jawbone sources, says that the company is transitioning to a business-to-business (B2B) model under which it will sell clinical wearable technology devices and services to health care providers.
Jawbone is likely looking to the clinical wearable tech market, where it could earn higher margins than it does from consumer devices and where it would face less competition.
Fitbit currently dominates the wearable device space; it held a 23% market share in the third quarter of 2016, according to IDC. That was an 11% year-over-year market share increase for Fitbit, and IDC believes there's plenty of more room of the company to grow in both the smartwatch market and the mobile payments space.
While Fitbit has risen, Jawbone has consistently failed to make it on the top vendor list for wearable devices. That's left the company looking to get out of the consumer market. A source told TechCrunch that:
"If you think about what a good consumer electronics company looks like, it's 30-percent margins, annual release cycles and huge risk. It's turned into a blockbuster game."
And it's a game Jawbone no longer wants to play.
How Jawbone will make the jump
Moving from consumer devices to medical devices will likely be a huge transition. It's still a bit unclear what type of device Jawbone plans to release, what services will go along with it, or the exact timeline of when it will happen.
But what's clear is that the company is looking to raise more money to make the transition. TechCrunch says Jawbone's looking to its current investors, new ones outside of the U.S., and investors in the medical sector to provide it with additional capital.
What's in it for the company?
The consumer wearable device market isn't exactly a forgiving space these days. Fitbit and China-based Xiaomi accounted for nearly 40% of all wearable devices shipped in the third quarter.
But the clinical wearable device market could provide higher margins and more opportunity for Jawbone. The worldwide market size for clinical wearable devices is expected to reach nearly $19 billion by 2020, and the segment is just starting to take off.
But it won't be easy. A report by Frost and Sullivan last year said:
"Clinical wearables must concurrently justify their value to payers, patients and clinicians to gain market foothold. ... Confidence in the accuracy of collected data is paramount to the utility of information in any medical decision support."
In short, Jawbone will have to create highly accurate devices that work well, have clear benefits to health, and are easy to use. The consumer wearable tech market has arguably lower standards -- and Jawbone didn't exactly excel in that space. The company will have to work even harder, with possibly less investor money, to make its clinical wearable transition a success.