It's now been about two months since Fitbit (NYSE:FIT) launched the Ionic, its first full-featured smartwatch that runs third-party apps. There's an awful lot riding on the device, as sales of basic wearables like traditional fitness trackers continue to trend lower as consumer preferences shift toward smart wearables like smartwatches. Fitbit even created an entirely new operating system, Fitbit OS, for Ionic, which was built based on three acquisitions since early 2016: Pebble, Coin, and Vector.
Yesterday, Fitbit announced a major software update for Fitbit OS that will also substantially expand the catalog of third-party apps, a crucial step in competing with Apple (NASDAQ:AAPL).
A major update for Fitbit OS
The Ionic is getting 100 more clock faces and 60 more apps, but as is often the case with app repositories, only a subset of those are meaningful additions. Only 14 of the new apps are coming from high-profile developers, including Walgreens, Alphabet's Nest, Yelp, The New York Times, TripAdvisor, Uber, and more. In addition to Pandora support that Ionic launched with, Fitbit is also adding Deezer to the mix of supported music streaming services starting in 2018 (premium subscription required).
The company is also launching Fitbit Leaderboard as a way to bolster engagement within its Fitbit Community user base, allowing users to compete with friends and family. Fitbit Community is the company's social play that was launched in January of this year.
Fitbit Pay is also getting some additions, including multicard payments, where users can choose which card to pay with. Also, the number of participating financial institutions has increased to 25 banks.
Fitbit doesn't want you to use your phone as much
Given how important Ionic is for Fitbit's future as it transitions its product strategy to smartwatches, it's encouraging to see that Fitbit is being proactive with pushing its Fitbit OS platform forward. That's absolutely essential when you're competing with one of the largest and richest companies in the world.
Fitbit has been consciously positioning Ionic as a stand-alone device that doesn't rely on a paired smartphone. For example, Fitbit detailed 10 features that can be used without a phone in an October blog post. "You now have four fewer reasons to pull out your phone," the company noted in the Fitbit OS announcement. This is important because Fitbit doesn't make phones, so it really wants to shift user behavior toward using a smartwatch instead of a smartphone, while many smartwatch owners may tend to revert to their phones to perform tasks out of habit.
Apple Watch is becoming incrementally more independent as well, most notably with the recent introduction of cellular connectivity, but still relies heavily on the iPhone. Smartwatches are becoming increasingly viable as a stand-alone product category, and Fitbit needs to keep up.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends GOOG, GOOGL, Apple, Fitbit, P, and TRIP. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends NYT and YELP. The Motley Fool has a disclosure policy.