It's hard to read about any tech news without stumbling upon new updates and more announcements about hypothetical smartwatch products. Samsung said two days ago that it's definitely working on one such product , and many others have speculated Apple's (AAPL 0.83%) working on its own device. But despite all the talk, and possible products, one more unknown is floating around -- will consumers actually buy a smartwatch?
It sounds silly, until it isn't
To write off a smartphone-integrated watch without considering its benefits would be like saying consumers don't want a phone that doesn't have a physical keyboard (ahem, Steve Ballmer). A smartwatch could, in theory, bring much-needed features to our barren wrists.
First, not having to whip out a phone to read texts, check the weather, catch sports scores, or receive location reminders would be nice. The most time sensitive information like texts and the most location based information like reminders when you get to work could be allocated to the watch, while the smartphone sits by for more of the heavy lifting.
Another obvious benefit, and ones that's talked about the most, is using it as a health monitor and fitness accessory. Streaming music from your smartwatch to Bluetooth headphones would be nicer than strapping an ever-increasing-in-size smartphone to your arm. Monitoring heart rates and walking and running distance would also be helpful without clunky phones tagging along.
Source: Sony.
But let's not forget that products like this already exist. Sony's (SNE 2.82%) SmartWatch does almost all of the above, has a sleek interface, and links to Android smartphones -- all for about $130. A Kickstarter project for the Pebble watch has made some inroads in the smartwatch industry as well, but for the market to take off, it would take someone of Apple or Samsung's influence to get the attention of the mass market.
Benefit of the clout
Morgan Stanley analysts Katy Huberty stoked the iWatch fire last month when we she estimated that Apple could bring incremental revenue of $10 to 15 billion a year with a smartwatch product. Apple has enough clout that consumers even mildly interested in such a product would likely give it at least a quick look, but it all comes back to the idea of whether or not consumers would actually buy it.
Source: Pebble.
The Pebble watch garnered almost 70,000 Kickstarter backers who raised more than $10 million for the project. Yes, million. The original goal was just $100,000. Its Facebook page has more than 33,000 likes and their Twitter following tops more than 24,000 followers. Sure, those social media stats may not matter much overall, but if you put together the grass-roots following Pebble has built along with the money they raised, you could consider all of those numbers concrete market research for a smartphone industry.
More than a decade in the making
Pebble and Sony, although their watches are innovative and intriguing, didn't lead the way in connected watch technology. Many others began the journey a long time ago, and almost all have stumbled. Microsoft (MSFT +1.40%) released a watch called SPOT that synced calendar appointments, displayed weather information, and sent messages using an FM transmitter.
Obviously, Microsoft's product didn't take off, but that didn't stop Samsung from trying not once, but twice to launch a connected watch. So, technically, the Samsung's latest smartwatch announcement will be its third attempt at the market. The first watch never actually made it to launch, and the second one was only sold in France. Both watches came in at over $600 -- not exactly the price point for mass market.
To be fair, past failed attempts aren’t a perfect predictor for future occurrences. Connected watches from the past couldn't possibly compete with a product that could be built now, and current smartwatch prices aren't nearly as high as in the past. But with smartwatches having been available from so many companies for years now, it's possible the mass market has chosen to pass on such a device.
Waiting for an iWatch
It's hard to tell whether Samsung will actually release a smartwatch or is just working on one just in case Apple is developing a watch. In true Apple form, investor and consumers don't know whether Apple is actually thinking about a smartwatch, testing one just for research, or simply not doing anything and letting the competition fret about what they think the company's doing.
With Google's (GOOG 0.73%) Glass expected to launch to consumers at the end of this year and Pebble already selling a wearable smartwatch, investors shouldn't be skeptical that an iWatch, or something like it, wouldn't connect with a large group of consumers. Determining the size of such an industry right now is a bit premature, though, since it doesn't really exist yet. Smartwatches aren't watches, and they're not phones, so quantifying their market worth is simply speculation at this point. One thing is starting to become clear for investors, though: Wearable computing is on the cusp of turning into a real industry; the question is, who can make the product that consumers will actually open their wallets for?
