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More Bad News for Apple Inc. Smart Watch

By Tim Brugger - Jan 15, 2015 at 12:48PM

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Despite the never-ending hype surrounding the pending smartwatch, consumers are not impressed.

It's easy to find studies suggesting the market opportunity for wearables, and smartwatches in particular, is poised to explode. One such study estimates the smartwatch market will grow exponentially thanks to adoption in China, at some point in the near future, and will generate nearly $33 billion in annual revenue within five years.

This opportunity should be especially exciting for Apple (AAPL 1.43%) fans as the iEverything maker prepares to join the likes of Google and Microsoft, taking the wraps off its much-anticipated Apple Watch in March. However, there is a major hurdle to overcome as these companies prepare to unveil their respective devices: Consumers don't seem to care.

Thanks, but no thanks
Regardless of the manufacturer or operating system, smartwatches currently serve a few primary functions. Synched with the appropriate smartphone, a smartwatch will alert a user to incoming emails, texts, and other communications in real-time -- what the industry refers to as "push" notifications. Fitted with extensive sensors, many devices will also monitor everything from respiratory functions to heart rate to help users track their health and fitness goals.

Here's the problem: Based on recent research, neither push notifications nor health monitoring is of any interest to the vast majority of prospective consumers. One study of existing U.S. and U.K. smartwatch owners speaks volumes about the market's potential, or lack thereof. Of the 2,200 smartwatch users surveyed, nearly a quarter hadn't set their devices to receive any notifications, and a third had just one app downloaded for messages.

The push notification study goes on to suggest that to garner any real value from an Apple Watch, Google's Moto 360, or Microsoft Band, among others, users need to have at least three alert apps downloaded. In reality, just 14% of the smartwatch owners surveyed actually had three or more alert apps downloaded.

Staying healthy? Not so much
But what about those sensors? Unfortunately, that's another function consumers simply don't use, or want. Endeavour Partners conducted research on wearables and fitness bands, in particular -- they found that a third of Americans that owned a wearable product ditched it entirely within six months. That speaks volumes, particularly when you consider what they likely spent on the device.

Half of the one in ten Americans that own a "smart" band no longer use them. And it gets worse -- a contingent of 3,400 U.S. consumers were asked recently if they intended on buying a fitness band and if so, which one. A staggering 85% of those surveyed said they have no intention of buying a wearable device to monitor their health, and of the few who did express interest, a mere 4.6% said they'd wait for an Apple Watch. Google's and Microsoft's offerings weren't even mentioned, unless you count the 0.9% who said "other."

The problem with the Apple Watch is the same as every other similar device: There's simply not enough benefit to warrant what is expected to be a costly purchase, about $349 in Apple's case. Push notifications? This modern take on the "pager" is not dramatically different than putting an existing smartphone on vibrate.

Health benefits? U.S. consumers have spoken loud and clear: "thanks, but no thanks." So where does that leave Apple and the others determined to manufacture smartwatches? They are probably better off heading back to the drawing board to incorporate a lot more "smart" into their smartwatches.

Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), Google (C shares), and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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