as Palm’s experience showed, one thing the world doesn’t need—not for long, at least—is a company that does only one thing.
When you strap a new Fitbit onto your wrist, it’s programmed to vibrate once you’ve taken ten thousand steps. From there, it keeps on counting. Fitbit can also track other aspects of your health—sleep patterns, calories burned, heart rate—and store the data in its software, so that you can track your progress over time. For Sedaris, who describes himself as “obsessive,” beating his own records becomes a kind of addiction: “At the end of my first sixty-thousand-step day, I staggered home with my flashlight knowing that I’d advance to sixty-five thousand, and that there will be no end to it until my feet snap off at the ankles,” he writes.
One man’s neurosis is another man’s business opportunity. By the end of last year, Fitbit Inc. had close to seven million active users and was nearing a billion dollars in annual revenue. On Thursday morning, the company went public, under the ticker symbol “FIT,” in an offering that initially valued it at 6.5 billion dollars. Fitbit’s most loyal users are a fervid crowd, but the company’s long-term success is far from guaranteed. It has, essentially, one line of products, with variations on the theme, and, while its product was novel in 2008, when it was first introduced, much larger companies have since noticed its success and started putting Fitbit-like features into their own products. In a filing with the S.E.C. in preparation for going public, Fitbit openly acknowledged that this presents a risk:
Many large, broad-based consumer electronics companies either compete in our market or adjacent markets or have announced plans to do so, including Apple, Google, LG, Microsoft, and Samsung. For example, Apple has recently introduced the Apple Watch smartwatch, with broad-based functionalities, including some health and fitness tracking capabilities.
The Fitbit I.P.O. comes right as Apple stores are beginning to sell the Apple Watch, which has underscored the question : Will Fitbit be able to compete with bigger and better-financed rivals—especially those whose products do more than just track their wearers’ health. (Why settle for just tracking your heart rate in an app, when you can also text your loved ones an image of a heart that pulses to the rhythm of your actual heart?)
Single-product companies have gone public before, of course. The most obvious cautionary tale, among makers of consumer-tech devices, is the experience of Palm Inc. In 2000, when Palm went public, its Palm Pilots—those handheld organizers that were marketed as replacements for paper planners—seemed cutting-edge. Al Gore and Robin Williams had their own; in the Times magazine the previous year, the journalist David Colman had called the device “a perfect amulet.” At the time, cell phones existed but were far from ubiquitous, and they didn’t do much more than send and receive calls. In 2003, though, Research in Motion came out with the BlackBerry, and in 2007, Apple released the iPhone—devices that could do what Palm’s organizers could do, plus much more. Palm tried to stay competitive by creating smartphones with revamped software and striking deals with cell-phone carriers to sell them, but, as The Verge has documented, it was too late. Several missteps, compounded by competition from Apple and other devices, such as Motorola’s Droid, that emerged in the late two-thousands, doomed the effort. In 2010, Hewlett-Packard acquired Palm. By 2011, its brand was dead.
/The problem for single-product tech companies is that, no matter how much they spend to develop devices with cool features, bigger companies like Apple—and, more recently, Samsung and China’s Xiaomi—can always spend more. This allows them to rapidly bridge feature gaps with smaller companies, and to incorporate those features into multi-purpose devices. And the threat goes beyond R. and D. Bigger firms also tend to have deeper and longer-standing ties to the suppliers that build their products—and, perhaps more to the point, more influence over those suppliers. They also have more established avenues to advertise and sell their wares and more clout with publishers and retailers. And they have the flexibility to undercut smaller rivals on price. When Nest, a startup that made connected devices for homes, announced last year that it would be acquired by Google, Nest’s C.E.O., Tony Fadell, in a blog post the importance of its acquirer’s impressive resources. “We’ve had great momentum,” he wrote, “but this is a rocket ship.”
What if a company could sidestep the Palm problem? That’s what GoPro, which makes small cameras that record footage from the user’s point of view, appears to be trying to do. The company went public around this time last year, with a valuation of three billion dollars, and its stock price doubled by October. By March of this year, its shares had fallen to close to their original levels, partly because of Apple and Xiaomi (which, incidentally, also sells a fitness-tracking device), though in April, GoPro reported earnings that suggested that it has, so far, managed to do well despite those threats; its cameras are only becoming more popular. In May, the company’s founder and C.E.O., Nick Woodman, announced that it is developing drones and viral assistants Erinn Murphy, an analyst at Piper Jaffray & Co., : “This puts some of the naysayers on their heels, who thought this was just a one-hit wonder.”
It might seem that GoPro is doing something similar to what Palm did in the two-thousands by branching out into new products, but there are important differences in its strategy. As Matt Burns of TechCrunch wrote earlier this month, GoPro wants to position itself not only as a maker of hardware but as a service that people can use to store and share their footage. “GoPro doesn’t want to be known just as a camera company,” Burns wrote. Instead, it “wants to be a lifestyle media company” that can “give owners an easier way to share all that rad action footage.” The goal is to “build a new business based on content, not hardware.” Viewed in that context, drone and virtual-reality technologies could be as much about hardware as they are about allowing people to capture, store, and share more interesting content.
It’s not difficult for companies such as Apple and Xiaomi to replicate hardware features—and even to render single-use hardware products obsolete, as smartphones did to handheld organizers like the Palm Pilot. But, as companies like Facebook and Instagram have shown, once people have stored all of one kind of content with one company, they are often reluctant to leave it all behind and start over somewhere else. Facebook and Instagram also benefit from what is known as the network effect: the more users that a given social network connects, the more useful it becomes—thus making it difficult for other companies, even more established ones, to come along and steal the users away. (This phenomenon is partly to blame for the failure of Google’s social network, Google Plus.)
Palm came of age before anyone had heard the terms “cloud” or “social network”—too early to learn from Facebook or Instagram. But companies like GoPro and Fitbit, whose appeal has as much to do with the material they help store and share as with the devices themselves, might have the best chance at staying in business if they think of themselves not as hardware companies but as providers of services that let people manage and share their content. Fitbit has already announced its own version of a smartwatch—the Fitbit Surge, which sells for two hundred and fifty dollars and includes call and text notifications and music controls. Competing directly with Apple on hardware isn’t a bad move; after all, the success of the Apple Watch is far from guaranteed. Fitbit might want to focus, too, on the health information it stores and lets users share with one another. It may not be able to become a Facebook for health stats, but as Palm’s experience showed, one thing the world doesn’t need—not for long, at least—is a company that does only one thing.