Follow the Money: Will Wearables Inflect in 2020?

This post is the latest in our “Connected Consumer” series. It’s our editorial focus for the month of December, including topics like personal assistant apps, smart speakers, IoT and wearables. See the rest of the series here


The wearables sector is approaching an inflection point. Though not a new category, activity levels are escalating per several signals we’re tracking. Gartner projects wearables sales to hit $41 billion this year, up 28 percent from $32 billion last year. Responding to that growth is a blitz of market activity.

Apple is far ahead with Watch and Airpods, which may have sold 3 million units since Black Friday. Google meanwhile acquired Fitbit to buttress its wearables play. Amazon and Microsoft launched wearables lines in the past quarter, and smaller players like Bose and Snap are planting seeds for a wearables future.

There’s an underlying driver for this activity that goes back to the perennial analyst exercise of “following the money.” This is all about extrapolating product roadmaps based on tech giants’ motivations. This is often to future-proof their core businesses or diversify revenue in the face of maturing products.

The poster child here is Apple. It’s leaning into wearables as a near-term diversification play and long-term succession plan. Both vectors are compelled by the fact that the iPhone (and smartphones in general) are reaching market saturation and declining growth. To satisfy Wall Street, Apple has offset those declines.

This sense of motivation and urgency — and wearables’ potential to fill the gap — was quantified further in Apple’s Q4 earnings. iPhone sales were down 9 percent YoY to $33.36 billion while wearables were up 54 percent to $6.52 billion. This is similar to where the iPhone once sat relative to maturing Mac sales.

Intersecting Paths

Google acquired Fitbit to accelerate its lingering WearOS platform and to have some hardware in the game. Its motivation, beyond wearables’ rising tide, is the same that drove Android a decade ago: to maintain a direct touchpoint with consumers in order to drive its core search business.

Speaking of direct consumer touchpoints, Amazon blitzed the wearables market in September. Just like Echo speakers, this is a delivery system for Alexa. Its Echo Buds are AirPod-like Bluetooth earpieces; Echo Frames are audio-centric glasses (shown below). And Echo loop is an odd little ring with a mic and speaker.

Its motivation? When it failed to market the Fire Phone, it lost a consumer touchpoint, thus ceding years of pole position to Google and Apple. It now sees smartphone and wearables trend lines on intersecting paths, and wants to redeem that mistake for the next era of hardware. And it all drives toward eCommerce volume.

The situation is similar with Microsoft. Its Windows Mobile OS licensing model quickly lost share to Android’s more compelling price tag (free) last decade. It missed out on that coveted position in the mobile revolution, which it now wants to redeem with a more vertically-integrated approach.

That can be seen in Surface laptops (a vessel for Windows and Office products) as well as the Hololens on the enterprise AR front. Back to wearables, Microsoft more recently exhibited this hardware-forward approach with the new Surface Earbuds, which have native integration with MS Office productivity functions.

Acclimation Play

Of course, the trend stretches beyond the big five, and let’s not forget Facebook, which is working on AR glasses. Samsung has its own wearables play. The strength of the category will attract commodity hardware players to fill gaps at the lower end of the market, scaling up global access and adoption.

We’ll also see specialty players at the high end, such as Bose. It’s leaning into a hearables strategy with its BoseAR platform. In addition to a strong brand, it’s the only player yet to open up a developer platform to scale up the creation of intelligent and sensor-informed audio experiences, such as local discovery.

Snapchat is another dark horse in wearables. Its advantages include high engagement and product focus, and it’s not afraid to experiment with hardware in the wild. It’s zeroing in on elegant UX with Spectacles 3 with the goal of feeling out and advancing consumer comfort levels for camera glasses (and eventually AR glasses).

Speaking of AR, it was mentioned a few times above, as its endpoints are inherently wearable. Though AR glasses are taking longer than expected to arrive, the rise of wearables should help. The thought is that once AR glasses roll out in earnest, consumers will be more ready if they’re already acclimated to wearable tech.

As for concrete projections for wearables in 2020 — this is predictions season after all — we believe that Apple will continue to lead the way. I’m predicting its wearables unit hits $30 billion in 2020 revenue, and AirPods sales (regular and Pro) will exceed 50 million units. The rest of the market should follow.

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Mike Boland is Street Fight's lead analyst, author of the Road Map column and producer of the Heard on the Street podcast. He has been an analyst in the local space since 2005, covering mobile, social and emerging tech. More biographical information can be seen at www.mikebo.land
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