Over the past two years, home fitness company Peloton has gone through a wild ride. Wilder, you might say, than a night out with Jess King and Adrian Williams.
At the start of the pandemic, sales of Peloton’s $2,000 connected spin bike were through the roof. The company could not meet the demand and resorted to shipping its bikes via air carrier from Taiwan, a move that cost the company $100 million.
Fast forward almost a year, the peloton is in trouble. Last week, Peloton CEO John Foley said the company was considering layoffs and production cuts, following a report that the company had hired McKinsey & Co. to review its cost structure.
Just this week, Blackwells Capital, an active investor with less than a 5% stake in the company, prompted the company to remove Foley and seek a sale of the company.
“company [Peloton] Too big, too complicated and too damaged for Mr. Foley’s leadership,” the group wrote in a statement. “At the same time, you must find out whether there is a better owner for Peloton, which we believe is There it is.”
In an analysis for Axios, Dan Primack ranked Google with a 3 to 1 odds of acquiring the company, if the company was ever up for sale.
“A lull for acquisitions, including a way to fight Apple over consumer hardware, lots of cash and welfare,” he wrote. “Plus, Peloton tablets already run on Android. On the flipside, Google has been hurt enough to shake off a bit of Health’s efforts.”
But I’d say Google might “hesitate a bit” but eventually consider a deal. If anything, the Peloton acquisition will better position Google to achieve its new goal in the health sector: focusing on consumers.
In October 2021, Google’s Chief Health Officer Karen DeSalvo told CNBC’s Bertha Combs that the company “wants to weave health into everything we do.
Google shut down its health unit in 2021, but the unit focused primarily on offering AI and other technology to healthcare systems, sparking controversy.
But the shutdown resulted in the talent moving to Fitbit, the $2.1 billion health tech acquisition that closed last year. Fitbit is positioned as Google’s entry into the world of consumer health.
Primac was top ranked with a 5 to 2 odds, as Apple “has always been Peloton’s best strategic fit, both in terms of strategy and aesthetics.” Both companies have similar philosophies when it comes to vertical integration. But it’s worth noting that Apple has its own Fitness+ initiative, which is a direct competitor to Peloton’s digital app. The company also shied away from big-ticket consumer tech acquisitions, instead quietly acquiring smaller firms.
Apple markets Fitness+ as “the first fitness service powered by Apple Watch.” The company would love for you to subscribe to its fitness content, which is $9.99 per month, but won’t mind if you upgrade to a new watch. In fact, the Apple Watch and Google’s acquisition of Fitbit follow in a big trend of tech-driven DIY health diagnostics.
Companies like WHOOP and Levels are making a splash in providing health enthusiasts with advanced data, just like your doctor provides you.
Tim Cook has said that Apple’s biggest contribution to mankind will be health, as the Wall Street Journal reported last year that the company experimented with opening health clinics of its own, possibly in the future.
While Clinique’s aspirations are believed to have largely stalled, there’s no doubt that Apple will try to integrate healthcare deeper into its Watch experience. One possibility is that Apple is using Watch data to provide more personalized care and preventive services to clinic patients at a lower cost than traditional health care.
The Apple Watch has a 55% marketshare in the smart watch category and it’s likely that a good fraction of current watch owners have previously owned one of Fitbit’s devices in the past. Google may use Peloton to bring these users back to the Fitbit platform.
Despite the current lack of demand for new customers, there are thousands of happy Peloton members who use their bikes, Bike+, Tread or Tread+ on a daily basis.
Peloton’s externally published metrics show that customers are incredibly satisfied with the product. In July 2020, Peloton said the product had a Net Promoter Score (NPS) of 94, which was higher than Apple itself.
Google may eventually market Peloton as a “fitbit-powered fitness service” and provide Peloton users with unique data, metrics or insights if Fitbit wears the device.
However, this is all pure speculation. Foley is unlikely to step down as Peloton’s CEO, given that he and his other board members collectively control 80% of Peloton’s voting power through super-voting Class B shares.