Yesterday, Under Armour dropped a cool $475 million for MyFitnessPal and another $85 million for legacy fitness platform Endomondo. And just like that, Under Armour became a tech company.
Becoming a tech company is now something that every business needs to be. I’m not sure exactly when it happened, but at some point in the past decade or so the rules for a company to become and remain extremely successful changed. It’s no longer enough to simply have a product that people enjoy—be it a digital bookstore or a pair of athletic shoes—you have to be a tech company, too.
The Amazon effect
In 1996, Amazon sold books… and that’s all. It wasn’t a tech company, it was just an online book store that became very popular, very quickly. In 1996 the site brought in $15.7 million in sales, and by the next year that figure had grown almost 1,000 percent to $147.8 million, but that was long before founder and CEO Jeff Bezos spun the site into a mega retailer that sells, well, basically everything.
Those tablets, phones, and streaming boxes are simply a means to an end.
The Kindle was launched in 2007, and it played to Amazon’s roots as a bookseller. Nobody really questioned why an online department store was getting into the personal electronics market, especially after seeing how fantastically the device worked. We didn’t know it at the time, but it was just the first drop in Amazon’s gadget bucket.
Today, Amazon sells several models of the Kindle including the Kindle Fire tablet line that competes with Apple’s iPad, as well as the Amazon Fire Phone, which had a hard time in its first year in retail but will likely spawn successors. There’s also the Amazon Fire streaming box and the smaller Fire TV Stick which the company has had a hard time keeping on the shelves due to its popularity and low cost, and the endless number of Amazon-branded cables, docks, and all kinds of other accessories.
Amazon’s revenue has grown by leaps and bounds since its early days but growth has been particularly explosive since 2010, a year before debuting the original Kindle Fire tablet. The company’s tablets and streaming devices are largely seen not as revenue-generating devices on their own, but rather as investments in Amazon’s digital content business which can continue to bring in money long after the device has been sold. Bezos has gone on record as saying that making money on the purchase of gadgets isn’t his principal aim, but that the company wants to “make money when people use [Amazon’s] devices.”
Amazon has entered the tech market without hopes of actually turning a profit on the devices it’s selling. Instead, those tablets, phones, and streaming boxes are simply a means to an end. They are the poster child for the new tech revolution, where companies in every industry are finding that becoming a “tech company” is ultimately inevitable.
Just tech it
It’s hard to think of a product with less in common with the tech industry than shoes. Nike, the company that started with nothing more than a modest offering of track shoes, got its first true start in tech thanks to a little help from Apple. The company’s Nike+iPod Sports Kit, which connected wirelessly with Apple’s iPod to offer activity tracking via an iPod., was introduced in 2006. The Nike+ line eventually expanded to include apps on a variety of smartphone platforms, and of course Nike’s own gadget line, including the FuelBand and SportWatch, and even an athletic training game for Xbox 360.
Like Amazon’s devices, these tech-centric fitness products are all about getting you invested in the Nike ecosystem. You buy a band that tracks your activity and translates it into a point system that is only useful within Nike’s own digital world. Are you going to buy a pair of shoes from a competing company if Nike makes a pair that connects directly to the app on your smartphone, where all your past fitness data resides? Of course not.
Joining the tech side
That, of course, is what Under Armour is absolutely mortified of. The company’s sports apparel has always been well-received, and it initially became popular because it was the only brand that focused on producing sports clothing with moisture-wicking fabric to keep wearers cool and dry. People bought Under Armour because it was unique, and they have kept buying it out of brand loyalty. Its explosive growth made it a household name practically overnight, but these days every clothing manufacturer has some form of the same type of material, and it’s time for Under Armour to invest in its future.
Under Armour is now a tech company, and like Nike and Amazon, it’s using tech as a tool.
Buying up two extremely popular and trusted names in fitness tracking is a great step in that direction. Between MyFitnessPal, Endomondo, and the community growing around MapMyFitness, which Under Armour bought in late 2013, the company now has direct access to over 120 million active users. (And let’s not forget the company’s investment in biometric clothing.)
Under Armour is now a tech company, and like Nike and Amazon, it’s using tech as a tool, rather than a product that will pad its bottom line.
Next, Under Armour needs to find a way to wrap all of these users into a cohesive unit and then make sure that they don’t go anywhere. Given that fitness fanatics are creatures of habit, the helm of three of the category’s most popular apps is a fine place to be, but gently nudging users into a position where the company can benefit off of them—especially from those who use the apps for free—is a trick Under Armour has yet to pull off.
Photo via Inguyen/Flickr (CC 2.0)