emarketer webinar: wearables—10 insights on device adoption and business opportunities

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Wearables: 10 Insights on Device

Adoption and Business Opportunities

Cathy Boyle

Senior Analyst, Mobile

June 25, 2015


Agenda

Ownership rates

Awareness levels

Most popular device types now

Challenges hampering adoption

Biggest business opportunities

Where the market is headed

Rolled together = 10 key insights


“Wearables”

is a

convenient

term for

categorizing a

new class of

tech devices

But it fails to convey the

complexity of the

marketplace


Wearable devices’ varied uses create one layer

of complexity

Consumer Enterprise Medical

Medical photo credit: Gracie Trinidad, University of Michigan Medical School Information Services


The multiple

subcategories

of devices

that fall under

the wearables

umbrella add

another layer

of complexity

There is a wearable

device for nearly

every body part

Product images sourced from manufacturers’ websites and Vindrico Inc.


10 Insights on Device

Adoption and Business

Opportunities


#1

Consumer awareness

levels are high, but

ownership rates are low


Depending on

the country,

40% to 68% of

mobile media

users

worldwide

were aware of

wearable

devices last

year


But only 1.5%

of the world’s

population

used a

wearable

device in 2014


As of March

2015, 17% of

internet users

worldwide

owned a

wearable

device


#2

Wearables are slightly

more popular in the US


US consumers

are more likely

than their

international

counterparts to

use a wearable

device

22% of the US internet users

polled by Accent Marketing

Services in February 2015

owned a Fitbit device


But not all

research

aligns:

16% of US

households

owned a fitness

tracker or smart

watch as of

January 2015,

according to the

CEA


#3

Interest and ownership is

all in the wrist at this point


Fitness

trackers

continue to be

the most

commonly

owned

wearable

device type


Consumers

are more

interested in

owning a

fitness

tracker than a

smart watch

As of February 2015, more US

internet users were excited

about owning a fitness tracker

than a smart watch


#4

Being a smartphone extension

is a double-edged sword


The link to the smartphone is a positive and

negative

On the plus side …

1. Manufacturers and retailers can bundle

wearables with smartphones to raise

awareness and drive sales

2. Consumers who are addicted to

smartphones are more prone to buy a

wearable device

More than a third (35%) of smart watch owners

bought the device to supplement their

smartphone addiction (Nielsen)


The link to the smartphone is a positive and

negative

On the negative side …

1. Smartphones are growing more

sophisticated, which raises questions

about the value of a wearable device

2. Operating system (OS) capability can be

a hindrance to adoption


#5

Value-to-price ratio needs

more work


The value

proposition is

not always

clear or big

enough to

motivate

consumers to

buy a

wearable

device


At this early stage of wearable device

development, consumers are price sensitive

On average, proposed retail prices were 41% higher than

what consumers were willing to pay for the wearables

studied by technology solution provider First Insight

Consumers expressed an unwillingness to pay $200+ for

new-to-the-world products


Pricing is a hurdle that needs to be overcome

“You shouldn’t be paying $150 for a

fitness tracker; you should be paying

$35, right? Pricing has got to be

addressed.”

—Niall Murphy, founder and CEO of

Evrythng


#6

Mass adoption requires a

“killer application”


Wearables’ low adoption rate suggests the

devices lack a compelling use case

“There's been a lot of niche wearable

development. But until we can find

something that hits mass-market

appeal, it's going to be tough to get

mass-market adoption.”

—Jeanniey Mullen, founder of Wearable

Collective and YellowBean LLC


What will

motivate

consumers to

buy a smart

watch?

Activity Tracking

Time Telling

Phone call

management

Navigation

Apps


Mobile experts say a robust app ecosystem is

needed for smart watches to succeed

“The development of an

app ecosystem is

one of the

fundamental core

tenets of adoption

because these devices

need to be useful to

the end consumer.”

—Scott Weller, CTO and

co-founder of SessionM

“Developing smart watch

and wearable-native

apps will be

imperative. Over the

next two years we’re going

to see a massive influx of

application developers for

wearables.”

—Ramsey Masri, CEO of

OtherLevels


Discover is experimenting with wearable apps to

gain knowledge and competitive advantage

“We developed apps for watches and

glasses to experiment and try to

figure out what a great consumer

experience would be. If we don’t

experiment, we’ll be taking somebody

else’s advice.”

—Mike Boush, chief digital officer at

Discover Financial Services


Under Armour has found that wearables make

app experiences richer

“We take the data that we can get from

those devices and create engaging

experiences on our mobile

applications, which are the hub for a lot

of wearables at this point.”

—Chris Glode, general manager at

Under Armour


#7

Data is the big win for

businesses, but it comes

at a cost


Wearable users are willing to share personal

data─if they get something in return

75% of US fitness

tracker users were

somewhat to

extremely

comfortable sharing

their personal data

if it meant ads

would be more

personalized


A more tangible reward increases consumers’

willingness to share data from wearable devices

40% of US consumers said they would share data

from their wearable devices with retailers or brands

in exchange for coupons, discounts or information

(Acquity Group, 2014)

Only 9% of those polled said they would share data

without such incentives


Under Armour used data from fitness trackers to

boost sales for its advertising partners

“Last year we launched a program with

Zappos on the MapMyRun platform.

We called it Gear Tracker. This was a feature where consumers could

use the data that’s collected

via a fitness tracker and stored in

MapMyRun to track how much mileage

they’re putting on their running shoes.”

—Chris Glode, vice president of digital,

connected fitness at Under Armour


Zappos used data from fitness trackers and the

MapMyFitness app to retarget sneaker buyers

1 2 3 4


#8

Notifications are the easy

way in─and out, if businesses

aren’t careful


Offloading calls, text messages, email and app

alerts to a wearable is common

“Push notifications are critical in the world of

wearables. Particularly

from a retail and a brand

perspective, they’re going to

become more and more

powerful.”

—Jeff Malmad, managing director

and head of mobile and life+ for

Mindshare

The highly personal

nature of the device

heightens the

importance of

notifications

In turn, delivering

value is paramount


Pandora is approaching push notifications with

caution

“Watch users are just starting to figure

out notifications and how to make

sure they get the right thing at

the right time. We need to be aware

[of that learning curve] so that we’re

not annoying people all of the time.”

—Carl Edwards, director of device

engineering at Pandora

Just because you can send a push, doesn’t mean you should


#9

Paid advertising will be

native and new


Mobile

marketers see

good potential

in advertising

on wearable

devices

66% of mobile marketers

polled by the IAB in

January 2015 gave

wearables a high rank for

advertising potential


Native ad formats are one way advertisers are

connecting with wearable users

“In order to get reach, advertisers are

going to need an ad format that is

ubiquitous, that works across

every one of the different

devices. The marketing industry is

moving toward native advertising as a

result, and for us, audio ads are native

ads.”

—Jonathan Eccles, product manager for

native ads at Pandora


Sponsorships are another way

American Family Insurance

partnered with Mindshare and Under

Armour to launch a fitness program, the

2015 Challenge.

People with wearables synced their devices

to Under Armour’s MapMyFitness app, and

then opted in to participate in the 2015

Challenge

The participants needed to work out 20

minutes a day for 15 days over the course

of the month.

People could unlock specific achievement

level badges and unique Spotify playlists

based on their workout routines.

“There were over 50,000

participants in the

challenge and we logged over 1 million workouts

based on people syncing up

their wearable to the

MapMyFitness apps.”

—Jeff Malmad, managing director

and head of mobile and life+ for

Mindshare


Still, ads will not appear in volume until one or

more devices attain significant market share

“There is a bit of a wait-and-see

approach right now, primarily

because we have yet to see how

consumers are going to be using

wearables in their lives.”

—Jonathan Eccles, product manager for

native ads at Pandora


#10

Looking ahead: Smart

watches are expected to

take off faster than tablets


Most

forecasting

firms expect

smart watch

shipments to

increase

dramatically

in 2015


Projections suggest the smart watch market will

grow faster than the tablet market did

Gartner projected 19.5 million

tablet devices would ship

worldwide in 2010, the year the

iPad was introduced

Investment firm PiperJaffrey was

more conservative in its estimate,

projecting 11.32 million tablet

shipments for the same year


Smart watch shipment projections for 2015 are

much higher than tablet projections were

On the low end, Gartner projects 21

million smart watches will ship

worldwide this year

On the high end, Yano Research

Institute expects 65 million smart

watches to ship in 2015


Wrap-Up

1. Consumer awareness levels are high, but ownership

rates are low

2. Wearables are slightly more popular in the US

3. Interest and ownership is all in the wrist at this point

4. Being a smartphone extension is a double-edged sword

5. Value-to-price ratio needs more work


Wrap-Up

6. Mass adoption requires a “killer application”

7. Data is the big win for businesses, but it comes at a

cost

8. Notifications are the easy way in—and out, if

businesses aren’t careful

9. Paid advertising will be native and new

10.Looking ahead: Smart watches are expected to take off

faster than tablets

Marketers are leading digital customer experience

Source: Altimeter

Wearables require customer identity

Janrain connects customer identity with wearables

Ad Serving CMS Analytics Email CRM

Web Mobile Apps Social

Sam

Feb 9

1983

User

Profile

Devices +

Touchpoints

Marketing

Technologies

Unified

Customer

Identity

Identity drives more meaningful customer experiences

Hi Sam,

Here’s a

tailored offer


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Cathy Boyle

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Device Adoption and Business

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