As Apple Inc. (AAPL) and Samsung Electronics Co. develop smart watches and Google Inc. (GOOG) (GOOG) prepares to roll out Web-enabled eyewear, an ecosystem of software developers is springing up to lend a hand and reap the profits.
The wearable-computer market may swell to $6 billion by 2016, according to Wellingborough, U.K.-based IMS Research. To tap into that early, companies like Evernote Corp. have already set up shop. At the Redwood City, California, headquarters of the note-taking software maker, about two dozen engineers work among a clutter of wireless watches, heart-rate monitors and Google’s computerized spectacles.
“You can draw comparisons to successful technologies like the smartphone,” Evernote Chief Executive Officer Phil Libin said in an interview. “In the first two, three years, it was a niche product. I expect it to be the same sort of thing. It’s going to start becoming very profitable in three to five years. These are long-term investments.”
While most of Evernote’s revenue now comes from use of its software for personal computers, tablets and smartphones, that may change as wearable computers gain traction, Libin said.
Some 70 million connected wearable gadgets will be sold in 2017, up from 15 million this year, according to Juniper Research. While the devices are now mainly fitness monitors from brands such as Nike Inc. (NKE) and Fitbit Inc., Apple has a team working on a watch-like device, people familiar with the company’s plans said in February. Samsung said in March it was also developing a wristwatch.
Wearable Computing
As the devices proliferate, consumers who use wearables may download applications, giving developers the chance to charge an upfront fee or serve paid advertisements to users.
“It could grow very quickly, once we have a product that meets the needs of the consumers,” Will Stofega, program director at researcher IDC, said in an interview.
The enthusiasm over wearables could also fade quickly if the predictions aren’t borne out. And there are plenty of reasons for caution. The new apps will have to overcome privacy concerns associated with gadgets that can discreetly capture photos and take video clips. Developers of programs for wearable computers will also have to make their products stand out as they compete for the dollars of consumers already awash in hundreds of thousands of apps for smartphones and tablets.
Still, early signs show that users are ready for wearable electronics. In a survey by ChangeWave Research in March, about 19 percent of 1,713 North American respondents said they would be very likely or somewhat likely to buy an Apple iWatch. Consumers responded similarly before the release of Apple’s iPad tablet, the Bethesda, Maryland-based research firm said.
App Spending
If 40 million wearable units are sold in the next five years, developers could expect a $400 million market opportunity, given consumers’ current spending patterns of about $10 per month on apps for the iPhone and iPad, according to Roger Kay, president of researcher Endpoint Technologies Associates Inc. So-called in-app advertising, or promotions that run within the program, could double that revenue to $800 million, Kay said.
About 42 percent of iPhone, and 19 percent of Android-based phone users spent $1 to $20 on apps in the past year, according to a March 2012 survey of 2,540 consumers from Online Publishers Association.
Kleiner Backing
Google’s Glass, so far the most prominent example of these wearable computers, will be available this year or next, according to a company blog post. To jump-start development of apps for the device, the Internet-search giant said on April 10 that it’s joining venture-capital firms Andreessen Horowitz and Kleiner Perkins Caufield & Byers to encourage developers to write software for Google Glass.
The group, called Glass Collective, is betting that wearable computers will grow into a platform for third-party software developers the same way Apple (AAPL)’s mobile devices fueled an ecosystem of thousands of mobile-app makers. The VCs will jointly fund startups that create new uses for Google Glass in areas such as entertainment, education and health care.
Bloomberg LP, parent of Bloomberg News, is an investor in Andreessen Horowitz.
For many companies already making apps for smartphones and tablets, the cost of developing wearable apps would be incremental. Modifying an existing smartphone app to run on a device like a watch might only take “a couple of hours,” said David Kincaid, founder of San Diego-based Mobile Software Design LLC, the maker of the FreeCaddie golfing app.
‘Compelling Experience’
Kincaid has released an app for Pebble Technology Corp.’s smartwatch that shows key statistics on golf courses.
“It’s really easy,” Kincaid said in an interview. “I get multiple e-mails from people excited to get an app for the watch. If the watches take off like phones, they could be huge.”
Jason Jacobs, CEO at FitnessKeeper Inc., developer of workout tracker RunKeeper, is creating apps for the Pebble watch, as well as fitness gadgets such as the connected scale from Fitbit. The program displays key running statistics on a user’s wrist.
“As other wearables come to market, anything that helps people make better micro-decisions throughout their day gets us really excited,” Jacobs said. “It makes for a more compelling experience. If it helps us get more users, that’s helpful to us.” RunKeeper has more than 17 million users.
Litmus Test
Some wearable apps may run only on one specific device. Others may display some features on a user’s smartphone, and others on a watch or smart glasses. Still others may exist on the Web, accessible by devices online.
“It’s really about apps that deal with Google Glass. Where where they are running doesn’t matter,” Evernote’s Libin said. “It could mean actual applications running on the devices, and other applications being aware of the devices.”
In one to two years, software for connected devices other than smartphones and tablets — such as Internet-ready household appliances, wearable computers, TVs and autos — could generate as much revenue as today’s mobile apps, Stofega said. Mobile apps generated more than $30 billion in revenue by the end of 2012, according to London-based ABI Research.
For all types of connected devices, the apps’ success will depend on how seamless the payment and purchasing experience is, Conrad said. Developers have yet to figure out business models and the types of programs that would be popular on each type of wearable device, Stofega said. Some connected devices might end up being a hit, while others may not catch on.
Smaller Developers
“I am not sure commercial developers are right now lining up for small-run niche devices,” said Roger Entner, an analyst at Recon Analytics LLC. “The first batch will come from hobbyists that do it as a labor of love. Only then will we see the commercial app developers jump on the bandwagon.”
The goal of most developers is to build apps that sense and work with all of a user’s connected devices, Libin said. Google (GOOG) demonstrated in March how Evernote’s Skitch app can share a photo taken with Google Glass with a tablet. He also used the computerized spectacles to add an emoticon to a post on Path, a social network.
“I do think we are ahead of the curve a little bit,” Libin said. “We are among the earliest companies that are going to experiment with them. I think there’s promise everywhere.”
Source:Bloomberg
