Two U.S. tech rising stars suffered setbacks, and smart hardware startups turned cold

When GoPro went public, it said that it had already started operating video content and was committed to building a "media empire." At that time, the outside world believed that GoPro might be the next entry point for video. However, the transition from hardware business to content business is a big one, and the content business can only win the favor of investors if there is continuous innovation. GoPro should perhaps look for a new story.

Recently, two new technology stars in the U.S. capital market, smart hardware concept stocks GoPro (NASDAQ: GPRO) and Fitbit (NYSE: FIT), have both encountered historic lows in their stock prices.

The U.S. stock market was closed on January 18 for Martin Luther King Day. As of the close of trading on January 15, Eastern Time, the share prices of GoPro and Fibit were $11.46 and $17.97, respectively, with market capitalizations of $1.576 billion and $3.723 billion, respectively.

As the old saying goes, when it rains, Fitbit has been hit by a class-action lawsuit due to inaccurate heart rate tracking results of its products; GoPro may also face a class-action lawsuit for concealing information about the company's business difficulties.

Both companies have achieved profitability when they first went public. They were extremely popular at the time of their IPOs and were favored by a large number of investors. However, today, both companies are facing crises. There are two reasons for this: first, many Internet giants have already entered their markets; second, their business models are relatively simple. Although the two companies have laid out new businesses, they have not yet seen significant results in terms of revenue.

Nowadays, smart hardware is one of the hottest areas for entrepreneurship at home and abroad. As early leaders in the smart hardware industry, GoPro and Fitbit are now facing problems that reflect the plight of the entire industry.

No more glory

GoPro's original goal when entering the market was to provide extreme sports enthusiasts with extreme sports recording tools. It was ahead of other competing products with advantages such as full HD, anti-shake, and a rich variety of fixing and carrying accessories - this solved the core pain points of extreme sports enthusiasts.

On June 26, 2014, sports camera manufacturer GoPro was listed on the NASDAQ (stock code: GPRO). On the first day of trading, the stock price closed at $31.34, up 30.58% from the issue price. Within four days of listing, GoPro's stock price had doubled.

A year later, on June 19, smart bracelet manufacturer Fitbit (NYSE: FIT) landed on the New York Stock Exchange and closed at US$29.68 on its first day of listing, up 48.40% from its issue price of US$20.

However, in the past six months, both companies have lost their glory.

Recently, due to the fact that the sales of sports cameras during the holiday shopping season did not meet expectations, GoPro announced that its revenue in the fourth quarter of 2015 would be lower than expected. In addition, the company will lay off 7% of the total number of employees, involving about 105 employees. Not only that, for the Hero4 Session sports camera that went on sale in July last year, five months later, the company has reduced the price of this sports camera from the original $400 to $199.

Fitbit's latest move was to release a new product, the smartwatch Blaze, at CES on January 6 this year. However, this product was criticized by the outside world as "lacking innovation in product design and function", so the stock price plummeted by 18% that day, falling below the IPO issue price of $20 for the first time.

Fitbit was hit with a class action lawsuit on January 7, the day after its new product was released. Consumers from California, Colorado, and Wisconsin alleged that the heart rate tracking results of the two products Fitbit launched last year, Charge HR and Surge, were inaccurate and "largely inaccurate."

Although according to third-party data, Fitbit still ranks first in the wearable device industry, and its wearable device shipments increased from 2.3 million to 4.7 million in 2015, it has to be said that Apple still took away some of its market share. Judging from its stock price, its current stock price is about 65.5% away from its highest price.

An unnamed person in charge of a smart hardware project of a domestic Internet giant said that apart from macroeconomic factors such as the Fed's interest rate hike, the surge in GoPro and Fitbit's stock prices was mainly due to the good market environment during this period. More importantly, smart hardware companies were previously popular in the US stock market, and investors deliberately hyped up this concept, resulting in the market value of GoPro and Fitbit being seriously overestimated. "At present, I think this market value has returned to a relatively reasonable level."

The fate of entrepreneurs

From a business perspective, almost identical competitors have emerged in most of the markets originally occupied by GoPro and Fitbit. More importantly, these competitors are all giants.

In the field of sports cameras, in addition to the Yi sports cameras produced by Xiaomi, other manufacturers such as Garmin, a large manufacturer specializing in outdoor sports equipment, and Sony, which already has a camera business, have launched similar products. In other words, GoPro is no longer the only one in the market as it was before its listing. Zhang Ming, a smart hardware entrepreneur and founder of "Kaibu Care", said that once a giant enters the market, its brand, control of the supply chain and bargaining power will inevitably have an impact on the original small businesses.

"I bought a GoPro product at CES last year, but I don't see any outstanding iterations in the functions of the new products launched this year," Zhang Ming told the 21st Century Business Herald reporter. In addition, the market itself has reached a certain level of saturation, so GoPro's revenue will naturally encounter bottlenecks.

In fact, before it went public, GoPro was able to achieve profitability through expensive hardware sales, and most of its revenue now comes from hardware sales. GoPro is not unaware that it is difficult to have a future simply by selling hardware, because this model will face challenges from giants and will not be able to form a story that investors are optimistic about.

Therefore, when GoPro went public, it stated that it had already begun operating video content and was committed to building a "media empire." At that time, the outside world believed that GoPro might be the next entry point for video.

In 2014, GoPro hired former Skype CEO Tony Bates to lead GoPro's new media division, and then began a series of actions. However, in the earnings conference last October, the company's CEO Nick Woodman said that GoPro has invested heavily in the media business, but refused to disclose when its media business will be profitable.

An entrepreneur told the 21st Century Business Herald reporter that the transition from hardware business to content business is a large gap, and the content business can only win the favor of investors if there is continuous innovation. GoPro should perhaps find a new story.

The giant disruptor that Fitbit faces is Apple. As mentioned above, Apple has taken away a part of Fitbit's market share. If Apple iterates the Watch in the first quarter of this year, whether Fitbit can withstand it will be a big question. The person in charge of the above-mentioned smart hardware project said that Fitbit specializes in sports and health, but like most bracelet and watch manufacturers, its products are still in the state of icing on the cake, and an effective cycle has not been formed in terms of data and services.

"Being eroded by giants and limited business models is actually a problem that all domestic smart hardware entrepreneurs will face. The domestic market competition is fierce, and it is even more difficult to make money by selling hardware like GoPro and Fitbit." The person in charge of the above-mentioned smart hardware project said that smart hardware entrepreneurs need to build their own ecosystem. It is unlikely to fight alone. It is recommended to seek ecological support from giants, or to truly cultivate and innovate in one field. For example, there are drone manufacturers entering the agricultural field to sell services, which may be a beneficial attempt.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.