Thomas Alomes | Peloton’s similarities to WeWork are uncanny, however the plight of linked health is tremendously exaggerated
Technology is used to realize a holistic approach to health and well-being that encompasses physical activity (or inactivity), nutrition, sleep and mental health. Devices, platforms, and apps that provide coaching, tracking, and insights into user activity to help achieve fitness or health goals are becoming ubiquitous.
After the Covid-induced boom in connected fitness and health over the past two years, 2022 has been a natural fragmentation and correction of the market into distinct segments, each with their own winners and losers.
To illustrate the evolution of the market and the trends that continue to drive it, let’s take a deeper look at two of the well-known names in the broader connected fitness and healthcare market: Peloton in the home connected fitness category and Whoop in wearable continuous health and fitness monitoring.
Peloton – the WeWork of connected fitness?
The rise and fall of WeWork has been well documented, to the point that it even has its own Apple TV drama series, aptly titled WeCrashed. For a while, WeWork convinced investors, and the market in general, that it was a fast-growing tech company dedicated to real estate (rather than the other way around). Additionally, it was riding a coworking macro growth trend that was reportedly destroying the traditional office setup.
Finally, WeWork’s internal mismanagement — including the founder’s appointment of unqualified family members to run business units — coupled with the survival of its incumbent rivals, caused the valuation to plummet from a high of $47 billion to its current valuation of 5 $.1 billion. This led to WeWork’s investors ousting the founders’ leadership team and reorganizing the company.
Peloton was seen as a darling of the booming connected fitness market during the Covid-required shift to home workouts. It has been positioned as a rapidly scaling tech company that is revolutionizing the traditional fitness industry and capitalizing on the unstoppable macro trend of digitizing the at-home fitness experience that was rumored to be killing traditional gyms.
But guess what?
Internal mismanagement — including the founder’s appointment of unqualified family members to run business units — combined with the survival of the gyms as the main competitors of the incumbents, caused valuations to plummet.
Peloton was trading at $162 per share at the start of 2021 with a market cap of around $45 billion after the stock surged more than 440 percent in 2020. At the time of writing, that has fallen to $12 per share in a market cap of around $4 billion. This led to Peloton’s investors ousting the founding leadership team and reorganizing the company.
Whoop’s Success Story
Now let’s compare Peloton’s cautionary tale to Whoop’s continued success. With a current valuation of $3.6 billion and continued strong growth, I think Whoop is the quintessential sports-tech unicorn success story. It makes the most of the major trends in the industry without overdoing it.
Let’s break down some of the successful elements:
1. Democratization of elite technology: Recent technological developments, including battery breakthroughs, have enabled smaller and cheaper hardware units that can be made available to a mass consumer market, not just elite athletes. Whoop was initially aimed at elite athletes before becoming ‘prosumer’ and is on the way to mass market adoption.
2. Healthcare cost control: Just as individuals are more proactive in shaping their own health journeys, employers understand that the health of their employees should be their priority. In the US, this is being driven by rising health insurance costs and lost productivity due to illness. Whoop employees receive cash rewards each month for achieving their sleep and recovery scores. It’s an opt-in program that encourages employees to be healthier and more rested, which means fewer missed sick days and more productive outcomes at work.
3. Athlete biometrics: Last month, I explored the use of athlete biometrics to improve the broadcast experience. Whoop has been instrumental in making this a reality.
4. Athlete Investors: Individual athletes are seen as part of the burgeoning creator economy, where athletes can connect directly with their audience and make their brand work with investment, not just support. Whoop understands the power of the athlete and has a number of high-profile athlete investors who also serve as brand ambassadors, including Patrick Mahomes, Rory McIlroy, Kevin Durant and Justin Thomas.
Connected fitness is not dead
Just as the death of gyms has been greatly exaggerated, so has the death of connected fitness. There was a needed market correction, but ultimately the way we live, including the way we move, has changed forever.
People are returning to in-person office work, but still utilizing video calling and team collaboration tools that became popular during the remote work era. People are returning to personal training in the gym while also using new connected home fitness equipment and social fitness platforms to stay connected with their community.
The adage “hardware is hard” still applies. Earlier this month, connected fitness maker Wahoo and cycling simulator Zwift both announced a round of layoffs to mitigate the normalization of connected fitness sales. Zwift also canceled its previously announced plans for smart bike and trainer hardware, citing “the current macroeconomic environment” as the reason for the decision.
Zwift CEO Eric Min sent an email yesterday informing the entire Zwift workforce of over 700 employees that a company-wide restructuring is underway.
The move includes a series of layoffs, a “pause” in hardware, and a refocus on software.
Read more: https://t.co/bhbicCQoYM
— Zwift Insider (@zwiftinsider) May 12, 2022
It will be interesting to follow Peloton and its contemporaries on what companies like yours can offer users in the “new normal”. Leading indicators are that social and community elements combined with the creative “talent” of their trainers and coaches are the answer to differentiating these connected fitness providers.
According to a 2021 report by global consulting firm McKinsey, digital fitness companies that offer an engaging and inspiring community element have been the most successful. During the pandemic, community-focused fitness apps are growing four times faster than tracking and exercise-centric apps.
Wearables – Platform Integrations
There will be a natural limit to how many devices people carry and how many apps or platforms they use to understand the data generated by those devices.
Workout tracking and social sharing platform Strava is the largest sports community in the world with 99 million users on its platform. In 2021, activity on Strava hit record levels with 1.8 billion activity uploads, 20 billion miles traveled across all activities, and two million new members per month. Strava’s success has been fueled by its ability to collect and share data from various tracking devices such as smart watches, bike power units, and its smartphone app.
Left a message for Amazon etc on each 4.0 board 👊🏼 pic.twitter.com/9yfWgZc4Uo
— Will Ahmed (@willahmed) September 16, 2021
In the same way, health and fitness wearables, which can become the user’s preferred platform for collecting and understanding all of their health data, will capture and retain most users. Users literally choose their operating system for life.
Whoop founder Will Ahmed predicts there will be a future where “everyone will one day wear technology that measures their health and works to improve it. The low-end versions of this technology will present data, the premium versions of this technology will coach you on it.”
It appears to be a battle between Apple, Amazon, and Whoop over who will dominate the health and fitness wearables platform market. With no love lost between Amazon and Whoop, we stayed tuned for the heavyweight title fight to make this future of connected health and fitness a reality.
Thomas Alomes is a sports technology expert passionate about making a positive impact on sport through innovation. As the SVP, Head of Market Insights at STWSThomas provides premier advisory and strategic advisory services to providers, governments, major events, sports-tech investment funds and fast-growing sports innovators worldwide.
Thomas is that too Founder and Director of Sports Innovation Texasa non-profit organization that recognizes the region’s potential as a global innovation hub for sports innovation, business and technology.
Thomas serves as Advisory Board Member of SXSW and Chairman of the Commercial Management Committee International Sports Technology Association (ISTA). Thomas also serves as a mentor to a number of prominent sports-tech accelerators, as well as a visiting faculty member for MBA programs and contributing author.