Alphabet Inc.’s (GOOGL) Google is seeking approval from the European Union (EU) Commission to complete its acquisition of Fitbit by offering to not use the acquired data for ad targeting.
In a report by Reuters on July 14, the tech giant has tried to ease concerns from the EU Commission that it will employ data for advertising through its search engine and its other divisions. The EU Commission is planning to gather feedback from Google’s competitors and users before making a decision.
In an emailed statement to Reuters, Google assured that the “deal is about devices, not data.” The company added, “We appreciate the opportunity to work with the European Commission on an approach that safeguards consumers’ expectations that Fitbit device data won’t be used for advertising.”
In November of last year, Google announced that it was acquiring the popular wearable and device tracking company, Fitbit for an estimated $2.1 billion. The announcement was followed by criticism from privacy-right groups expressing concerns about privacy because the devices house users’ health data.
The Center for Digital Democracy, Public Citizen and Consumer Action wrote to the Federal Trade Commission (FTC) on November 19, saying that with the acquisition, “Google already holds a dominant position in the digital marketplace, health data is critical to the future of that marketplace, and the data protection concerns stemming from the acquisition will have far-reaching consequences including a dramatic erosion of consumer privacy.”
One month later, the US Department of Justice and the FTC announced that they would be investigating the acquisition.
While the merger would add to Google’s portfolio of user information, the amount of health data is comparably small. Fitbit trails behind Apple (AAPL), Xiaomi, Samsung, and Huawei with only 3% of global wearables as of Q1 2020, according to market research firm International Data Corp. Google currently lacks a wearable brand that has reached mainstream recognition and they have not made significant inroads in the consumer health market.
On November 1, 2019, Google Senior Vice President of Devices and Services Rick Osterloh said, "Fitbit has been a true pioneer in the industry and has created terrific products, experiences, and a vibrant community of users.” He added, "We're looking forward to working with the incredible talent at Fitbit and bringing together the best hardware, software, and AI, to build wearables to help even more people around the world.”
When news of the merger leaked beforehand, Wedbush analyst Michael Pachter said on October 29, that Fitbit made a “fine” acquisition and that it made “imminent sense” to purchase rather than go to the trouble of creating devices and collecting years of data. As of July 14, he maintains a Buy rating and a price target of $1,550 which implies upside potential of 3%.
Overall, 28 analysts assign Buy ratings, 1 Hold rating, and no Sell ratings, giving GOOGL a Strong Buy Street consensus. The average analyst price target stands at $1,566.04 suggesting 4% upside potential, with shares already up 13% year-to-date. (See Alphabet Inc.'s stock analysis on TipRanks).