Apple's new watch update is the missing piece of the puzzle the Apple Watch needed, and Fitbit should be worried

Apple’s missing piece of the puzzle

That should be particularly worrying for Fitbit. The company launched its own similar capability called Cardio Fitness Score way back in 2016, a feature that tracks users' cardio fitness level trends, provides them with a rating, and gives them advice on how to make changes in their routine to improve their score.

Fitbit and Apple are far from the only companies to offer VO2 Max monitoring on their wearable devices — firms such as Garmin, Samsung, and Huawei do so as well. But Apple is undoubtedly one of Fitbit's biggest competitors in the United States, according to market research firm NPD Group, which reports that Apple leads the smartwatch market in the US followed by Samsung and Fitbit.

The US market is particularly important for Fitbit, as the company said in its most recent earnings report that sales in the US alone make up 50% of the company's revenue, representing a 3% drop year-over-year. (The company did, however, see a 36% year-over-year increase in devices sold in its fiscal first quarter, although the average selling price dropped by 19% since the company has launched less expensive devices).

The health context that Fitbit provides based on a user's cardio fitness level was one of the few features that differentiated Fitbit's devices from the Apple Watch, and it seems like that's about to change in a matter of months.

It's a critical move for Apple's smartwatch, which has excelled at serving up key health metrics and tracking a wide variety of exercise types, but hasn't done much when it comes to making sense of all that data. Giving users a snapshot of what this data means over time and providing insight into how to improve has been the missing piece of the puzzle the Apple Watch needed to be a true general-purpose fitness tracker — not just a smartwatch with a lot of fitness-tracking features.

The Apple Watch is gaining another capability Fitbit has already offered, too. The watchOS 6 and iOS 13 updates coming later this year will enable women to track their menstrual cycles both on the watch and in Apple's Health app for the iPhone. With this new tracking feature, women will be able to log symptoms like headaches and view the days in which their period occurred, as well as their fertile window. Users can choose to view multiple months at a time as well, and Apple's system will integrate with third-party period-tracking apps too.

Fitbit's app has supported the ability to monitor menstrual cycles since last spring when it launched its Versa smartwatch. In Fitbit's app, for example, the dashboard can tell female wearers when their next period is expected to come, and they can track their symptoms and mood within the app as well.

Fitbit’s advantages

The watchOS 6 update will certainly put the Apple Watch on a more level playing field with Fitbit when it comes to how it performs as a fitness tracker. But even so, there are three important ways in which Fitbit's watches and trackers still outshine Apple's: sleep tracking, battery life, and pricing.

The Apple Watch still doesn't offer native sleep tracking, although it does support third-party apps that do so. (That might not be the case for too long, as Apple is said to be working on sleep tracking for the Apple Watch).

Fitbit, meanwhile, offers fairly comprehensive sleep tracking that can tell wearers how much time they've spent in deep, light, and REM sleep and presents that information in a graph. You can also see the average amount of sleep you get over the course of a week, and the app provides tidbits of information about how lack of sleep can negatively impact your health.

The battery life on devices like the Fitbit Versa can also last for multiple days, whereas I'm typically happy to get two days out of the Apple Watch Series 4. Long battery life is a necessity for sleep tracking — after all, how would you be able to log your sleep if you have to charge your device over night?

Plus, Fitbit's smartwatches are noticeably cheaper than Apple's. The standard Fitbit Versa starts at $180, whereas the Apple Watch Series 4 starts at $399. That makes Fitbit's smartwatch less than half as expensive as Apple's.

As Apple pushes deeper into health, Fitbit expands beyond watches and trackers

All told, Apple's watchOS 6 update is another sign that it's getting increasingly difficult for Fitbit to differentiate its products from the Apple Watch and other rival wearables.

Fitbit has been making an effort to diversify its revenue stream beyond consumer products with premium services such as the one it plans to launch later this year and its enterprise health program called Fitbit Health Solutions. That program grew 70% year-over-year and generated $30.5 million in revenue in the company's first fiscal quarter, accounting for a small but growing chunk of the company's overall revenue of $272 million.

But smartwatches and trackers still account for most of Fitbit's revenue, and based on Apple's increased focus on health, it doesn't sound like the company plans to slow down anytime soon. After all, CEO Tim Cook has even said when speaking with CNBC that Apple's "greatest contribution to mankind" will be about health.