The Future of Fitness and Health Apps

University of Toronto — Human Biology Dept.

HMB431 — Dr Jayson Parker

By: David Barnes, Patrick Hornlimann, Olivia Kezirian, Sun Lee, Patrick Walton

Introduction

The advent of applications for mobile phones and tablets created a new market space for software developers. There is a growing demand for mobile health and fitness applications within this space. Health and fitness apps are distinct because they address an issue or assist in improving an individual’s physical and mental well-being. The mobile health and fitness apps that will succeed in this market will be the ones that are able to make effective use of available hardware and provide meaningful interpretations of an individual’s health data. The mobile health (mHealth) market has several strengths including low barriers to entry and opportunities for individualized care. Mobile app development is much easier than hardware development so there are plenty of opportunities to grow within the available mediums of wearables, tablets, and smartphones. The limited available hardware puts limits on what can be accomplished by apps. That being said, mobile health and fitness apps have yet to take full advantage of all the capabilities and data the current hardware provides.

Market Analysis

Market Strengths

The health and fitness industry is a strong one to get into because of available opportunities as well a growing public health sentiment. The mobile health market has been booming since the launch of the Apple App store in 2008. Since then there has been over two Billion US dollars of revenue generated by this market (2). One of the reasons why this market is so successful is because of its diversified avenues of revenue generation. Health and fitness apps generate revenue from in app purchases, paid downloads, transaction fees, device sales, and service fees. For 50% of app developers their main source of revenue comes from either device sales or service fees such as wearable sensors and data storage tools (2).

In 2017, 90% of the markets total revenue is expected to come from both these categories (2). This shows that the use of devices and app services is upwardly trending and it is important for new and current market players to make use of these avenues. Another strength of this market is the ease to enter due low start-up costs. This market has many participants that range anywhere from hospitals to general app specialists to fitness specialists (2). This market is also diversified with regard to consumers. Chronically ill people, temporarily ill people, health & fitness Interested individuals, physicians, and hospitals can all be targeted by health and fitness app publishers (2). The fact that it is easy to download, use, develop, and distribute apps is another strength of the mHealth market that lowers the barrier for new entrants (2). Health and Fitness apps are very attractive and highly demanded for customers and patients as they support them in daily life. This is further supported by general health and nutrition hype that we are currently experiencing. A knowledgeable consumer base combined with high opportunities for growth makes the health and fitness market a good business venture.

Market Weakness

The mHealth market has many weaknesses because it is a young, rapidly growing market. Survival in the market and the ability to generate revenue has been largely dependent on experience. The lack of standards and regulations in terms of data security constitutes a major barrier for app developers and hinders them from producing safe and trustworthy apps. Considering the large amount of app launches in the mHealth market that accounts for only 2.9% of the app market, there is lots of indirect competition, which could be a publisher’s downfall (1).

The mHealth market is still a niche market and is expected to enter its integrated market phase only in 2016 indicating acceleration in growth (2). Few app developers (5.1%) succeeded in generate significant revenue (more than 1m) in the mHealth market (2). The largest mHealth market section (68%) did not make more than 10,000 USD in 2013,which is associated with high risks for newly entering app publishers (2). Regarding the high amount of new entrants, the mHealth market is full of competition (2). This in turn results in applications being redundant and unprofitable, as they do not comprise additional value. The mHealth industry is a small and volatile market that needs to be taken into account by any potential new entrants.

Competitor Analysis

The Health and Fitness app market is highly competitive; apps that are able to connect to wearable technology and maximize data storage are performing better than their competition. By the end of 2014 there were an estimated 15,000 app developers in the Health and Fitness category (2). The Apple App Store has experienced over 75 billion downloads but Health and Fitness apps make up less than 3% of them (1). RAM storage on devices such as smart phones and tablets is limited. This creates direct competition between Health and Fitness apps as well as indirect competition with other app categories such as Lifestyle and Gaming. Only a small proportion of Health and Fitness apps make over 1 million US dollars and one way in which they were able to distinguish themselves from their competition is through the use integration of Application Program Interface (APIs) such as wearable technology and data storage (2). The majority high-revenue generating apps use APIs, while API use is a minority in apps that generate little to no revenue (2).

Not only has it been proven that using APIs differentiate publishers from their competition, but sharing them can give a competitor a considerable advantage (2). The Connected Elite is a collaborated group of Health and Fitness apps that have publicized their API to enable synchronization with competitor apps, sensors, and devices (2). This allows app publishers to maintain a competitive edge over non-synchronizing app publishers by developing and improving their apps’ main functions while outsourcing secondary features such as data management and analytics (2). By connecting to more sensors, devices and databases, users have a greater experience with their apps. Therefore, the use and sharing of APIs publishers promote more downloads of their apps thus generating more revenue.

Hardware and Software Development

Software developers can easily create and reproduce apps compared to a company’s ability to produce hardware. This leads to greater competition in software development. This asymmetry in development cost, effort and resources provides more incentive to create software than hardware. There are therefore many more software development companies than hardware manufacturing companies. The mobile app market is no exception with even more ease of development from software developmental kits and free distribution via online app stores. This makes this market very appealing to both large and small companies and has led to an over-saturation of the market. The mobile health and fitness app market is one of the fastest growing mobile app markets today and is currently a four billion dollar industry with projections as high as 26 billion by 2017 (1). It is no surprise that app developers are rushing to this market in hopes to capture some of this value. With over 100,000 apps in this market, only five percent of these apps have over 500,000 downloads (2).

That means that only a small percentage of these apps have attracted any real interest. Many of the apps available perform the same functions, so there is massive redundancy. This imitation process leads a superfluous quantity of apps. App developers need a way to distinguish themselves from the competition. This is most successfully accomplished by creative or extremely good integration of existing hardware with the software being developed, or by manufacturing proprietary hardware accessories. Since app developers all have access to the same software development kits, an incumbent rival company with the right software developmental expertise can emulate creative software development strategies. Early software provider advantage may be enough to secure a foothold in the market but hardware accessories are much harder to recreate and therefore provide a better chance of differentiating your app.

Hardware manufacturing lowers the threat of new entrants by increasing capital cost. Generally, the all-inclusive developmental cost of creating an app is between $20,000 and $150,000 (3). Once the product is developed there is no cost to reproduce it or distribute the app. With hardware design one must also develop a prototype for the device, but there are additional cost in manufacturing and distribution. If successful, the hardware accessory provides an added product for revenue, differentiates the app, and locks customers in to the product by making them invest in hardware.

Companies today may create their own app and devices or outsource their software development expertise to existing products. Remote monitoring apps are projected to be the most profitable over the next five years. These can include device capable apps that are able to track a patient’s condition, for example diabetes apps which are able to monitor blood sugar with blood glucose monitor (2).

These apps and devices will greatly reduce hospital stay cost and cost from patient non-adherence. Since developing hardware accessories can be challenging many software companies partner with other companies who have existing hardware. Res.im is a company that develops software for clients such as GoodLife (4). An interview conducted with Geoff Villeneuve, the Lead Mobile Developer, who addressed his role in fitness app industry (5). He believes that cross-platform functionality and having a distinguishing feature is imperative for the success of an app (5). In this case, the GoodLife gym network is an accessory to the app that gives a distinguishing feature and aids in its use and success (4).

Like most new and exciting markets there is an initial bubbling effect where many rival companies enter the market to try and capture some of the potential value. Over estimations may be made in both the value of the market and therefore the value of the companies in that market. When the actual value of the market and companies is realized, huge attrition rates take place leaving only the most elite companies. If an attrition event was to occur in the health and fitness app market the larger well established companies will persist, specifically the ones who innovate the industry by offering hardware accessories. Health and fitness app developers who have hardware accessories are more likely to succeed because of the accessories ability to differentiate their product.

Hardware Limitations

The limitations of current hardware provide better opportunity future development of health and fitness apps. Current mobile devices and wearable technologies capture certain metrics, including temperature, acceleration, relative position, tactile stimuli, as well as visual and auditory stimuli. This opens up the possibility for applications to use of this data for particular purposes. Apps nowadays can measure REM and Non-REM sleep and adjust the alarm clock accordingly (6). Also apps are able to detect heart rates, leaky windows, or measure muscle mass (7). These apps either manage to integrate the data from the smartphone alone or in combination with other devices and result in useful information for the customer. However, the sources of raw data that could be meaningfully integrated are scarce and are thus a limiting factor for the development of new applications.

Bant is an app that in combination with glucose sensor and a connecting device to track blood sugar over a time (8,9). App creator Joseph Cafazzo lamented about how in the year 2015 it is not possible to transmit that data by Bluetooth (8). The connecting device between blood glucose sensor and smart phone therefore has to fit into the smartphone’s plug (8). The original Bant was released six months before Apple changed the iPhone’s plug, which caused even more connectivity issues (8). The connecting device was FDA approved and would take years to be approved again in order to ensure quality and security. This is a very extensive type of dependency on hardware as such health apps make use of medical devices that have to be FDA approved.

Another app that is currently limited as a result of lacking technology is Onyx Motion, an application that teaches you how to improve technique in basketball and other arm related sports by integrating the signals from wearable devices at the wrist (10,11). The accelerometer and altimeter in a smart watch collects data about arm positioning, speed, and body positioning, which is then analyzed and used for digital coaching (11). Onyx Motion is a company that takes full advantage of wearable technology as they tightly follow our body movements and can interpret the actions. The app is compatible with any wearable and smartphone as the sensors that are used in those devices are standardized, according to creator Marissa Wu (11). Onyx Motion is currently in use for basketball as the only wearables on the market are around the wrist. Marissa Wu says that the app could also be used for soccer once a wearable device for the ankle would hit the market (11). This clearly indicates their limitation by the currently available hardware. Having said this, Onyx Motion is a very good example of a device that takes advantage of every possibility of the data that can be generated by wearables and thus, is dependent on further development of the hardware in order to take the app a step further.

Jason George talked in an interview about the interplay between developing hardware and software. Mr. George is the VP of Sales and Partnering for Muse, a company that produces an EEG headband that teaches you how to pay attention by analyzing brain activity (12,13,14). Muse is the first of its kind on the hardware side and has been quite successful in attracting potential software partners (12,13). Mr. George stated that their company has recently been cluttered with requests of application developers that are willing to make use of their technology (13). As illustrated by Muse, app companies will try to take advantage of any new technologies to overcome the current hardware limitations. For a resulting application to become a big player in the market, it then needs to be able to meaningfully integrate this data in new ways.

Other devices that might trigger a bunch of new applications are currently in development. Such up-and-coming devices include implantable devices such as microchips (15). These will be able to provide utterly unique data for health and fitness apps based on blood values that could then generate individualized feedback for the users. Consequently, such new devices are inevitable for the app market’s further growth in the health sector and will provide strict guidelines in the close future. mHealth apps which take advantage of these new hardware developments show promise for future development.

Future Potential

There is no ideal Health/Fitness app that could serve as a model for others because none of the apps give a practical reason for all the data collection. Regardless of the specific goals of an app, they should make full use of the data and capabilities available through the smartphone or wearable medium. Apple’s Health Kit best illustrates this recurring issue. Apple’s Health Kit has maximized integration with other apps and puts a lot of data in one place (16). The app then displays this information in a variety of charts and graphs (16). This information would only be useful to a very knowledgeable consumer or a personal trainer, who knows what the data represents its significance in terms of improving individual health. Nicole Tentativa, a personal trainer at GoodLife Fitness, additionally has concerns that the information gathered is only as accurate and useful as the individual is when documenting it (17). This is a time intensive process, which only benefits the user when total and accurate recording is used (17). There is an opportunity for this process to be improved upon, whether by coming up with a better process for recording or a more follow up steps to take once the information is collected. Health and fitness apps need to come up with a practical utilization for all of the data that has been collected and present it to the user in a meaningful way.

A Toronto based start-up called Onyx Motion is working to solve exactly this problem, by using data from wearables to digitally coach athletes 10. While the app is currently in beta testing, this is the type of real time feedback and advancement that health apps need to create (11). Onyx is not creating the hardware, but they are maximizing its capabilities by providing an immediate value to the customer to improving athletic performance. Onyx Motion is going to be able to capitalize on the market space by taking an underutilized platform and raw data and interpreting it for the user. The ability to create a user experience that provides value for the consumer will be Onyx Motion’s key to success.

Health and fitness apps have the potential to become a part of daily life, especially if they are marketed as maintaining wellness or teaching life skills. There is a large potential market space for an app that takes the mountain of data available and tells the user how to live a healthier or better lifestyle. Applications such as Bant and Muse are going to do well because they create value for the customer. These apps provide the user with a skill, which can extend beyond the app interface. Bant helps diabetic adolescents keep track of changing blood glucose levels, using achievements, rewards, and connections to social media to keep adolescents interested (8). Joseph Cafazzo, who created Bant, did so to lower the burden of care on physicians and increase awareness of the necessity for glucose monitoring among young people with diabetes (8,9). Diabetes is a chronic disease, and being aware of how diet and exercise affect glucose levels will have lifelong implications (8). Muse is an app and wearable combination that can provide lifelong benefit through basic mediation training using a special EEG headband (12,13,14). Mediation has drastic effects on physical and psychological well being, and Muse is a simple and nonthreatening way to bring that exercise into daily life (12,13,18). Apps that are even more basic like Nike Training provide the user with exercises and skills to improve their physical health (19). This app could be improved by utilizing wearables or the Nike+ sneaker technology to time and track activity levels during the exercises, but as is it provides several tailored and effective workout routines. Bant, Muse and Nike Training all work to build skills to improve health. The daily use of such apps could be a benefit not only for people who are already healthy, but effect the quality of life for people with chronic conditions.

Using individual data to create a personalized health profile and recommendations seems like the next step for the health and fitness industry. There are hundreds of apps that are targeted at simply tracking data and information but have no real purpose beyond that. Mobile applications that can take the available data and provide relevant criticisms and conclusions are the way of the future. For example, health trackers could be updated to be capable of analyzing taste preferences and providing new recipes to keep diets on track. They could also suggest ways to improve health by suggesting alternatives to detrimental choices, like swapping processed and high caloric foods. Apps that provide exercise programs such as Nike Training could gradually increase the intensity and vary target muscles. Apps that collate data in the same fashion as Apple Health could make suggestions for other programs to use that would round out or improve their health profile. Apps that effectively collect and integrate data is going to require innovative hardware integration.

Conclusion

The mobile health and fitness apps that will succeed in this market will be the ones that are able to make effective use of available hardware and provide meaningful interpretations of an individual’s health data. The use and sharing of APIs publishers promote more downloads of their apps thus generating more revenue. Health and fitness app developers who have hardware accessories are more likely to succeed because of the accessories ability to differentiate their product. mHealth apps which take advantage of these new hardware developments show promise for future development. Apps that effectively collect and integrate data is going to require innovative hardware integration. The mHealth industry has many opportunities for growth as the market is going to continue to advance. Market conditions overall are favorable for new ventures, especially because of the low cost of entry. In order to stay relevant and generate revenue, the apps should differentiate themselves by taking advantage of available hardware. Apps that provide users with useful services and meaningful interpretations of data will be the most successful because they contribute to the user’s daily functioning. There are numerous opportunities for success in this area, particularly with regards to offering a service for the user. In the future, apps will make more effective use of personal data to create an individualized health and fitness experience. This trend towards individualization is supported by the growing amount of data made available from the ubiquitous smartphone use and the increasing wearable device trend. Mobile health and fitness is the way of the future; companies who can create apps that take advantage of individual differences in data will be poised to capitalize from this promising and growing market.

References

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