Technology startups in tough markets: the case of Pebble
I’ve been following the fortunes of Pebble since the company hit the headlines in April 2012 in the wake of its highly successful Kickstarter campaign. That campaign, which is now a case study for crowdfunding researchers, managed to garner $10.2 million and sell some 275,000 units of a device that a market didn’t really exist for until then.
Pebble didn’t invent the smartwatch: Sony, I’m Watch, Motorola, and a few other companies were there first. What Pebble did was to set in motion a campaign that, helped by an infinite number of blogs and other media, inspired many, many people to the point of putting their money into a project that was still unfinished, and that was delayed further by production problems. But despite the setbacks, barely a handful of those who had paid upfront asked for their money back.
My experience with the first Pebble was very positive. Despite my initial reticence toward a category of product that many people consider unnecessary or that they would file under accessories, after several months use, I can confirm that I have come to rely on it. Being able to use a watch to see who is calling me or sending me an email has become second nature, and the device really adds something to my life. On the downside is the poor quality of the plastic, which thanks to my clumsiness meant that the thing was covered in scratches by the end of the first day’s use. The second version, the Pebble Steel, fixed all that: the combination of steel and Gorilla Glass was just what the doctor ordered.
After its Kickstarter adventure, which taught the company a lesson about the tough nature of the hardware market, Pebble took a few important decisions: on the one hand it cut a distribution deal with Best Buy, a move that infuriated some of the people that had taken part in the initial Kickstarter offer, but who still hadn’t received their watches; however, what it did achieve was that a great many of the chain’s shops sold out of the device, establishing its popularity further. Besides that, it received $15 million in financing and consolidated its open hardware strategy via an SDK that allowed anybody to develop apps for the watch, along with an announcement that it was opening its own App Store.
But Pebble’s growth doesn’t hide its principal problem: it is a small competitor in a large, difficult category where several leading companies already have carved out a niche for themselves. To the competition that already existed when Pebble arrived on the scene (for example, Sony, which in November launched the second version of its model), the usual suspects have since entered the fray: Samsung, Google, and Apple, along with a few surprises in the form of Qualcomm, Epson, or Lenovo. Google particularly seems committed to smartwatches, as shown by its recent acquisitions and announcements.
Apple, too, intends to enter the smartwatch market, an event that has been delayed for a variety of technical reasons. Nevertheless, both it and Google are companies are heavy hitters able to change the rules of the game. The major watch manufacturers still do not seem to have woken up to the possibilities of the smartwatch market, and are instead repeating the mistake they made in 1969 when they failed to grasp the potential of quartz, which changed the whole industry.
This is a category subject to its own dynamics: on the one hand, a transition from beta to a phase whereby style has come into play much more; on the other, it is experiencing the less-is-more tendency that has seen Pebble shun color in favor of a black and white e-paper look, as well as deciding not to clutter the device with a microphone, speaker, or even a camera. The result is a device that can be read comfortably even in direct sunlight, that can be recharged every four or five days, and that rarely lets you down by running out of power.
It is still too early to make any firm predictions about Pebble’s future. A small company in the tough consumer electronics market, it faces competition from some powerful players with big plans for the category. But for the moment, it finds itself in a paradox: in a segment that it kick started, it is setting trends and experiencing adoption like no other player. Is this just a flash in the pan, or a sustainable strategy? Either way, this is an uplifting and inspiring story.
(En español, aquí)
