A Look Under the Hood of the Next Killer Smart Watch App

By Markets Fool.com


Hyundai's new smart-watch app lets you start your car remotely from your wrist. Source: Hyundai USA

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A big trend at CES 2015 is connecting cars to wearable devices. Hyundai, for example, showcased its Blue Link app for Google Android Wear earlier this week, which allows new model Hyundai owners to unlock their car doors and start the engine remotely, among other things.

While using a watch to interact with your car may seem like just a fun perk, especially in these early stages of development, I believe this kind of functionality could become a linchpin for wearables -- the feature that will get consumers to take the plunge into devices like theApple Watch.

The prototypes
The Hyundai Blue Link system works in conjunction with a phone connected to an Android Wear watch, which beams a signal over the Internet to the vehicle. The whole process is bottlenecked by the cellular network used to communicate between the phone and the car, so starting the engine could take as long as 30 seconds. As a security measure, users must also key in a pin code, but the small screen can be prone to mistyping.

The whole process is far from seamless.

When Apple unveiled the Apple Watch last September, BMW already had an app for the device. It could help you find your car, but there was no remote start or door unlock features. But Apple appears to be pulling ahead of Google and Android Wear developers when it comes to using its smart watch as a digital key. Starwood Hotels, for example, has its own app that will allow guests to access their rooms simply by waving their Apple Watch in front of the door lock. That's the kind of seamless functionality necessary for people to start using apps for their cars as well.

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Pair that with the biometric authentication Apple is likely to build into the Apple Watch for use with Apple Pay -- if it opens that up to developers, as it recently did with the iPhone's TouchID sensor, the Apple Watch could be the most secure key available.

Imagine being able to walk up to your new car, place your hand on the door handle, and it unlocks in less than a second. Get in, buckle up, place your hands on the steering wheel, and it starts right up. You could be able to get this for as little as $350 . . . on top of the price of your car.

Getting your partners to advertise your product
Apple has been extremely successful in getting free advertising from wireless carriers and banks with the iPhone and Apple Pay. Those partnerships have saved the company billions over the years. If the company partners with more car manufacturers and helps them develop attractive apps for the Apple Watch, they could end up similarly selling the Apple Watch for Apple.

With 16.5 million new cars sold in the U.S. last year and an average price above $33,000, that is a large, lucrative market for Apple to dive into. It could be a significant advantage that allows Apple to overcome Google's head start in the wearable tech space.

Diversifying revenue
In recent years, Apple has seen its revenue become increasingly concentrated on the iPhone. For fiscal 2014, the product category accounted for 55.8% of the topline. With climbing iPhone sales following the release of the iPhone 6 and iPhone 6 Plus and weakening sales for the iPad, this concentration should only worsen.

While the Apple Watch is unlikely to make a huge dent to the iPhone's percentage of revenue this year, 2016 could see stronger adoption of the Apple Watch and fewer upgrades with the S-cycle of the iPhone. It could be the first year since the iPhone's introduction that the product doesn't account for a higher percentage of Apple's total revenue than the year before.

Analysts already expect the new iPhone models and the introduction of the Apple Watch to have a significant impact on Apple's 2015 financials -- the overall consensus is that Apple will grow revenue more than 15% this year. However, analysts currently expect slower growth for 2016, but that could be the year Apple Watch sales take off. Assuming a third quarter release this year, the device will have at least twice as much time on the market in fiscal 2016. Opening the watch to developers for innovative features like digital keys should only boost sales further.

The article A Look Under the Hood of the Next Killer Smart Watch App originally appeared on Fool.com.

Adam Levy owns shares of Apple. The Motley Fool recommends Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.