Fitbits Down, But With its Active User Community, its Not Out

By Brian Withers Markets Fool.com

Following itsfourth quarter pre-release of earnings, Fitbit (NYSE: FIT) has its stock and investor confidence sitting at all-time lows. But the company's growing community of active users is an underappreciated asset that investors are overlooking, and recent comments from management make it clear that Fitbit is investing to strengthen the offering to those super-engaged customers.

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Image source: Fitbit.com

Fitbit's community is huge

Since 2009, Fitbit has sold over 60 million devices, more than double its nearest competitor. Over that time, the company has also sponsored a Fitbit community for users, allowing individuals to link up with family and friends that have a Fitbit to share their fitness results, create step challenges and cheer or taunt others in their network as healthy motivation.In the recent fourth quarter preliminary results announcement, Fitbit reported that its community has grown to 23.2 million active users.

Image source: Chart by author, data from Fitbit's earnings releases.

While the number of devices sold doesn't always translate into active users, Fitbit has created one of the largest fitness social networks in the world. Fitbit doesn't take this network for granted and understands the value this community brings to its brand. In the most recent earnings call, CEO and founder James Park said:

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Due to desire to participate in the social experience in the Fitbit app, we believe people are more likely to buy Fitbit over a competitor, because their friends and family are more likely to be users already, and people are less likely to leave their competitor due to similar dynamics.

It's clear Fitbit's management understands the pull of the network effect, and is doing its best to bring it to its offering. As more people use the community platform, it becomes "stickier" for users and the use-case becomes more compelling to non-users. Given that potential, it's no surprise that Fitbit chose to make improvements to the company's community features.

Fitbit doubles down on community

Fitbit's recent community enhancements revolve around three areas: feed, friends, and groups. The feed feature allows users to share successes, read content from Fitbit experts and discover and attend workouts. The friends feature allows you to easily connect with your friends and family, create step challenges, direct message and cheer or taunt your connected network. Lastly, groups let you discover, join or create groups of like-minded individuals to help encourage you as you work on your fitness goals.

When users are engaged with friends on the Fitbit platform, they are more active. Having more active Fitbit users in the community helps increase the chance you might have friends or family to engage with. Two key data points from the company's recent announcement emphasize these points.

  • Fitbit users who have one or more friends [on the platform] take 700 more steps per day on average than users without friends.
  • Over the past year, Fitbit saw a 98% increase in the number of users who have at least one friend on the Fitbit platform with overall Fitbit users averaging more than six friends.

The data makes it clear that an engaged community member is a good thing for the company. While Fitbit is a ways from the critical mass necessary to truly enjoy the network effect,the pieces are there -- the company has a commanding share of the wearables market and significant active user base. Their recent community experience enhancements are the next step in building the platform and base of long-term loyal customers.

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Brian Withers owns shares of Fitbit. The Motley Fool owns shares of and recommends Facebook and Fitbit. The Motley Fool has a disclosure policy.