The Biggest Sign Yet the Apple Watch Is Failing

By Adam Levy Markets Fool.com

When Apple (NASDAQ: AAPL) introduced the Apple Watch in 2014, CEO Tim Cook said, "We believe this product will redefine what people expect from its category." Apple then went on to demo lots of different apps for the Watch and launched it in April 2015.

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But even in those early demos it was clear the third-party app use cases for the Apple Watch were limited. The best use of the Watch was to extend the functionality of an iPhone, which Apple is uniquely positioned to do. Third-party apps demoed that day -- like Twitter, Pinterest, or BMW's electric car app -- were all better suited for a smartphone.

So, if anything, it's a surprise it took this long for companies like Amazon, eBay, and Google to kill the support of their Apple Watch apps. That didn't happen until earlier this month, a full two years after Apple launched the original Apple Watch. Nonetheless, it's the biggest sign yet that the Apple Watch failed to redefine the category. But that doesn't make it a completefailure.

Image source: Apple.

The best fitness tracker on the market

Just because the Apple Watch failed to live up to the company's initial expectations doesn't make the product a failure. After all, Apple sold about 22 million Apple Watches in 2015 and 2016, according to IDC. 2017 is off to a great start with Apple outselling Fitbit (NYSE: FIT) and every other wearable device maker, according to Strategy Analytics. And during the company's second-quarter earnings call, CEO Tim Cook said Watch sales nearly doubled from last year.

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The success of the Apple Watch is due to the company's focus on making it the best fitness tracker on the market, not a shrunken-down iPhone like it initially envisioned. It took about 18 months for Apple to find that focus with the release of the Apple Watch Series 2. Fitness trackers don't rely on third-party apps, and Apple's best uses all take advantage of the built-in software.

Apple also beefed up the hardware with fitness-specific applications. It added GPS for tracking runs sans iPhone and water resistance for swimming laps in the pool. These additions make it much more attractive than any other fitness tracker on the market.

Doing what Apple has always done best

Third-party applications are a relatively new business for Apple. It long relied on the closed ecosystem and combining its own hardware and software to produce a better product than its competitors dating all the way back to its earliest days in computing. It wasn't until a year after the iPhone launched that the App Store became a thing.

And while the App Store has been a huge success for Apple, driving revenue and profit growth for the company over the last few years, Apple's biggest strength is in creating a better user experience through premium hardware and software integration. That's how the Apple Watch has managed to be a successful fitness tracking device while failing to win the support of major third-party app developers. It's not a platform that's well suited for most third-party apps.

To be sure, there are some apps that fit right in with the fitness niche Apple is now squarely aiming for. Apps that track your golf swing or run cadence are well suited for the Apple Watch, as tracking those things via phone ranges from difficult to impossible. But apps that let you shop from your wrist are completely unnecessary and offer a poor experience.

So, yes. The Apple Watch is a failure. Many of the uses Apple demoed two and a half years ago are bad and unsurprisingly never took off.

At the same time, it's hard to argue that a product some 25 million people bought and more people are buying every quarter is a disappointment.

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Adam Levy owns shares of Amazon and Apple. The Motley Fool owns shares of and recommends Amazon, Apple, eBay, Fitbit, and Twitter. The Motley Fool has a disclosure policy.