Baltimore-based Under Armour rose to prominence after applying technology to the problem of sweaty cotton undershirts. Now, that same thinking underlies the almost $1 billion that Inc. reports the company has spent on creating a 150-million person strong digital health user base. CEO Kevin Plank sees this investment as the key to jumping ahead of Nike to become the largest maker of sportswear on Earth. Under Armour’s $4 billion a year in revenue is impressive, but whether putting $1 billion into digital health tech can pull it ahead of Nike’s massive $30 billion in revenue a year isn’t immediately clear.
The digital health tactic wasn’t an easy sell to investors and stakeholders. Spending $710 million to acquire and invest in three mobile app startups did unnerve many of the stockholders. Health and fitness apps MyFitnessPal, acquired for $475 million, MapMyFitness, acquired for $150 million and Endomondo, bought for $85 million, aren’t anything like the kind of product Under Armour is known for. Building a digital community doesn’t offer immediate financial benefits, and long-term planning is risky in a way that always bothers Wall Street.
That may start to change now that Under Armour’s Connected Fitness can boast five times as many people on its apps as Nike has on Nike+. The larger company also got rid of the FuelBand fitness wearable even as Under Armour starts selling fitness devices and a smart scale in a deal with HTC. Those are connected to the newly relaunched UA Record app that lets users track all of their health measurements. In some ways, this makes the Apple Watch and Fitbit more of a competitor to Under Armour than Nike. Coming after Nike by taking the lead in an area Nike isn’t participating in sounds odd, but if Plank is right, then Connected Fitness and the data the apps provide might very well multiply Under Armour’s value.
If it does happen, it won’t happen quickly, with Connected Fitness projected to bring in less than three percent of Under Armour’s revenue over the next two years. But the potential market is undeniably large and Under Armour is investing in different ways to exploit all of its new software, including helping users track when they need to buy new shoes and offering easy replacements through Zappos. Of course, Under Armour’s original success with athletic clothing might mean adding smart shoes of its own to its catalogue someday, if Wall Street’s heart rate doesn’t jump too high from all the money spent investing in the digital health future.