Under Pressure from Under Armour

Adidas Buys Runtastic App to Catch and Defend

Earlier in August Germany-based Adidas announced plans to acquire fitness app developer Runtastic for €220 million. Runtastic, based in Austria, has about 70 million users around the globe. In addition to fitness apps, Runtastic also makes related hardware, including fitness trackers, advanced scales and heart-rate monitors.

Adidas hadn’t been blind to the digital trend before this announcement. The company already addresses the connected world of fitness with its miCoach line of trackers and apps, but Runtastic brings Adidas a community of millions of active runners and an understanding of user behaviour.

Last year CCS Insight predicted tie-ups between sports equipment manufacturers and wearables companies. We saw an example of this in May 2015, when Finland’s Amer Sports purchased Sports Tracker. Equipment manufacturers are now expected to tie quality analytical software and services to their hardware. We expect the trend to continue, and it appears independent fitness app makers are becoming the exception.

This year Under Armour, the number-three US sporting apparel maker, acquired app-maker Endomondo for $85 million and MyFitnessPal for $475 million. The company also purchased MapMyFitness in 2013 for $150 million. The aggregate user count between the three apps and services was 120 million.

The larger consolidation trend here is the growing fusion of sportswear and wearables. A weakness in wearables for sporting goods firms, even at this early stage of wearables, could threaten a company’s long-term position. Adidas, currently the world’s number-two maker of sports equipment and clothing behind Nike, is now feeling pressure from Under Armour, partly because its rival appears more tech-savvy.

Under Armour has made significant investments in developing wearables and we expect the company to continue this pace. The Under Armour brand is already strongly associated with advanced sports performance apparel, so the company is well-placed to release a biometric smart clothing line.

Adidas was right to acquire Runtastic, a popular app that will provide it with valuable user statistics and a stronger wearables ecosystem. The Adidas business is crossing over into life tracking, connectivity and big data. The technology advances in the industry mean Adidas and competitors now have to run their companies with a new mind-set.