Smartwatches await their time
The smartwatch market is especially questionable for young people who have moved away from wearing traditional watches and use their smartphones to track the time, analysts said.
The most promising uses for smartwatches, initially, could be health-related. A wristband on a smartwatch can monitor the user's blood pressure and heart rate. For instance, contract electronics supplier Foxconn Technology Group last month unveiled a wristband technology that can monitor a user's health and sync with a smartphone, usually through a Bluetooth connection.
Fitness watches are fairly common already. Some can cast an LED light on the skin to get a pulse or monitor whether the wearer is properly hydrated. The next step will be to put sensors used in fitness watches into smartwatches.
Smartwatches may have functions that extend the capabilities of a smartphone. They could, for example, be designed to display alerts of phone calls, texts or tweets—saving users the trouble of taking their phones out of their pockets, backpacks or handbags.
"It's more discreet to just glance at your wrist and be able to see phone calls, texts or tweets, or other announcements on the face of a watch," said Angela McIntyre, a Gartner analyst who researches wearable technology. "Smartwatches are really acting as peripherals to the smartphone, so that people using them have an alternative screen to the smartphone."
McIntyre envisions adding microphones to smartwatches so they can accept simple commands or be used to make calls. Some prototypes are already designed to respond to incoming tweets with preset automatic tweets, she said.
Stealth smartwatch efforts
Microsoft is reportedly developing a smartwatch that would run on a modified version of Windows 8 and would have its own LTE data wireless connections, so it wouldn't have to completely rely on a connection to a smartphone.
One potential downside to such a design is that users would need subscriptions to wireless service plans to take advantage of the device's support for LTE connectivity, McIntyre noted. "That's the biggest barrier to having LTE, and why these smartwatches will likely be tethered to another device like a smartphone for connectivity," she said. Still, having cellular technology on a smartwatch could be valuable if the device was used to, say, monitor a person's heart rate and transmit the information to a doctor.
Even if full voice conversations via a smartwatch aren't likely to be feasible for quite a while, McIntyre envisions a market for smartwatches that act as devices to give updates when connected wirelessly to a phone.
"Surveys show that people check their smartphones over 20 times an hour," she said. "People are constantly looking to see updates, so it would be easier to check their watch. There is user interest in smartwatches, which are light in weight."
Gartner hasn't put a specific number or dollar amount on sales of smartwatches in coming years, but the research firm has seen a healthy market for wearable fitness devices of all types, including fitness wristbands. Global sales of wearable fitness devices will jump from $1.6 billion this year to $5 billion in 2016, McIntyre said.
When Sony unveiled its third-generation SmartWatch 2 on June 25, it projected that 41 million smartwatches would be sold in 2016. To put that figure in perspective, it's just a fraction of the more than 1 billion smartphones expected to be sold that year.
Jack Gold, an analyst at J.Gold Associates, said he's doubtful that smartwatches will be seen as having much value, and added that device makers will have to offer something impressive to attract customers.
"What need does a smartwatch serve that I don't already have met by all the other devices I have around me?" Gold asked. "Do I really need a remote display on my wrist rather than just pulling out my smartphone or tablet? I'm a bit skeptical of the concept."
In search of a market
Sony's offering notwithstanding, some earlier smartwatches haven't been huge successes, Gold said. Microsoft's SPOT (Smart Personal Objects Technology) Smart Watch, first introduced in 2003, was discontinued in 2008, he noted. The result of partnerships with Fossil, Suunto, Swatch and Tissot, it initially sold for $800.
Chip and sensor technologies have come a long way since 2008, but Gold said he needs to be convinced that a smartwatch would be worth $100 to $300.
"Given that the majority of twentysomethings no longer even wear a watch, giving them up for the phones in their pockets, it's not like the watch concept will just evolve into the smartwatch," Gold said. "For many consumers, a smartwatch is a new paradigm, and makers will have to offer some real value to get them to wear one."
McIntyre is less skeptical, although she agreed that wearing a watch is a "generational thing." While young people have smartphones with them most of the time, the wearing of a traditional watch is still considered a "symbol of style" for other age groups.
McIntyre expects traditional watch makers to partner with Apple and others to market the allure of wearing a watch with smart attributes, such as Internet connectivity—possibly through a phone—and the ability to run some apps. Kickstarter-funded Pebble released its watches earlier this year.
The smartwatch market is so young (even though some models have been around for a decade), say analysts, that a watch's brand name will have almost as much influence on buyers as the device's features and functions. The iPhone is a good example of that marketing phenomenon: Apple was able to generate excitement for the iPhone, partly because it had a great reputation for making quality products, even though other smartphones already on the market had failed to gain traction.
"Brand certainly comes into play with smartwatches," McIntyre said. "Consumers choose electronics more by brand reputation and quality than on the basis of features alone."
Big players don't want to miss out
Kevin Restivo, an IDC analyst, said it's not surprising that all the coming smartwatches are being developed by large, respected companies, often those with an ecosystem to design, manufacture and market devices. "The largest consumer brands are the most trusted, and that makes them most likely to succeed with a smartwatch," he said.
As it did with the iPhone and the iPad—and even the earlier iPod—Apple may be able to generate excitement for a technology that isn't widely understood or appreciated. Apple and other smartwatch makers will succeed "if they make the smartwatch matter to people," Restivo added.
"They will make devices that are of the greatest interest to early adopters and those who are willing to experiment with new technology," he said. "Smartwatches aren't likely to take off like a rocket, but there will be early adopters and those willing to experiment."
Smartwatches are still so new to the general public that they still remain in the "so what" phase of technology innovation, Restivo added. "The question for people is really still, 'Why do I need one?' And to be fair to the companies making these, a lot remains to be seen. We don't know what to think of them or even care. The technology hasn't so far gone beyond 'so what?'"