Under Armour’s Digital Long Jump

Why Sportwear Maker Under Armour Spent $500 million on Fitness Apps

Under Armour’s Digital Long Jump

Under Armour now knows what millions of people ate for breakfast. The sportswear maker bought MyFitnessPal, a calorie- counting app, for $475 million in February 2015. The app tracks the calories that a person consumes (for example, the 880 calories in a Cinnabon cinnamon roll) against the weight-loss and fitness goals of that person, nudging them to maintain a healthy lifestyle.

The deal was the most significant investment in health made by a US consumer-facing company in the first quarter of 2015. It shows a fitness company long-jumping from retail to tech. It shows the competition among sportswear brands, which sell mostly through offline retailers like Walmart, as they race toward the digital future.

Under Armour

Under Armour

Under Armour has spent over $700 million on fitness apps since 2013, when it bought MapMyFitness, the US workout-tracking app. It bought Endomondo, a European workout-tracking app, concurrently with MyFitnessPal for $150 million this year. These investments are separate from its spending on the underarmour.com e-commerce infrastructure, and they are hefty for a company that expects to make around $400 million in operating profits in 2015.

What does a manufacturer of athletic clothes get from these apps? For one thing it buys itself an online community of 120 million people, led by MyFitnessPal’s 80-million-person user base. Not all of them are fitness fanatics with a daily workout regimen. But they all felt strongly enough about a healthy lifestyle to download one of the apps and provide some personal data.

Data is the real payoff in these transactions. The three apps target different but overlapping audiences in the fitness market, which makes the aggregated data potentially rich in insights. Between MyFitnessPal, Endomondo, and MapMyFitness, Under Armour now knows what millions of people eat, where they work out, what fitness goals they aspire to (and which ones they actually reach), what types of workouts are becoming popular, and what fit people are talking about on social media. The company can analyze prevailing fitness trends by age, gender, sport, location, and climate.

By knowing more about potential customers, Under Armour believes it can market its products in a smarter way to an increasingly diverse audience. The company is moving from sportswear to casualwear, from menswear to womenswear, and from a focus on sports to a focus on fitness. It needs to reach not only US football players but also elderly yoga enthusiasts and people who aspire to exercise but actually prefer to lounge in comfortable clothing. Under Armour can harness the data to reach new customers in all of these categories. And just as importantly, it can harness the data to develop new products that cater to them.

Data’s power to drive sales is the essence of digital marketing, and it is the source of strength for many e-tailers like Amazon. The challenge for an app-ified Under Armour is to entice people to take their workouts online, just as Amazon persuaded people to take their shopping online. By drawing more people into digital fitness networks Under Armour can learn more about them. It can also count on more people needing athletic shorts to meet their fitness goals.

“At the end of the day the math is pretty simple,” said Kevin Plank, Under Armour’s founder and CEO, about the acquisitions of MyFitnessPal and Endomondo. “The more active someone is, the more likely they are to buy athletic apparel and footwear.”

Kevin Plank - CEO, Under Armour

Kevin Plank – CEO, Under Armour

The ever-competitive Under Armour sees itself in a race with Nike, and the competition is speeding its digitization. The world’s biggest sportswear retailer by sales (which are nine times higher than Under Armour’s) was the first to invest in digital fitness technology in the mid-2000s. Those efforts have now grown into the Nike Plus platform of fitness apps and wearable devices. Nike does not disclose user numbers, but its CEO this year referred to a “Nike Plus community” in the “tens of millions” – smaller than the 120-million-user community that Under Armour has amassed.

The companies’ approaches to conquering the digital space are as different as Apple’s is from Google’s. Nike painstakingly built its digital fitness platform from the ground up, integrating homemade apps with its FuelBand device. Under Armour, by contrast, bought a suite of market-tested fitness apps. It has no wearable device and prefers not to develop one, relying (in a Google rather than Apple mentality) on its apps integrating with the plethora of fitness-tracking devices on the market.

Nike has increased its investments in the Nike Plus platform. Through its Nike Plus Training Club and other new apps, it is moving beyond biometrics to social networks of fitness enthusiasts. “Our customers,” said Nike’s CEO said last year, “want to be part of a community where they can share and compare information, find performance tips and motivate each other. That’s why the expansion of our digital ecosystem continues to be one of my top priorities going into fiscal 2015 and beyond.”

Under Armour has followed suit. Connected Fitness is the new name of its Nike Plus-like platform. It integrates the company’s newly acquired fitness apps and aims to build on them through projects like UA Record, a homegrown app that emphasizes social media.

With its underdog mentality, dynamic founder-CEO, and extraordinary growth since the mid-1990s, Under Armour has much in common with Amazon. Like Jeff Bezos, Under Armour’s Kevin Plank is spending big on a grand vision to close the gap between his company and larger incumbents. This year Under Armour passed Adidas to become the world’s second-biggest sportswear maker by sales.

MyFitnessPal

MyFitnessPal

One sign of its ambition is the Connected Fitness headquarters in Austin, Texas. It recently opened in March 2015. “Dedicated to digital innovation,” the office employs over 100 data scientists, engineers, and designers (more toned on average than their peer group). They are meant to advance Under Armour’s transition to a digital brand encompassing a community of fitness enthusiasts larger than Under Armour’s retail customer base.

Helping the engineers concentrate on this task are a variety of fitness amenities: treadmill desks, “spin boardrooms”, and a kitchen stocked with healthy snacks. MyFitnessPal scans the barcodes of all these snacks, instantly transferring the data to the employee’s daily record and telling them how many more calories they need to burn that day to meet their fitness goals.

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