In Search of the Killer Fitness App Business Model

It is difficult to maintain a healthy lifestyle, and consumers, academics, companies, and the government are all aware of this fact. The Affordable Care Act carries many provisions to promote healthy behaviors, in many cases following initiatives already independently implemented by insurance companies. The difficulty is often implementing top-level policies that filter down successfully to the individual level.

Recent theories in behavioral change emphasize engagement, providing timely, positive feedback loops to reinforce good behavioral changes in the individual. Given the proven economic advantages to preventative care and healthy lifestyle, the healthcare industry is moving to test such theories in the market.

For example, the idea of the Quantified Self started out in 2007 as a blog co-founded by Gary Wolf, a journalist and writer living in San Francisco. Underpinning the Quantified Self movement is the belief that collecting and analyzing personal data on an everyday basis helps people improve their lives. The blog has generated widespread interest and led to meetings of entrepreneurs in more than 50 cities around the world.

The Mass-Market Challenge

However, this data-intensive model brings in only certain consumer segments. In general, the quantified self approach tends to attract tech junkies, fitness “freaks,” and people suffering certain conditions so severe that they have to watch their personal data closely (e.g., Type 1 diabetes). They are not the mainstream consumers that entrepreneurs require to build scalable business models. To engage these customers, who are key to sustainable business models, self-tracking tasks must be interesting, engaging, and rewarding — or simply fun.

New technologies have an important role here, specifically mobile devices and fitness-related apps. Parks Associates’ consumer research indicates consumers actively seek motivation to improve their personal health and they desire technology, services, and social support to assist them in that process.

For instance, 29 percent of mobile phone users with one or more health problems feel that an easy-to-use device that tracks their condition and progress would motivate them to better track or manage their health. Twenty-seven percent would like to have a personalized plan from their care provider to guide them to better health.

The Supply Side

The timing is right on the supply side. Technology platforms that enable a fun and engaging experience — devices such as computers, smartphones, game consoles, and tablets — have achieved critical mass in major developed economies. They provide the following:

  • connectivity to the Internet and to peripheral devices (e.g., a fitness-tracking device), making them instant information aggregation and sharing centers;
  • potent operating systems enabling the support of wide-ranging applications to meet a variety of consumer needs; and
  • access to services and solutions that can be highly personalized and motivate driving people to try new experiences and sustain certain behaviors.

Even more importantly, this movement to change via technology tools, built on the momentum around behavioral changes and measurable results, has caught the attention of payers in the healthcare industry — government payers, commercial health plans, integrated health systems, and self-insured employers.

As the healthcare industry undertakes a seismic shift from an intervention-driven economic model to one that is prevention-driven and payment reform requirements rage on, the payer groups are genuinely interested in supporting and funding businesses taking on such initiatives.

Health and Wellness Apps

App developers have responded with a groundswell of wellness and fitness apps for smartphones; however, sustaining use has been an issue. Number of downloads is not a good indicator of number of actual users, and even then, app usage usually peaks within 15 days of download, which is a problem for an app meant to promote long-term health.

To encourage consistent and sustained use, app developers have worked to simplify use, add social features and reminders, integrate with other apps, and offer incentives such as extra points for continued use or rewards for hitting a milestone.

Games and Online Health Services

Offering incentives is a gamification-type approach that in general is an attempt to infuse fun into an activity. The gaming industry itself has taken a direct role in health and wellness in particular with Nintendo’s Wii and its related Wii Fit and Wii Fit Plus products. In general, game titles serving the health and wellness needs of consumers fall into three categories: exergames, behavioral change games, and brain-stimulating games.

Online health services are also using the gaming and social-media approaches to expand their offerings and encourage more usage. The first generation-health portals like WebMD were strictly informational. The new wave of online health services leverages the interactivity of the Internet to help consumers manage their health, modify health behaviors, and complete health-related product or service purchases.

These services must offer a high level of engagement to targeted users in order to influence their behaviors and achieve desired health outcomes and financial savings. Parks Associates’ survey data show that one in five consumers who visit health-related websites have used these sites to track their weight, while 17 percent track their fitness progress on a Web portal.

Even more encouraging is the solid percentage of consumers interested in online health activities; about one-third of consumers using health-related websites are very interested in reviewing their medical history online or accessing their doctor’s Web portal to schedule appointments, request prescription refills, or view lab results.

The dynamic online health market has attracted a variety of players. Established portals such as WebMD and Weight Watchers, start-up companies such as Mindbloom and Keas, and health service providers/insurers such as Alere and UnitedHealth all view the Web as a frontier for experiments with innovative services and disruptive business models.

Early Market Growing Pains

The wellness and fitness industry has anchored its future success to the formula of high engagement — a formula in which the fun factor is a key ingredient. To these efforts, consumer interest is strong, the spirit of experimentation is high, media exposure is extensive, and venture funding is relatively ample. However, many business models are still unproven, and business failure rates will be high. This market’s success relies upon healthcare institutions. The good news is healthcare stakeholders (especially insurers) are actively participating in this new market, paving the way for collaborations and innovations on service and business models.

Parks Associates estimates about 15 million U.S. consumers actively tracked personal health and fitness online or via mobile in 2011 — and that number will more than double by 2016. Also in 2011, 14 million consumers used online wellness services, and that number will also double by 2016.

Harry Wang is director of health and mobile product research at Parks Associates.

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