FRANKFURT—Germany's Adidas AG is placing a costly bet on
catching up with its rivals in the digital fitness world, agreeing
to pay €220 million ($239 million) for Runtastic GmbH, an Austrian
fitness app maker.
The world's second-largest sporting goods company, which claims
it was the "first in the industry to comprehensively bring data
analytics to the athlete," hopes the acquisition will pump up
interest in its brands and turn some of Runtastic's 70 million
users into Adidas footwear and apparel shoppers.
"There is no doubt that the digital world is conquering our
industry," Chief Executive Herbert Hainer said Thursday. "Just
looking at Runtastic numbers gives a decent impression of how many
consumers one can attract."
Adidas doesn't want to be outrun in digital growth, judging from
the price tag. Among the sellers is publisher Axel Springer, which
bought a 50.1% stake in Runtastic in 2013, when its enterprise
value was just €22 million.
Runtastic was founded in 2009 in Pasching, Austria, and entered
the fitness app movement early. It now offers more than 20 fitness,
health and endurance apps, including Leg Trainer, Six Pack, and
Sleep Better, which tracks sleeping patterns. It also recently
branched into hardware.
Adidas isn't the only sportswear maker betting apps will inspire
enthusiasm for its products. The purchase comes only a few months
after its U.S. rival Under Armour Inc. invested $710 million in its
Connected Fitness platform. The platform consists of health and
fitness app companies MapMyFitness, which Under Armour acquired in
2013, and Endomondo, and MyFitnessPal, which it bought in early
2015. MyFitnessPal cost $475 million and was Under Armour's biggest
acquisition.
Nike Inc., Adidas's most formidable competitor, has been a
pioneer in fitness tracking, and teamed up with Apple Inc. early
on. People who use the Nike+ Fuel app can track their fitness on
the most recent iPhone.
Adidas launched its own fitness device mi Coach last year, but
has been losing market share, particularly in North America. Last
fall, it fell behind Nike and Under Armour to the third spot in
U.S. apparel and footwear sales, according to figures collected by
SportScanInfo and Sterne Agee.
"There has been a move toward more consolidation in connected
fitness for some quarters now," said Cé dric Rossi, an analyst at
Bryan Garnier in Paris. Increasingly, active people want to track
their performance and data, he added. "Adidas obviously doesn't
want to lose out in that market."
More often than not apps are free, like Adidas's mi Coach Train
and Run app, but they can pay off by letting manufacturers cash in
on sales of matching hardware. The mi Coach Fit Smart armband, for
example, costs about $150.
Runtastic will continue to operate as it successfully has to
this point in time, Adidas said, adding "we will determine the best
path to ensure Runtastic users and Adidas mi Coach users continue
to enjoy great experience, services and products."
Matt Powell, a sports-industry analyst for NPD Group, believes
the play for sports brands is more software than hardware. "The key
to leverage will be how well they brand Runtastic with Adidas," he
said.
Both Mr. Powell and Mr. Rossi said buying Runtastic is a good
move for the German company, if an expensive one.
"There has been a huge inflation in the category," Mr. Rossi
said.
Unlike other free fitness app companies, Runtastic has been
profitable from the starting gate, Adidas said, which helps explain
the price tag.
Adidas said Runtastic will continue to operate as an independent
business unit, and all its four co-founders will stay on board for
at least three years.
The German sportswear maker reported second-quarter earnings on
Thursday. It said profit rose slightly, while sales grew 5%
compared with the year before.
Write to Ellen Emmerentze Jervell at ellen.jervell@wsj.com
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