Weight Watchers Losing Customers and Revenue To mHealth Innovators

8-11-2013 9-55-56 PM

Weight Watchers is seeing an erosion of its customer base due largely to the increase in free mobile health apps that target weight loss. The subscription-based weight loss program reported a 16 percent drop in Q2 earnings and an equally alarming drop in new members during its earnings call last week. The news led to a 19 percent drop in share price by the end of the week.

"We feel that some of that is driven by the continued sudden explosion of interest in free apps and activity monitors," CFO Nicholas Hotchkins explained in the company’s earnings call. He went on to describe mobile health apps as a “temporary phenomenon” that cannot compete over the long term with the science and proven track record of the Weight Watchers method.

The pressure in this industry is coming from mHealth innovators such as LoseIt, Nutrino, or MyFitnessPal (which just passed the 40 million user mark.) These apps try to make exercise and tracking calories enjoyable. Some will double as a pedometer, while others track running time and distance. Most can determine food product calories by taking a picture of the barcode. Several integrate data from an activity tracker or wireless scale. 

These apps are innovating the weight loss industry and offering services that supplement any diet, not just Weight Watchers. They are doing it all for free.

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What’s interesting is that Weight Watchers has had an app since 2008, years before mobile health would have been seen as a potential threat to its bottom line. The company launched a mobile version of its subscriber’s online portal, which contained tools for reporting and tracking Weight Watchers points along with a library of low-point recipes. However, the app was designed for subscribers only. It’s now free, but offers little of substance for anyone not following the Weight Watchers diet plan.

Weight Watchers used to maintain significant mindshare among people evaluating weight loss tools. Today apps like MyFitnessPal or Lose It are more likely to fill the role of personal health coach. As various industries continue to digitalize, major corporations like Weight Watchers (or Blockbuster and Kodak before them)  have been put in a position where they must either think like a startup and innovate or disappear.

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