• The Opportunity: Amazon Halo aims to help consumers track their health, as well as share patient data with healthcare insurers and clinicians. It’ll make it easier to manage chronic conditions and incentivize users to use PillPack and Amazon Care in the future.
  • Estimated Growth Potential: Sales of $1B can be achieved by focusing on early tech adopters among baby boomer population alone. That’s in addition to the $600M+ annual recurring revenue from its health data subscription service, and not accounting for revenue from sharing data with health insurers and systems.
  • Competitive Advantage: A smartwatch without a watch, Amazon Halo is the wearable for those that don’t want to be distracted by apps or even time itself. The device’s lower cost makes it more affordable for health insurers to give it away to members than Apple Watch.
  • Execution Roadblocks: Main challenge will be to partner with as many healthcare organizations as possible to give it to their members. User privacy may also be a roadblock as tech companies come under heavier scrutiny.

Amazon wants to improve our mental health with the new Halo wristband. This comes after making it easier for 112M US Prime members to get compulsive buying disorders.

Halo appears to be Amazon’s first major Wellness initiative. Amazon has been building a Health and Wellness team since 2018. The idea was to make Alexa more helpful in managing our healthcare needs: Manage diabetes, re-order diapers, care for elderly, etc. In the two years since the team’s launch, Halo appears to be its first major product: The number of new job postings dwindled until Halo launched.

What’s so unique about Amazon Halo? How does it plan to compete against the Apple Watch? Especially when Apple now accounts for half the market share of smart watches? Halo doesn’t bother telling you the time.

Data First, Heath and Wellness Second

Amazon Halo is all about health data. Its key value propositions center on measuring body fat percentage, activity, sleep patterns, and emotional health via tone of voice analysis. The band doesn’t even have a screen, so users won’t get distracted by calls, messages, or time passing.

It’d however be naive to think that Halo’s health data will improve the lives of consumers. Users would ideally buy the Halo band and adopt healthier lifestyles with insights into their health. Halo’s partnership with Exhale, a fitness and spa program by Hyatt, is indicative of the value Amazon Halo hopes to bring its users. However, research published in 2016 and more recently in 2019 suggest there is “little indication that wearable devices provide a benefit for health outcomes.” That’s to say, Halo won’t likely impact its users’ lifestyles.

Amazon Halo’s health data will be best leveraged by healthcare companies instead. That includes life insurance companies like John Hancock, which is partnering with Amazon Halo to reward healthier habits. Cerner, a health IT company known for its electronic health record (EHR) software, is also partnering with Halo to include user data in its EHR. Doctors and nurses could eventually see a patient’s health habits and lifestyle as they diagnose.

Halo’s sales and adoption will therefore very likely be driven by health insurers. Insurers may give the band for free to its members in return for their data, just like Aetna and UnitedHealthcare are doing with Apple Watch. In turn, accessing health data will enable insurers to design better tailored insurance plans and reward healthy habits. Lowering the need for healthcare and saving money. It won’t be a surprise if Halo becomes one of many free fitness tracking bands or smartwatches members can choose from.

Amazon is No Longer Testing the Waters in Healthcare; It’s Investing for Growth.

Amazon Halo is also an engagement and customer retention tool for Amazon’s expanding healthcare services. When first launched, Amazon’s Health and Wellness team had a goal to make it easier for patients to manage chronic diseases such as diabetes and other aging related issues. Chronic disease management, from a financial perspective, is a recurring source of revenue. Most retail giants are fighting for a piece of the pie: CVS and Walmart are building clinics across the country specialized in chronic disease management.

The Halo wristband is only the data acquisition branch of Amazon’s holistic strategy to disrupt healthcare. Other branches include PillPack / Amazon Pharmacy to send medications directly to a patient’s house, and Amazon Care to offer primary care.

All these services center around chronic disease management.

Online or mail-order pharmacies such as PillPack work best for patients managing chronic conditions. Research has shown that patients dealing with chronic conditions are more likely to adhere to their treatment plan with mail-order pharmacy services. That’s likely because they’re more convenient: A patient that just needs pills for a one-time issue will likely drop by their local pharmacy store after the doctor’s visit, but those managing chronic conditions need regular refills and it’s more convenient to get it delivered to your door than going to the pharmacy every month. Walmart Pharmacy’s Home Delivery service goes as far as calling out the fact it’s most effective for those with chronic conditions. Costco and PillPack are no different. PillPack even has a blog dedicated to stories from those with chronic conditions. 

Source: Walmart Pharmacy Mail Order (visited October 17th, 2020)

Amazon Care clinics, for its part, serves as a beachhead in diagnosing and managing chronic disease patients. Chronic conditions are among the top 10 reasons people seek primary care. While only available to employees right now, Amazon Care recently posted a number of business development roles across the country. This indicates it is likely starting to sell its services to other organizations.

Source: Amazon Careers (visited October 17th, 2020)

The level of investment Amazon is putting into its Care unit also grew significantly since this past August. Amazon Care is no longer just testing the water; they’re investing for growth.

The combination of Halo to gather patient data, Amazon Care to offer tailored primary care, and PillPack to easily manage chronic diseases signals that Amazon is trying to disrupt healthcare using the same value proposition that made it a retail giant: A to Z convenience. A patient won’t ever need to get outside of Amazon’s ecosystem to manage health issues. Successful execution will hopefully lead to high retention rates and potential cross-selling of non-healthcare related products and services.

Baby Boomers in the Crosshair

Amazon Halo is most likely targeting the growing aging population as core users with its focus on chronic condition management. The CDC reports that 78% of US adults over the age of 55 have at least 1 chronic condition. This translates into about 74M Americans, from a total population of 330M, 29% of whom are aged 55+. This number is growing: Over 10,000 new baby boomers are turning 65 every day.

Halo is tailor made to capture the business of these 74M aging Americans. Pew Research Center reports that only 17% of American aged 50 or more have a smartwatch or fitness tracker. People 55 years or older also overwhelmingly prefer a fitness tracker to a smart watch by a factor of 5:1, mainly for its size, single use case and battery life. Halo may be exactly the wearable American baby boomers want: No screen, no distraction, long battery life. If successful, it would help Amazon boost the number of recurring customers aged 55 or above, the group with the lowest rate of Prime members at 60%, compared to 81% for 18-34 years olds.

Less is More: Halo’s Value Proposition is A Distraction-Free Experience

Amazon Halo is entering a highly competitive field.

Apple Watch currently dominates the smartwatch market with over 55% share. The number of new job postings supporting Apple Watch development, a mature initiative, is much greater than what Amazon is investing to jumpstart Halo.

FitBit, a well-known smartwatch maker, saw its market share erode from 44% in 2014 to less than 3% by 2020. We cannot however write FitBit off just yet. Its acquisition by Google may very well see it transformed into the go-to smart watch for Android users, which accounts for ¾ of all smartphones.

Based on features, all three smart devices seem to target a slightly different user base. Only Apple Watch seems to be targeting the same Baby Boomer customers as Amazon halo, offering fall detection since 2018.

Ultimately, Amazon Halo’s adoption may be decided by how many health and life insurers offer it for free. It’s certainly a cheaper alternative to Apple Watch which would cost insurers less money to subsidize.

Amazon HaloApple WatchFitbit Sense (Google)
Product DifferencesDistraction-free health metrics via app:No timeNo appsPremium Subscription: Insights on emotional wellbeing and 3D body scansExtension of iPhone that strives to make users more active, get fitDeeper Integration with iPhoneVoice Assistant: SiriPremium Subscription: Workout via Fitness+ Extension of Android devices that strives to report on healthDeeper Integration with Android devicesVoice Assistant: Alexa, Google AssistantPremium Subscription: Health Insights
Target Customers79% of Americans who don’t have a smartwatch or fitness tracker74M aging Americans dealing with chronic conditions.iPhone users: predominantly female with higher income than Android users.53% of Baby Boomers aged 65+ with a smartphone who want (or their kids want them to have) Fall DetectionAndroid users: predominantly Gen X and Z with high income and advanced degreesWants a smart watch, but not from Apple.
Growth Trendn/aShipments grew 23% YoY in Q1 of 2020, with market share increasing from 54% to 55%.Declining revenue after peaking in 2016, with Fitbit’s Community slowly plateauing. Shrinking market share from 34.2% in 2015 to 3% in 2020.
Switching costsHigh switching cost for smartwatch users that got used to having TIME and APPs available.High switching cost for Android usersHigh switching cost for iOS users

$1.5B+ Opportunity with Early Adopters Alone

The revenue potential of Amazon Halo is over $1B from early adopters alone. Our estimate considers the fact that 74M Americans over the age of 55 have at least one chronic condition. Of these baby boomers, 83% don’t have a smartwatch and 21% are early technology adopters open to give Halo a shot at launch. That’s 12.9M early adopters of Halo, which translates into $840M in sales with Amazon Halo priced at $65. That would represent a 6% boost to Amazon’s “Other” revenue of $14B in 2019.

The above revenue is just from selling devices. It doesn’t account for the $3.99 monthly subscription fee the 12.9M users need to pay for access to health metrics. User subscription fees could add another $619M annual recurring revenue to the pool. Amazon would likely also double-dip by charging subscription fees to organizations needing its user data: Health insurers, Electronic Health Record vendors like Cerner, and primary care clinics.

If Amazon Halo realizes its full potential, it’d also boost the number of members using PillPack, Amazon Care, and of course, feed data into the Care Hub Amazon is building for elderly users and their families.

Partnerships with Insurers, User Privacy Will Make or Break Halo

Amazon appears to have the key people to make Halo a success. Melissa Cha, a veteran from the Echo device makers at Lab126, is leading the engineering effort.

It also previously hired a former FDA chief health informatics officer: Taha Kass-Hout. He is leading machine learning initiatives under AWS. Kass-Hout is in an ideal position to transform Halo’s user data into actionable insights for health insurers.

This is in addition to a list of well-known medical doctors such as cardiologist Maulik Majmudar who can help engineers design the integration with EHR software, as well as develop consulting programs to support primary care physicians leverage data from Amazon Halo.

Amazon will also need a great business development and partnership team. It needs to sign on many more health insurance and life insurance companies to distribute its Halo wristbands. These partners could make or break the business case for Halo to be perceived as an effective tool for chronic disease management. They could very well also be future clients of the data the Halo collects.

Surprisingly, Amazon decided not to incorporate its super power in its first health & wellness device: Alexa. Over 100M devices with Alexa have been sold since 2019. From Echo speakers that dominate US market share to Fire tablets it practically gives away for free just to expand Alexa’s reach, Alexa is a driving force behind much of the growth in device sales. Yet Amazon Halo has no integration with Alexa. The Apple Watch has Siri, and even FitBit smartwatches have Alexa and Google Assistant integrations. Consumers comparing these wearable devices may very well opt for one with a voice assistant than one without, especially when insurers are paying for it.

Whether users trust Amazon with their health data is another issue. Amazon has been taking user privacy a bit more seriously after a series of PR failures where users found out humans were listening in to their conversations. They most recently brought in Anne Toth to do privacy right, a veteran of user privacy that’s worked at Yahoo, Google and Slack.

Amazon will need all the help it can get in the looming battle to preserve consumer trust. While the retail giant remains one of the most trusted tech companies, the ratio of Americans viewing tech companies favorably nosedived from 71% in 2015 to 50% in 2019. This could easily impact consumer trust in Amazon. Apple has taken notice and privacy is now touted by Tim Cook as a key value proposition of Apple products. Amazon will need to be just as fierce in protecting users’ health data. A single misuse by an employee, a health insurer, or a primary care clinician could ruin adoption. Taking off a wristband takes no effort.

Google FitBit x OneMedical x Walmart Would Be A Great Threat

Apple is unlikely to develop a watch without a screen, but it’ll likely keep a close eye on the Halo band and potentially offer a cheaper watch more focused on health metrics tracking. That’s keeping health insurers as main customers in mind. The $65 to $99 Halo band costs less than half that of the cheapest Apple Watch, and gathers more health data than the Apple Watch.

The bigger challenge may come from FitBit and Google. Google may offer to link FitBit’s user data with the electronic health record system used by OneMedical, the technology-savvy primary care clinics it invested in that just went public earlier this year. It’d give FitBit users a seamless primary care experience. FitBit could also partner with Walmart, which already has hundreds of pharmacies in its stores, and is launching dozens more primary care clinics. Either option would make FitBit a key tool in helping manage chronic diseases for the aging population.

Other wearable startups (Crunchbase counts close to 600) may also gain traction by solving what Amazon Halo or Apple Watch fail to. That includes actually getting users to adopt a healthier lifestyle and not just track habits (Programs within Halo’s Labs feature may find success here). Or incentivize users to actively manage mental health, as only 30% of people with mental illness currently seek help. It doesn’t do much good for users to know they’re unhappy or depressed by using mood trackers like Amazon Halo; they need to act on it. Competitors could also skip the health & wellness focus and offer unique shopping, communication, or entertainment services; all activities that are still predominantly done over a phone today.