During the most recent Weight Watchers earnings call, Nick Hotchkin, CFO, reported that total company revenues declined 11% in Q4. The company shares dropped nearly 26% the next day, reaching a 52-week low. Jim Chambers, Weight Watchers’ CEO, stated that the last quarter included the first ever decline in revenues for WeightWatchers.com, the online platform that has been the one division they were always able to count on for steady growth.
So why is the worldwide leader in weight loss in a freefall? Could it be that we no longer need to lose weight? Perhaps we’ve simply given up trying? Chambers has another answer: weight-loss apps and activity monitors.
“The headwinds from free apps and activity monitors have only continued to intensify and are significantly impacting consumers,” said Chambers. “If you look in everything from Internet search trends to app store rankings to share a voice in social media, you can see that it was indeed a very crowded and noisy environment.”
So what are these apps and activity monitors, and how are they undermining Weight Watchers? I can tell you from the perspective of someone who makes one.
Apps look nothing like the competitors Weight Watchers has faced in the past, such as Nutrisystem and Jenny Craig. The app category didn’t even exist a few years ago. Apps don’t sell food products or have retail locations. Most are free. And there are suddenly thousands of them.
Chambers also talks about devices stealing market share. Indeed, there has been an explosion of wearable activity monitors like Fitbit, Nike’s Fuelband and Jawbone’s Up that enable their wearers to easily monitor calories in and out.
Many of these apps and devices are tools for do-it-yourself dieters and will fade away like so many do-it-yourself diets that Weight Watchers has outlasted over the years. Users will fatigue with counting calories, gain back the weight and return to Weight Watchers. At least that’s what Chambers seems to think. But there is one kind of technology that should keep him up at night: social dieting apps.
Social dieting is, after all, in Weight Watchers’ DNA. In the 1960s, Weight Watchers founder, Jean Nidetch, discovered the power of bringing people together to lose weight. In her group sessions, participants would get weighed-in and then exchange tips and struggles. This social component is what has made the company the dominant name in weight loss, and also so successful at helping millions of people lose weight and keep it off. When it comes to sustainable weight loss, group support and accountability really works.
While Chambers uses a broad brush to paint a scary picture of “free apps and devices,” the reality is that most of these products don’t really compete directly with the core social elements of the Weight Watchers business.
A few companies, however, do compete on this level and they’re gaining traction. MyFitnessPal, for example, makes a free calorie counting app that features social connectivity among its users. Founded in 2005 with 50 million downloads and counting, it recently raised $18 million in venture capital. SparkPeople is a free weight loss community with over 10 million users, many of which are former customers of Weight Watchers. And my company, DietBetter, has received traction setting up online weight loss communities structured as social games that we call dietbets.
“What we’re seeing here is classic disruptive innovation,” says John R. Kimberly, professor of management at Wharton. “Old-line companies are being deeply challenged by new technology and new competition.”
Fifty years ago Weight Watchers pioneered social dieting — this amazing idea of bringing people together to lose weight as a group. While social dieting remains as relevant as ever, consumers also want flexibility, value and convenience, and that means fewer and fewer want to drive to a Weight Watchers meeting. Weight Watchers has an online offering, but it lacks the social magic of their meeting rooms. Until they figure out how to recreate the meeting magic in a virtual format, it’s in big trouble.
Jamie Rosen started DietBetter after seeing friends compete in an office weight-loss contest. People who rarely exercised were suddenly jogging and doing push-ups. Jamie bottled up that energy on a large scale, using social media to let people motivate each other to get in shape. DietBetter’s paid out nearly $5 million to people who’ve successfully lost weight, while helping players lose over 500,000 pounds. He can be reached at [email protected].