Apps everywhere

Apps everywhere

According to the University of Florida Diabetes Institute, there are more than 1,100 iOS and Android apps designed to help in diabetes treatment, listed on the Apple App Store and Google Play. Now this really isn’t all that shocking given the convergence of technology and managing diabetes or as we like to call it interconnected diabetes management (IDM). Something we seem to be writing about now on a regular basis.

This is why it may be somewhat surprising that Apple, that maker of all things that are way cool, a company that has more money than Santa has gifts to deliver seems to want no part of this wacky world. That after taking a very serious look into this space and throwing some serious money at it, this maker of all things whiz bang and way cool has decided to walk away. According to multiple sources Apple has abandoned their diabetes related projects preferring instead to let others develop tools which can work with their platform.

This move is also in sharp contrast to their neighbors at Google who are moving aggressively into the diabetes space. Which begs the question what does Apple know that Google doesn’t? Let’s also not forget that this move by Apple is also in sharp contrast to almost every other high tech cash rich company who wants a piece of the diabetes pie. That besides Google, Samsung, Qualcomm, Panasonic, Facebook and Phillips are just some others in this space.

Is Apple just being smart or are they missing a huge opportunity?

Maybe the pullback is just temporary, maybe they see the opportunity but felt they didn’t have the correct pieces to the puzzle.

To be honest we haven’t a clue as to the reasons nor do we think they really matter that much. The harsh reality is IDM is following the exact same path as glucose monitoring, the path to commodization. The big difference being that it’s just doing so at a much faster pace than BGM. That while it took years for the BGM market to commoditize, the IDM market is commoditizing in matter of hours.

Just as we used to ask whether we really need 40 plus meters, all of which do basically the same thing the same way. We are now asking do we really need 1,100 plus apps with more on the way. Now since we have not looked at all 1,100 we cannot state with certainty that they all do the same thing the same way let’s just say there are only so many ways to skin a cat.

So just as the BGM market has become a battle not over price but scale, market share so too do we see the IDM following this model as well. That it’s not a battle over who has the “best” app but who has the most patients using the app. Where the two markets part ways comes in terms of how money is made. Even with compressed reimbursement BGM margins are still ok, no they are not obscene like they were but they are still ok. Combined with scale and the proper cost controls BGM is still nicely profitable, just as the folks at LifeScan.

Now the University of Florida Diabetes Institute did not mention which of the 1,100 apps are free and which are paid for but given the nature of apps our guess would be the vast majority are free. That the makers of these apps must somehow monetize the patients that use their app. Some think they have solved this problem as the app is just an adjunct to an existing device, i.e. glucose monitor and the money is not made from the app but the sale of test strips. This is the model being used by iHealth and others who make meters which attach to a smartphone. Yet the issue under this model is the same issue facing conventional meters, i.e. achieving scale.

This is why just as the BGM market consolidated so too do we see the IDM market consolidating just at a much quicker pace than the BGM market. The harsh reality is just as we don’t need 40 plus glucose meters we don’t need 1,100 diabetes related apps. Apps which like BGM do basically the same thing the same way.

Perhaps this is the reason Apple basically decided that it’s better to let this market sort itself out. That as long as these apps work on their platform and keep patients using their platform it really doesn’t matter who wins the race. This is not unlike the strategy employed by Qualcomm as they have developed the track the trains run on and they could care less who owns the trains as long as they run on their tracks. Once it becomes apparent who is emerging as the likely winners in the app world Apple can then step in. They may pay a higher multiple but at least they know they are buying a proven system. This is the luxury of having a huge pile of cash.

The IDM market is changing rapidly which given the nature of technology is not at all surprising. It’s also true that those that seem to be in the lead today could be also-rans tomorrow. This is race will not be won by who’s the swiftest as it’s not a sprint to the finish line. This is a race that will be won by which company has the most well thought out strategy, management talent and ability to execute. In other words, it’s no different than any other diabetes market where talent triumphs.

And as we have said many times talent, real talent is in short supply.