Eric Migicovsky’s favorite part about the Apple (AAPL) Watch is its starting price of $350. The founder of smartwatch startup Pebble has had reason to worry for quite a long time, given Apple’s propensity for sucking the air out of fledgling device categories. Migicovsky now believes the Apple Watch will exist in an orbit far above the humble Pebble.
The price gap just might give his startup a chance to pursue people who want to read text messages without paying for an expensive piece of jewelry. ”They’ve used gold, they’ve used luxury materials, they’ve stated to the world that this isn’t just about the technology,” Migicovsky says of the Apple Watch. “For people who are looking for a Rolex or a Tag (MC:FP) and would rather get a smartwatch, that would be a great choice for them.”
In case the distinction between the two products wasn’t clear enough, Pebble is cutting the price of its own watch to $100, a drop of $50. (A luxury version, the Pebble Steel, will drop its price by $30, to $200.) The company is also expanding its retail operation and will soon make its products available in 10,000 stores. The expansion comes largely through an expansion into the U.K. and several Scandinavian markets.
Pebble is also plugging a major hole in its software with an update that allow apps to run in the background, a prerequisite for step counters and sleep monitors. Fitness tracking is one of the basic appeals of wrist computers, and Pebble has lagged behind single-minded devices from companies such as Jawbone and Fitbit. Pebble has always had the hardware to run these apps; the issue was a lack of software to keep them from quickly draining the batteries. Jawbone, Misfit, and Swim.com have all built new apps for the platform.
Pebble needs a niche; it stands no chance facing Apple head-on. The startup has raised $10 million on Kickstarter and an additional $15 million from venture capitalists. This is about the same amount of money that Apple made every 70 minutes in the past year.
Resource constraints and inexperience led Pebble to struggle in meeting early demand. Migicovsky says it has hired supply-chain experts from such companies as IBM (IBM) and Cisco (CSCO) and moved past early growing pains. One reason the company can cut its watch prices is that it has learned how to save money by avoiding such costs as shipping by air. While the company won’t reveal exactly how many watches it has sold, the total has reached the hundreds of thousands.
Pebble’s advantage has been a head start, one that will continue until sometime next year when Apple actually begins selling smartwatches. At that point, Pebble will be a cheaper, less powerful watch that offers certain advantages like better battery life and the ability to track workouts—even those that happen in a pool—without the need to carry around a companion phone.
Will that enough to survive the Apple onslaught? People are interested in some type of wrist-based computer. According to a survey conducted by Forrester, 42 percent of Americans said they were interested in a wearable computing device for their wrists, up from 28 percent the year before. But there’s still no clear vision on what those computers should do. Early smartwatches, Pebble included, have focused on reducing the number of times you have to glance at your phone.
Apple’s smartwatch does more than this. It will be able to unlock hotel rooms, serve as a substitute for a credit card, and give a range of subtle physical cues. “Apple has established a broader strategy that includes a new type of behavior,” says JP Gownder, an analyst at Forrester. Providing these experiences requires sensors and processing power that the Pebble doesn’t have.
It’s not at all clear that Apple’s watch is what people really want. But if that’s what they decide they need, Pebble’s job is going to get a lot harder.
