Runners in America have likely never heard of fitness app-maker Runtastic, but there are some big reasons Adidas Group just bought it up in a deal valued at $240 million. That's a relatively small deal, but Runtastic, which is headquartered in Austria, has offices in San Francisco and some 70 million users. Owning it will allow Adidas to better compete with Nike in running technology and to better compete in the larger space of fitness-tracking tech.
In a press release announcing the deal, Adidas boasts that Runtastic, "is already one of the most diverse global players in the health and fitness app market, operating a multi-app strategy with over 20 apps covering a wide variety of endurance, health and fitness activities... With high user satisfaction, an impressive pipeline of innovative concepts and relentless speed to market, momentum is expected to remain robust in the coming years." The company was private and majority-owned by German media company Axel Springer (owner of Germany's largest tabloid, Bild). Adidas bought out Axel Springer's shares and will be sole owner of the app-maker.
"Digital technologies are providing new capabilities and insights to help athletes of all levels take control of their sporting destiny," said Adidas Group CEO Herbert Hainer in a statement. "This investment will add considerable value on our journey to deliver new world-class sports experiences."
What Hainer doesn't say there is what industry watchdogs know: Nike has long dominated running footwear, and the Swoosh has also seen big success with its running-related tech offerings. It launched Nike+ years back with Apple and the iPod, then was one of the first fitness-trackers to market with FuelBand in 2012. (It has since shifted focus away from the hardware, but still has its Nike+ app featured on the Apple Watch.)
Thus, buying Runtastic is a smart play by Adidas to try and break into an area that Nike has been leading.
It is an especially crucial move as Adidas looks to claw back market share in the U.S. from Nike and others. (Last year Nike had 48% of the U.S. athletic footwear market to Adidas's 8.7%, though that includes all sports, not just running.) Under Armour, too, which is now No. 3 in U.S. sports apparel, has taken the same tack in app-purchasing: in 2013 it acquired MapMyFitness, then this year purchased two more fitness-tracking apps, Endomondo and MyFitnessPal.
Beyond just its peers in the sports apparel industry, Adidas is dipping its toes into the larger market for fitness tech, which continues to grow. The very reason Nike downsized its FuelBand team was because of tough competition from tech companies like Jawbone and FitBit; consumers have shown they want to track their every step and mile (even the Apple Watch, some reviews have said, can be attractive as a fitness device).
In running shoes, Adidas has seen some success with its Boost line, which it launched in 2013. It expanded the brand beyond running, using the fused-pellet soles in shoes for basketball, baseball, golf, and other sports. (A pricier version of Boost called “Pure Boost” was Complex‘s best sneaker of 2014.) Adidas says Runtastic's four original founders will stay on and operate Runtastic within the larger corporation—for now. But look for the German giant to ultimately rebrand Runtastic apps as Adidas apps, perhaps under the Boost name.
Nike has earned plaudits for its digital innovations; Adidas would like to see some of that same buzz. If it can successfully turn Runtastic's apps into an Adidas+ type of fitness-tech brand, then $240 million will look downright cheap.