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Google parent Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) announced in early November that it is acquiring the wearable technology company Fitbit (NYSE: FIT) in an all-cash deal worth $2.1 billion. While a lot of people are excited about where Google can take Fitbit with all of its available resources and expertise, others have major concerns.

Why is this a good move for Google?

There has been a lot of talk in recent years about the potential in the wearables market. To date, smartwatches have been the only wearable technology that has really taken off. The likes of smart clothing, head-mounted displays, and implantable smart devices still have a long way to go before being a major part of most people’s lives.

The purchase of Fitbit gives Google an instant leg up in the wearables market where it has been lagging behind the likes of Apple and Samsung Electronics to date. Google will look to innovate further by working closely with the Fitbit team on enhancing the existing product line.

However, the major issue that is concerning a lot of people is the huge amount of data Google will now have access through after acquiring Fitbit.

The Fitbit devices have 28 million active users and they collate all sorts of personal data when people are going about their day and when they are asleep. Some of the standout info that Google will now have access to includes the number of steps a person takes, their heart rate, sleep stages, active minutes, each location the person goes when wearing the device, and access to all user records in the Fitbit life coaching service.

Alphabet shareholders should welcome this move if it gets clearance. The company will be gaining quick entry into the wearables market with a quality hardware product that has been tried and tested. The company can use its vast resources to make these Fitbit products a real force in the market once more.

The announcement of this acquisition was met with a 2% rise in Google’s stock price. Fitbit saw an even stronger response to the news with its stock price rising almost 41% initially, before dropping back to a 29% gain. The current buyout figure sits at $7.35 per Fitbit share.

Why are people worried?

Privacy of data is a major topic in this digital age. People are more concerned about the privacy of their data than ever before. Over the past decade, there have been numerous major data scandals that have caused people to be mistrustful of how big companies like Google and Facebook utilize the data of their users.

Google’s parent company, Alphabet, is currently being investigated by state and federal regulators in the U.S. for potential antitrust violations. The Labor Party in the U.K. is calling for this acquisition to be stopped, seeing the deal as being a “data grab” by Google.

Both Google and Fitbit have publicly stated since the announcement of this acquisition that Fitbit data will not be sold and it will not be used for Google ads. However, the companies have not publicly stated in what ways the data will be used. It was recently revealed that through its “Project Nightingale” Google gained access to millions of people’s personal health data from 21 states in the U.S.

Significant power placed in just a few hands

There is no denying that this buyout is related to getting access to valuable Fitbit data. Many people are concerned that if the likes of insurance companies get access to more in-depth data about people’s health they can use it to increase premiums or avoid paying out in the case of a claim.

People’s limitations and vulnerabilities become exposed when someone can view their health data.

The personal health tracking market is also now effectively in the hands of major tech companies: Google, Apple, Samsung, and leading companies in China. Having this important data in the hands of these parties is questionable.

This is why regulators will likely have to examine the Fitbit acquisition closely before giving it the green light. So many people already use Google goods and services that the regulators may have concerns that the company knows too much about people.

At the end of the day, those looking to buy wearable devices have to consider the trade-off of a company having a lot of data on them versus the value that the wearable technology provides.

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The post 3 Factors in Google’s Acquisition of Fitbit appeared first on The Motley Fool Canada.

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Chances are that most of you reading this have purchased something on Amazon.com at one point or another. What started out as an online bookstore during the famous dotcom era grew to be the second company ever to reach a trillion-dollar market cap, and is now often referred to as “The Everything Store.” Amazon was founded in 1995, became publicly traded in 1997, and as of 2018 did $232.89 billion in sales.

Had you been an early investor in Amazon back in 1997, your total return on investment would be approximately 96,446.43%, or an average annual compounded growth rate of 136.47% as of this writing (adjusted for stock splits and dividends). Sounds like a return on investment you could live with!

The next “Amazon success story”

Thousands of new companies start up every day just like Amazon back in 1995, and hundreds of those companies become publicly traded each year. By looking for companies with similar growth characteristics as Amazon, a little bit of fundamental analysis, and maybe a pinch of speculation concerning the future, you may just become one of the few investors turned wealthy from a great stock pick.

Aside from looking at the company’s balance sheet, sales growth, and market share, three common factors always seem to be fundamental characteristics of industry-disrupting companies such as Amazon (of course, hindsight is 20/20). They are:

• Does the company solve a growing problem, market need, or market trend?
• Does the respective company’s market trend indicates a growing market opportunity for the company?
• Does the company have a competitive advantage, first-mover advantage, or clear “moat” within its market?

Here are three stocks that I believe have great potential to become the next Amazon success story, and carry all three characteristics indicated above with major growth numbers.

1. Roku

Roku (NASDAQ: ROKU) provides a streaming-TV platform allowing users to stream media to their TV from multiple streaming media apps such as Netflix, Hulu, Amazon Prime Video, and many more.

What problem or market need does Roku solve? Streaming media is provided through internet access, and media content is presented by companies to the viewing consumers in the form of an app, such as Netflix. Currently, consumers on average subscribe to three video streaming services. With announcements of major media companies to produce their own Netflix-like app such as Disney Plus, consumers have a growing demand to access all of their favorite subscriptions in one location, and Roku provides a cost-effective and universal solution to this demand.

What’s more, according to Deloitte’s 13th edition of its annual “Digital Media Trends” survey, 47% of consumers say they are frustrated by the growing number of subscriptions and services required to watch what they want.

Roku accounted for more than 30% of U.S. sales of connected TV devices in the first quarter of 2019, according to a research report. In terms of devices in use, Roku has a 36% lead over the next major streaming platform, Sony Playstation, and is expected to stretch to 70% by the end of the year.

As more and more companies build their own streaming media subscription channels, their top sales avenue with access to consumers will be the Roku streaming media device, a strong industry moat in and of itself. Furthermore, Roku’s partnership with major TV manufacturing companies allows it to reach more customers by embedding the Roku platform into the TV itself, making it a default option for streaming media to new consumer segments.

2. Square

Square (NYSE: SQ) provides both hardware and software for companies to more efficiently run their business. Its products include point-of-sale hardware and software, invoicing software, payment gateways for online businesses to accept payments, and even payroll services. More recently, Square has invested heavily in expanding its products to offer capital for businesses in need of loans, peer-to-peer payments for both consumers and businesses (known as Cash App by Square), and even e-commerce websites (Square owns the website builder Weebly).

Where Square stands out among its competition is in its first-mover advantage of making it easy for entrepreneurs to start accepting payments for their idea-turned-business with a square device (and hence, the name Square) inserted into the auxiliary input on your smartphone.

This moat extends to traditional brick-and-mortar businesses that are new to online commerce. Square makes the transition from an old-fashioned retail store to a modern digital storefront nearly a seamless process, for both new and well-established companies. In short, the solution Square provides, and the industry moat it owns, is a service that bridges the gap between small-business start-ups and accepting their first payments, as well as old-fashioned retailers and competing with an online presence.

Reports by Disruptive Advertising show that the online trend is growing exponentially. For example, in 2017, people spent $5 billion online during the 2017 Black Friday sales alone. And according to a Shopify report, e-commerce sales hit $2.3 trillion in sales in 2017, and are expected to hit $4.5 trillion in 2021. What do these statistics mean? They’re a clear indication of a growing trend for start-ups to be online, and for aged brick-and-mortar stores to have an online storefront, or risk going out of business.

Is there a growing trend for accepting payments both online and offline, as well as adding digital presence to your brick-and-mortar operations? Absolutely! And Square is in a prime position to disrupt the industry, with a current valuation at $24.89 billion and growing.

3. Wix

Wix (NASDAQ: WIX) is primarily a website builder that caters to both individuals and businesses of all experience levels. Wix Editor is its “drag and drop” website builder that allows individuals and businesses with no web development experience to create a professional-looking website in a simple way. Wix ADI allows users to literally answer a few questions on the type of website they wish to build, and it automatically creates a professional-looking website based on the response to your website objectives and industry.

Lastly, Wix Code allows web developers with development experience to code up their own websites from scratch, as well as build web applications and integrations. If some of that jargon is foreign to you, long story short, Wix makes building websites easy and customizable for everyone.

What is Wix’s industry moat? Consider Wix the publicly traded, modern version of perhaps the most well-known website builder, WordPress (which currently powers more than 30% of websites online), except without the learning curve.

Is the online market a growing trend? If the growth of social media platforms (Facebook, Twitter, Pinterest), online resumes (LinkedIn), and e-commerce sales isn’t enough evidence, perhaps the fact that 51% of smartphone users discovered a new company or product online while conducting a smartphone search further illustrates the importance of having an online presence. And this trend is only growing, putting Wix in a secure place to be perhaps a ten-bagger or even twenty-bagger investment. Wix is currently valued at just over $6 billion dollars, with plenty of room to grow.

The post 3 Stocks That Have the Potential to Be the Next Amazon appeared first on The Motley Fool Canada.

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