With the smartphone market both mature and crowded, it is natural to seize on the smartwatch as the next great opportunity.

But what looks like a more open road is actually a highway to nowhere, according to Jackdaw Research chief analyst Jan Dawson.

There is little demand for the kinds of notification and payment uses that are seen as the biggest selling point for most smartwatches. And, by virtue of their small size, it is difficult to make a device that has both enough features and a decent battery life.

Between the lack of compelling uses and the technological challenges around battery life, most companies would be wise to steer clear of the market, Dawson says. Google’s release of Android Wear gives companies an easy on-ramp, but that doesn’t mean that they will find it easy once they head down that road.

“The current market simply doesn’t have room for more vendors pursuing the same narrow opportunity,” he writes in a report being issued later on Thursday. “We would advise most would-be vendors to stay out of the market.”

Even those that are in it might want to take their foot off the gas.

“We do not recommend that existing vendors should maintain current levels of investment when market growth and the overall revenue opportunity remain poor,” Dawson said. “It is unlikely that more than one or two small vendors will be able to make a sustainable business out of smartwatches in the face of competition from Samsung and potentially Apple.”

That said, it appears that most of Dawson’s advice is likely to go unheeded.

Motorola is on the verge of joining in with its Moto 360, while HP and HTC have signaled their intent to enter the market. Microsoft has also been working on a wearable. And, of course, Apple is planning an October launch for its wearable.

There’s also our own Re/watch.

Peter Fretty
Peter Fretty

Wearables are a very immature space at this point. Although they have an amazing potential to integrate into what Cisco calls the Internet of Everything, doing so is going to take a meaningful realignment between app providers, OS creators and manufacturers.  The wearable device needs to be able to add to the equation not just duplicate what phones already provide. 

Peter Fretty


"That said, it appears that most of Dawson’s advice is likely to go unheeded."

By the same companies that have been failing to make a profit in smartphones for the last two to three years? Shocking!

What I haven't figured out is who is investing in these companies. Last time I checked a failure to turn a profit was a sign that you need to change something, not double down on it.


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