The Illusion of Necessity: Who Really Wins the Health Data Arms Race?

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If collecting more information about our bodies automatically made us healthier, you’d think we’d all be in phenomenal shape by now.

We can track how many steps we take, how well we sleep, our resting heart rate, stress levels, recovery scores, blood biomarkers, and just about everything in between. Hell, we’re now reaching the point where companies are developing technology to analyze what comes out of us when we go to the bathroom.

Yet amid this explosion of new technology, there’s a question we think investors should be asking: Are consumers actually becoming healthier, or are companies simply getting better at convincing them that more data is the key to better health?

More importantly, which companies are ultimately going to capture the economic value being created by this movement?

Back in August, we published our updated investment thesis on Hims & Hers Health (HIMS), highlighting what we believed was an underappreciated opportunity for the company to capitalize on the growing demand for personal health data.

While that report focused primarily on HIMS, we wanted to expand on the broader opportunity and, more importantly, examine why we believe some of the companies pioneering the health-data revolution may not be its biggest long-term beneficiaries.

Our argument comes down to a relatively simple distinction. Knowing what’s happening inside your body and actually doing something about it are two very different things.

Wearables and diagnostics companies have largely built their businesses around helping consumers understand their bodies. Traditional telehealth companies, meanwhile, have focused on diagnosing and treating medical conditions.

Today, these two sides are increasingly converging. Wearables are adding AI-powered recommendations, coaching, and healthcare services, while telehealth platforms are incorporating blood testing, wearables, and other diagnostics.

Everyone wants to become the central platform for managing a patient’s health. But in our opinion, the companies that already own the care relationship have a distinct advantage over those trying to build a healthcare business around data collection.

And to understand why, we first need to revisit an earlier generation of companies that tried to do something remarkably similar.

Disclosure: Cedar Grove Capital Management (CGCM) is long Hims & Hers Health (HIMS) and Hydreight Technologies (NURS.V) at the time of publication.

The idea of convincing consumers to pay for insights into their own health is nothing new. Companies like 23andMe, uBiome, and Fitbit were among the early pioneers of consumer health data, promising customers greater insight into their bodies through genetic testing, microbiome analysis, and wearable tracking devices.

23andMe, founded in 2006, allowed customers to purchase an at-home genetic test for ~$99. In exchange for a saliva sample, customers could learn about their ancestry and, eventually, potential genetic predispositions to certain health conditions.

Fitbit, founded a year later (2007), approached the opportunity from a different direction. Rather than analyzing someone’s genetic makeup, Fitbit offered consumers the ability to monitor their activity throughout the day. What began as relatively simple step and calorie tracking eventually evolved into devices capable of monitoring heart rates, sleep patterns, blood oxygen levels, and other biometric measurements.

In fact, due to the continuous tracking of a customer’s heart rate, the Fitbit history even led to a doctor being able to determine when a patient first experienced atrial fibrillation, which ended up saving his life.

In the end, both businesses were effectively selling the same underlying proposition: the more you know about your body, the better equipped you’ll be to take care of it. And, at first, this translated into wild success.

By 2019, 23andMe commanded a ~35% market share (second behind AncestryDNA) with a database of >10 million people, and eventually went public via a SPAC in 2021 at $3.5 billion before quickly peaking at a ~$6 billion valuation. By 2015, Fitbit owned 64% of the U.S. fitness tracker market and 85% of all connected activity trackers. It eventually went public in June of 2015 at a $4.1 billion valuation and quickly rose to nearly $10 billion just a month later.

But despite their initial popularity, both companies eventually encountered problems that exposed the weaknesses in their respective business models.

The curse of a single-purchase product.

Unlike today, where we’re subscribed to death on basically everything — including your home printer and car features — back then, it wasn’t really a thing. 23andMe was a one-time at-home genome test, and it’s not like your genome was changing, so there wasn’t a need to order another test. For Fitbit, while it pioneered the fitness tracker industry, it was operating off of an older business strategy that revolved around a single one-time hardware purchase.

This worked until it didn’t.

23andMe tried to offset this limitation by utilizing its millions of mapped genomes to potentially run clinical trials for new drug discovery. Something that could have proven lucrative if it actually worked and they had enough time and money to do so. Fitbit, the market leader, ended up getting squeezed from both ends of the pricing spectrum when Xiaomi released an ultra-budget fitness tracker in 2014, and Apple released its watch in 2015 at a premium price with iOS integration.

23andMe eventually ran out of time, money, and trust (after its highly public data breach) and filed for bankruptcy in 2025. The founder, Anne Wojcicki, purchased the company out of bankruptcy for $305 million. Fitbit didn’t pivot quickly enough and still prioritized itself as a hardware-first company rather than a software company (more on that later). Its relevance faded into the ether, and its stock eventually crashed from >$50/share to ~$6, and Google acquired it for $7.35/share in 2019 (closed in 2021). Google officially discontinued some Fitbit products in 2024 to prioritize the Google Watch.

But the main takeaway here is that they demonstrated that consumers were willing to spend considerable money to learn more about themselves. What they struggled to establish was a defensible business model capable of monetizing that interest over long periods.

They also proved that knowing more about your health can sometimes motivate behavior that general medical advice cannot.

One blogger put this POV into perfect perspective when she took the test and asked her doctor what they thought. The doctor was deeply skeptical of the value of knowing your health risks, because, she said, all of the ‘what you can do’ recommendations are exactly what she always tells people to do anyway.

I.e., a science-backed version of a gentle wake-up call (preventative health → regular cancer screenings, blood tests, etc.).

This is an early demonstration of what the value proposition is behind gathering personal health data. The problem was how to make that value recurring.