Israeli Glide bets on smartwatch video chat and cuts 25% of staff: A doomed move?

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One of the most prominent startups in the Jerusalem tech ecosystem is Glide, a video messaging app which had brought the company a $100 million valuation at one point. That darling, however, may be falling quickly.

Rumors started swirling as Glide employees began entering the job market, and some sources told Geektime that a number of employees would phase out their work in the coming months. A story by Business Insider confirms a quarter of the company’s employees are being let go as it pivots toward creating a “smartwatch ecosystem.” That includes some $8 million of “bridge financing,” a.k.a. convertible debt. It’s unclear if the investors’ debt financing was made contingent on the layoffs.

Despite Glide’s newfound focus on smartwatches, the company clarified that Glide would not abandon video messaging. “Our focus on the smartwatch ecosystem is not distinct from our belief that messaging will continue to boom and be a central part of the smartwatch experience,” CEO Ari Roisman told Geektime. “We remain committed to developing the Glide app in full force.”

A pivot into a different unknown


The choice to emphasize a different part of its business should first bring up questions about video messaging, but the market isn’t exactly folding here. The Telegraph reported last week that WhatsApp might be launching video messaging soon. So if you are a smaller video messaging service like Glide or fellow Israeli company Rounds, which just introduced its own video function for WhatsApp called Booyah, it might be time to look for business alternatives

“It is still very early in the smartwatch ‘revolution or evolution’ and that I firmly believe they will surpass the sale of handsets,” Glide COO Jonathan Caras told Geektime. “It might take some time, but that’s the market potential that they have. I believe that our children’s first devices will live on their wrist, not in their pocket.”

The choice to focus on the smartwatch market is a gamble by many estimates, even if Glide is hoping to take the industrial lead in providing wrist-based video chat. Adweek reported that orders for new app campaigns revolving around Apple Watch have declined massively, indicating there simply aren’t enough people using the watches to justify investments right now.

“I think the smartwatch market has not opened yet, and won’t until people view smartwatches as an alternative to mobile phones, not as a companion and that is the phase the industry is entering,” Caras emphasized, meaning the watch needs to overcome the idea it is simply augmenting smartphones and can provide their own utility. The answer to that might be using smartwatches as health monitors.

Sony SmartWatch 3 (top), i.amPULS (bottom). Photo Credit: Sony and i.am+
Sony SmartWatch 3 (top), i.amPULS (bottom). Photo Credit: Sony and i.am+

There’s no indication yet that these changes will mirror the apparent priority focus of Apple and Pebble right now: the health industry. Pebble CEO Eric Migicovsky told Tech Times that the company (which also laid off 25% of their staff recently) would move toward the health space, while Apple CEO Tim Cook told MSNBC pretty much the same thing.

“If you think about some of society’s biggest problems and challenges, one of the ones that we are really focused on is health,” Cook said. “Arguably the health care system can be made much simpler, can have much better results, you can have patients that really feel like customers…and have systems and applications that bring out the best in the medical professionals…I think the runway there is enormous.”

Beyond Kickstarter-fueled Pebble’s layoffs in March, industry leader FitBit has also seen dramatic stock price drops from a high of $51.64 on August 5, 2015 down to just $14.06 at the end of trading on Wednesday. Roisman played down industry concerns about smartwatch markets, even though there are signs Apple is investing more in other spaces.

The first glimpse of the Huawei Watch. Photo Credit: PR
The first glimpse of the Huawei Watch. Photo Credit: PR

Original Apple Watch sales projections expected 20-30 million units in the first year, not the 8-12 million that actually got out. Android-based smartwatches also saw only 3.2 million units shipped last year. More companies like Sony, Huawei, Samsung, LG and Motorola are getting into the space, lowering Apple’s smartwatch market share to dip in the first quarter.

“If year 2 Apple Watch sales grow in a similar fashion to year 2 iPhone sales, we will see 35-50 million Apple Watch sales in the coming year,” Roisman added. “We anticipate the smartwatch will usher in a new era of personal computing where the primary method of command happens through voice.”

The one thing for sure is that Glide is feeling the pinch of the times. With the pressure on startups to prove those $100 million valuations to investors and the economy at large, demands for potential are definitely, and finally, moving toward demands for results.

“I think the entire tech ecosystem is getting a shift, not just the messaging space,” Caras added in one last thought. “I see companies being challenged to create objective value through things like revenue and innovation. All in all, this is a good thing for consumers and the market: The companies that come out on top will ultimately be stronger because of this adjustment.”

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