For Google Fit, Your Health Data Could Be Lucrative

Google GOOGL -0.2% Fit was one of several big updates Google announced at its annual I/O conference Wednesday, a service that lets apps and wearables cross reference our health data with one another. Sounds great for developers and consumers.

What’s in it for Google?

There’s a major advertising opportunity for Google to aggregate our health data in a realm outside of traditional search, observers say, but the company will need to downplay that business opportunity for the next year or more.

Google will need the ok from regulators like the FDA and FTC (which could be a challenge), and it will also need consumers to feel comfortable handing their health data over for processing. It’s one thing for Google to share your heart rate, steps and temperature with other apps thanks to the increasingly-sophisticated biometric sensors going into wearables — quite another for it to share that data with marketers.

Google emphasized several times during its announcement of Google Fit on Wednesday, that users would control what health and fitness data they gave the platform access to. “That’s the key,” the company’s representative said. “You’re in control. You can delete fitness activity.”

Google Fit needs to win consumers hearts. “Even before advertising comes into any of this, you need a really good user experience and to make consumers want to use these products before you start inundating them with adverting,” says Brian Yeager, an analyst with online advertising research firm e-Marketer.

Google, Apple AAPL +0.6% and Samsung are all trying to solve the same problem with their new health-data platforms: bringing together the motley array of health apps and wearables to get a comprehensive view of someone’s health. Google seems to be the most likely candidate to profit from such a service with ads.

“It’s a pretty good possibility that Google will take the Google Fit platform and figure out how to integrate advertising with it,” Yeager says. Advertising drives the vast majority of Google’s revenue and the company will account for almost a third of the $140 billion made from global advertising this year, according to eMarketer.

To put things in perspective, the healthcare and pharma industries are a small portion of all digital ad spending in 2014, according to e-Marketer’s estimates: $2.4 billion out $50.7 billion.(Retail will be the biggest spender, accounting for $11.2 billion this year.)

But that doesn’t mean healthcare isn’t lucrative to Google’s ad business, which makes money from clicks related to valuable search terms. The term “self-employed health insurance” for example, commands a cost-per-click price tag of $43.39, according to this 2013 breakdown by Statistic Brain.

The financial and insurance industries were also the biggest spenders on Google’s online ads in 2011, with health insurers like State Farm and eHealth Insurance contributing to a total spend of $4 billion that year.

Pharmaceutical companies meanwhile pay top dollar for Google search terms like “Lipitor” and “diabetes.”

“Diabetes ads are incredibly profitable,” says Derek Newell, CEO of corporate wellness management software firm Jiff. Not only do targeted pharmaceutical ads have high click-through rates, they’re expensive. On Google’s dynamic pricing platform AdWords, “[pharmaceutical] companies buy up all of those spots,” says Newell.

The looming problem for Google is that people are using its traditional search bar less and less, and they’re increasingly turning to apps to get details they need — to Kayak’s app for booking a flight, or to OpenTable for finding a restaurant.

To nourish its all-important ad business, Google needs to increasingly place itself in the middle of all the personal information that these apps process everyday. It’s already in a strong position to do that with Android, which now has more than 1 billion active monthly users. Google also owns one of the world’s biggest mobile advertising networks, AdMob.

Google Fit now represents another way that Google could tap into specific health-related data that flows between apps — data which has no chance of ever coming up in traditional search.

“The big question is are they going to try and put search on top of [Google Fit] to mine your data,” says Newell. “If Google knew that you had diabetes, then Google could start feeding you pharmaceutical advertisements about diabetes.”

Google could also sell access to Google Fit’s data to services that go beyond advertising — like Practice Fusion, one of the world’s largest electronic health record companies. Around 112,000 active medical professionals use Practice Fusion’s free, ad-supported service, which is targeted at small practices who can’t afford the usual $50,000 annual fees to set up an electronic records system.

One of Practice Fusion’s leading data scientists, Chris Hogg, suggests Google Fit could feed data directly into the company’s e-medical records. “We could easily integrate these kinds of devices and data streams and give more information back to physician at point of care,” he says.

The grand idea is that eventually, instead of updating your medical records every time you see your doctor, heath data gathered from platforms like Google Fit or Apple HealthKit can be pushed to those records far more frequently, even in real time.

“There’s this big gap between doctor visits,” says Hogg. “Collecting data from these devices and from our phones, then aggregating it on Apple and Google and eventually making its way track to doctors, is a transformative change.” His company has already begun updating its e-medical records with the real-time data from AliveCor heart monitors and Diasend glucose monitors that patients wear outside the hospital.

Would Google charge health IT firms like Practice Fusion to access the potential mountain of consumer health data that Google Fit could generate, or would that remain free? If the service really does take off over the next few years, the answer could ultimately affect Google’s bottom line.