Is 2014 the Year of the Smartwatch?

When International CES opens in Las Vegas in early January, a flood of wearable computing devices, including smartwatches, will be on display.

The fledgling smartwatch market is tiny compared to that for smartphones, or even wearable devices like Google Glass or smart bands that cater to fitness and health-monitoring needs.

Still, the smartwatch phenomenon promises to blossom in 2014 as experts expect Google to launch a model by summer followed by Apple sometime in the fall. Even Microsoft is reportedly working on one.

To achieve any degree of greatness, though, these major tech innovators and their smaller competitors must overcome some significant hurdles.

For instance, most of the smartwatches unveiled to date are too expensive, at $200 to $300 each, for widespread adoption. Most of the devices also require a connection to a smartphone via Bluetooth, which implies that users face the added cost of the smartphone and a wireless service contract.

The early smartwatches also lack functionality and mostly run fewer than 20 smartwatch apps.

Several analysts say the so-called value proposition of smartwatches is unclear so far. Sure, you can check your smartwatch for a text message or email or use it to find the time or a weather forecast without having to dig into a pocket or purse to find your smartphone. But is that enough to attract users to the technology?

Some smartwatches (sometimes called smart bands) include sensors that let them double as fitness monitors, which helps expand their functionality to a degree. A few also have cameras, microphones, and speakers.

Beyond those basic price and functionality hurdles, some of the early smartwatches are just plain ugly and far too large (mostly around 2 inches by 1.5 inches) for women to wear on their wrists, say several analysts familiar with the market.

Samsung Galaxy Gear

That problem suggests the successful smartwatch innovators will—or should—pair up with fashion designers.

"Fashion will be important, whether in smartwatches or Google Glass," said J.P. Gownder, an analyst at Forrester. "Vendors need to up their game on design. They should partner with jewelry and clothing vendors. Tech firms just aren't equipped to deal with fashion by themselves."

Gartner analyst Angela McIntyre said that most of today's smartwatches are too large and dull-looking.

"When I put many of them on, they are wider than my wrist is, and I'm not that small," she said. "These are meant for males to wear, so they are missing half the market right there."

"One of the most difficult issues is the smartwatch face—it's a black box. If they'd make them look like conventional watches, that would help. Yes, I'd like more sparkle, and there are some designs for making them look like regular watches. These devices need more of a value proposition that people will understand and want," she added.

McIntyre summarized the challenges this way: "If a company could get the home run design—one that's right—with more apps and good price points, they could take off, but we haven't seen that design and that solution yet."

Newcomers to the market

The latest smartwatches to become available include Samsung's $300 Galaxy Gear. The Galaxy Gear, launched in the fall, is designed to pair with Galaxy devices like the Note 3 plus-size phone to make phone calls, take pictures, download apps, conduct Web searches, or check email.

The Sony Smartwatch, now in its second generation sells for $200, but cannot make voice calls.

Samsung and eBay recently announced that Galaxy Gear can now notify users of responses to online eBay bids, giving users the ability to make a quick counter-bid. But that kind of app isn't sufficient to justify the cost of a device that largely relies on smartphones to make calls or the smartphone's cellular or Wi-Fi connection to the Internet.

Innovation coming?

Officials at Samsung and elsewhere acknowledge that wearable technology, especially smartwatches, is barely beyond infancy and will likely see substantial innovation in the next two years.

Perhaps Apple will wow consumers globally with an "iWatch" by including technologies like the iBeacon proximity tool that was added to recent iPhone models. The innovative iPod and iPhone turned the consumer electronics market upside down, and Apple could do that again with a smartwatch.

Unfortunately, Apple doesn't exhibit at CES, and the company has yet to officially disclose that it's developing an iWatch smartwatch.

That said, an iWatch with iBeacon technology could usher in a Apple smartwatch world where users could literally open doors equipped with their own transmitters. For instance, a driver could unlock his or her car and start it with such technology. Users could also use the technology make purchases in a store after receiving a discount coupon by authorizing a credit card payment through a previously-stored account with Apple.

Future smartwatches may also include voice and gesture activation capabilities, which would go a long way toward reducing the need for a large touchscreen interface. Voice or gesture control makes it more likely that we'll see an elegant-looking smartwatch with a much smaller face that still has powerful functionality.

Market potential for smartwatches

Analysts at Canalys back in July projected that 5 million smartwatches will ship worldwide in 2014, while Gartner recently said it projects that the global number could reach 7 million next year.

Both the Canalys and Gartner projections are tiny compared to the forecasts that 1 billion or more smartphones will ship in 2014. However, the 2014 smartphone projections are both substantially higher than Canalys' report showing that 500,000 would be shipped this year.

What will work?

Canalys analyst Daniel Matte singled out the $150 smartwatch made by the startup Pebble. That company was started with funding from 85,000 investors found through Kickstarter.

Matta termed the Pebble smartwatch as reasonably successful with more than 200,000 reportedly shipped since its unveiling in early 2013. By comparison, reports have Samsung selling 800,000 Galaxy Gear devices to date, though the number has not been confirmed by the vendor.

"The Pebble is the best smartwatch so far, even though it's fairly basic," Matte said. "The one or two things it does do, it does well, which means it connects well to smartphones and runs apps on the display fairly reliably. It's really early, but it's still not a great device."

The Pebble smartwatch comes in five colors made of a water resistant material and features a 1.26-inch, 144-by-168-pixel e-paper display with an LED backlight. The device weighs 1.3 ounces and can work with both Android and iOS smartphones via Bluetooth 4.0.

The ARM Cortex M3-based smartwatch runs the Pebble OS. The processor runs at up to 80 MHz.

The size of the smartwatch's battery is not disclosed, though Pebble says the device can run for up to seven days between charges.

Pebble says that "thousands" of developers are working on Pebble apps. Some of the apps coming soon include iControl, which can control home alarms, the FourSquare social app and GoPro for taking photos.

Currently, Pebble supports notifications from email or other inputs and alarms, music from the phone and some basic fitness apps. The watch face is customizable.

Matte said the Pebble falls at the upper end of the $100 to $150 sweet spot for what he believes smartwatches should cost to catch on with users.

Like other analysts, Matte said most smartwatches today "aren't very aesthetic or fashionable." He did note that Jawbone and Nike are making fashionable wearable smart band devices for fitness and sports activities, and those could provide design tips for the major smartwatch makers.

Neither the Jawbone or Nike device has a watch-like face in the conventional sense.

The Nike+ Fuel Band SE works with iOS and comes in three sizes and four colors for $149, with a rose gold version for $169. (Nike also has a Nike+ SportWatch GPS for $139.99 that has a conventional watch face.) The Jawbone Up24 has a wrap-around design that works with iOS and comes in two colors for $149.99.

With better designs and many more apps, Matte believes that smartwatches (which he terms smart bands) shipments will reach 40 million globally within several years.

"Smart bands are the next big thing in consumer electronics," he said.

In addition to Samsung, Sony, Nike, and possibly Pebble, other companies expected to show off smartwatches at CES include Basis Science, Burg, Connected Device, Dennco, Ezio, Filip, Kreyos, Kronoz, MetaWatch, Mio, Neptune, Polar, Qualcomm, and TomTom.