Earlier this month, Ancestry announced that it is letting go approximately 6% of its workforce due to declining customer demand. The company speculated that the market for direct-to-consumer genetic testing is now at an inflection point, as most people who are receptive to using this technology have now already been tested.
Rival company 23andMe made a similar decision in January when it announced layoffs for approximately 14% of its workforce.
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Illumina, the main underlying manufacturer for this market, reported lower year-on-year revenue for array consumables and services in its Q4 2019 earnings call. Illumina pointed to weakness in the direct-to-consumer genetic testing market as the cause of this decrease in sales.
It is generally acknowledged that early adopters of DNA testing will require innovative products and new features if they are to continue to pay for these services.
Other considerations such as privacy concerns are also expected to have negatively impacted the direct-to-consumer genetic testing market. Companies such as Ancestry and 23andMe continue to receive warrants from law enforcement organisations, requesting access to their databases. While both companies have publicly stated that they will fight these requests, it remains unclear whether this stance is enough to alleviate customer concerns.
In an attempt to expand its customer base, Ancestry launched a health-based arm to its business last year called AncestryHealth. This is a similar approach to that taken by MyHeritage, another family history and DNA testing business, in 2019. Whether or not this expanded product profile will be enough to drive the necessary growth in sales remains to be seen.
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