If Alphabet did snap up Fitbit, it could dramatically change the landscape for smartwatches. In spite of challenges, Fitbit is still one of the largest smartwatch makers on the planet -- this would quickly consolidate the market. It could also provide Google with expertise in a number of areas, including fitness tracking. This doesn't necessarily mean that you'll see Google make is own Fitbit-influenced smartwatches, but it could incorporate more fitness features into Wear OS.
A deal might be necessary for Fitbit. Although the Versa line has helped Fitbit's fortunes, the company is still struggling between its heavy dependence on basic fitness trackers and its gradual transition to services. It's bleeding cash, and things might only get worse as competitors like Apple and Samsung offer both more advanced and more affordable models. Alphabet may offer a lifeline to a team that would face uncertainty on its own.