If you haven’t heard of Headspace (where have you been?), it’s a meditation app. And more than that: It’s one of the best meditation apps that exists.
In the last decade, in the Western world, meditating has evolved from being seen as a mystical, zany, and quirky thing to being seen as something incredibly useful, widely adopted, and practiced by most successful people. Headspace has been at the forefront of that change.
Their no-frills approach started as in-person daylong seminars, and it eventually mutated into bite-size daily guided meditations, accessible from an app on your phone. This got people interested. It removed the friction from trying it out. And it’s been incredibly popular. This year, they completed their Series C; the total equity funding was $100.7 million.
Their app made meditation easier, more accessible, and more understandable.
But that’s what it’s primarily been: an app on your phone. Since launching their product, the Headspace app, their company’s aim has been to reach as many people as they can and convert them into paying subscribers who use their app to meditate. In 2020 they’re trying to change this approach and redefine what their company is.
The goal of any company is to make money, or technically speaking, increase profit. Profit is a simple function of revenue and cost: total profit made is total revenue minus total costs. So, increasing profit is done either by increasing revenue or decreasing costs.
Companies that are the size of Headspace will have multiple, diversified revenue streams. But it’s easy to see that their business model relies on one core revenue stream. Users pay a subscription fee for access to the platform. Content on the Headspace platform can be accessed via the iPhone app, the Android app, or the web interface.
There are different types of subscriptions. Headspace offers student pricing, corporate partnership deals where a company pays rather than an individual, different contract periods (you can be a monthly subscriber or annual subscriber), and previously there have been discounts for teachers, healthcare workers, and unemployed people. But it all comes down to paying subscribers. More paying subscribers = more revenue.
Subscription models have become near-ubiquitous in tech over the last half-decade. It’s a great model for companies: The reliability and confidence from having recurring revenue allows them to make strategic plans that stretch over multiple years.
And, to stay profitable, those strategies focus on acquiring new paying subscribers and reducing churn.
NB: A company’s churn rate is the annual percentage rate at which customers cancel their subscriptions.
For a company like Headspace, there are bound to be a few strategic plans that tie together. As they have a content platform, they will have a content strategy. (What new guided meditations should we focus on this year?) They’re an app company, so they will also have digital product strategies for each platform they’re on. (What bugs can we squash? What improvements can we ship?) They’ll also have marketing strategies for different channels, about how to reach potential new subscribers, and an overarching brand strategy, to shape how they define themselves.
These strategies all work in tandem. Brand strategy and overarching vision will determine content strategy, app and product strategy has to support new content types, and marketing strategies will use all that as a launchpad.
Looking specifically at 2020, Headspace’s content has expanded greatly over the last year. Their app has therefore adapted to support those new content sections.
Previously, the app had three distinct sections: a homepage, a library of guided meditations, and ‘You’ to track your stats and manage your settings. In 2020, the app’s core navigation has been totally redesigned. As well as Meditate, the sections now include Today, Sleep, Move, and Focus.
This shows us that Headspace is changing direction.
And, to be clear, this isn’t just conjecture that I’m extrapolating from app changes. A recent job listing for Headspace states that they’re expanding their reach beyond meditation:
This is an exciting career opportunity at a dynamic growth stage company with a talented and diverse team on one of the world’s most loved apps. We’re at an exhilarating time in our history — essentially expanding our programs to address important human problems (mindfulness, sleep, and beyond) and into new territories (Europe, Asia, South America, etc.) and industries (Workplace, Health).
These new content formats (daily podcasts, sleep sounds, focus music, and so on) help them challenge new problems, in new territories and industries. Why are they doing that now?
My hunch is this: Headspace has likely conquered 95+% of the addressable meditation market.
NB: I’m being loose when using the term ‘addressable market’ but am focussing on serviceable market (SAM) rather than the total addressable one (TAM).
Everyone who was ever going to use a meditation app in the Western world has likely already tried one out. And, if you’re trying out a meditation app, one of the ones you’ll have tried will have been Headspace.
So meditation isn’t enough to get new customers anymore. They’ve peaked. Everyone who would use an app to meditate already does. So, by introducing new content, Headspace can attract new paying subscribers. (It also helps them reduce churn, as existing subscribers see more value in their subscription.) In turn, this fulfils their primary goal of keeping their revenue growing.
It’s worth pointing out, though, that the new content isn’t a bad thing. While their new content isn’t straight-up meditation, it’s still all about living life in a mindful way. I’d bet money that somewhere in Headspace Inc. there’s a board with a vision statement on it around making people live happier, calmer lives. Their new content does still aims toward that vision.
The multi-platform approach goes hand-in-hand with the new content formats. Partnerships have been something that Headspace has been building for a while — early on, they committed to funding peer-reviewed research about the benefits of meditation.
However, this approach is now more bombastic and far-reaching. Some of the partnerships announced in 2020 include:
These are all big brand partnerships. But it’s easy to see why they’ve been successful. 2020 has been one hell of a year, and mindfulness, wellbeing, and self-care are ‘in.’ Companies and brands want their users to know they care, so they are promoting mindful living. And if the best meditation app in the world wants to help make the content, then that’s all the better.
And that’s why it’s good for Headspace too: It elevates them from being ‘just an app.’ By appearing on other platforms outside of their own, they can raise their own status to being something more than just a meditation app.
Headspace has already proven itself to have an incredible value. They’ve reached a huge number of people, created massive amounts of value, and made a ton of money in the process.
But their new strategy helps strengthen their position as the market leaders. It sets Headspace up for a decade more of new and exciting content and partnerships, where they can reach beyond the limits of their own platform. And moreover, it sets them up to genuinely help people. Meditating and living mindfully genuinely do help people become happier and calmer. In the end, what else matters?
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