The Race to Mindfulness
How Calm and Headspace are taking on the booming mindfulness market
Calm and Headspace, the two leading meditation apps on the market today, were once considered “too niche” to reach billion-dollar valuations.
Fast forward several years, and both companies are unicorns.
Over the last decade, Calm and Headspace have grown into large-scale, technology-enabled businesses benefiting from a rising health & wellness wave. Mindfulness has followed the path of jogging or yoga, gradually making its way into the mainstream and establishing itself as an integral member of the thriving wellness economy. Per the CDC, around 14% of American adults surveyed in 2017 said they had meditated at least once in the last year — a proportion over three times higher than in 2012 (and likely on the rise amidst a seemingly never-ending pandemic).
Calm and Headspace, the dominant players in the space, jointly hold about 70% of the mindfulness meditation market. At their core, both are content companies: deploying funds to invest in content, charging subscriptions for access to content, then reinvesting revenue back into content production. Combine favorable macro trends with tech-enabled scalability, recurring revenues, and high margins from relatively inexpensive audio recordings, and you get an attractive business opportunity. Meditation, it turns out, is not so niche after all.
Head-to-head: Calm vs. Headspace
Despite being built on the values of taking it slow, the race to mindfulness has been anything but zen. As Calm co-founded Michael Acton Smith puts it, Calm and Headspace have been engaged in “mindful competition” for nearly a decade.
The two companies are, in many respects, quite similar. No doubt a result of years of fierce competition, Calm and Headspace have pursued many of the same growth strategies and market opportunities — both have integrated sleep stories, T.V. content, corporate offers, and exclusive music deals. Their missions are also essentially interchangeable: Calm aims to “make the world healthier and happier,” while Headspace wants “to improve the health and happiness of the world.” A quick ‘Calm vs. Headspace’ google search yields dozens of pros-and-cons lists, but not necessarily a clear-cut winner.
From a VC perspective, the answer is more nuanced. It seemed until recently as though Calm was in the lead. Heralded the “world’s first mental health unicorn” in 2019, the company won the Apple App of the Year in 2017, was valued at $2 billion in its latest 2020 funding round, and maintains the title of #1 app for sleep/meditation. Headspace, meanwhile, was valued at $320M in 2017 then kept its valuation private for years — perhaps due to not reaching the same $1B milestone.
In the past few months, however, the competitive landscape has shifted. Amidst an escalating mental health crisis, Headspace finalized its merger with on-demand mental health service Ginger in October 2021 — creating a $3 billion mental health company. And so the race to mindfulness intensifies…
How do the two competitors stack up? What lies ahead? Below, we take a deeper look into the history, business models, and trajectories at the heart of the Calm-Headspace debate.
Calm, Nike of the Mind
The Calm vision: to “build one of the most valuable and meaningful brands of the 21st century”- an all-encompassing wellness brand with a focus on direct-to-consumer. Calm has already started branching out of sleep and meditation, making its first foray into physical activity this month with its newest ‘Daily Move’ feature. Beyond digital content, co-founder Michael Acton Smith can see “retail outlets, to clothing, to publishing, to hotels.” Perhaps most ambitiously: “a Calm island run as a profitable resort.”
Much of the company’s direct-to-consumer vision and customer acquisition strategy can be traced back to its founding story. Before starting Calm, co-founder Alex Tew launched the viral Million Dollar Homepage, selling 1 million pixels of internet ad space for $1 each (see image below). Leveraging this knack for internet fame, Calm has relied heavily upon clever P.R. as a means of building a recognizable consumer brand that resonates with its audience. Examples include: turning the General Data Protection Regulation legislation into a Sleep Story, sponsoring CNN’s coverage of the U.S. presidential elections, or hiring Ben Stein (the actor who played the economics teacher from “Ferris Bueller’s Day Off”) to read a chapter from “The Wealth of Nations.”
Today, Calm aspires to become the “Nike of the Mind.” Just as Nike brought recreational fitness into the mainstream, Calm aims to initiate a similar revolution in the emerging field of mental fitness. The emphasis here is on building a recognizable, consumer-facing brand around a state of mind. Taking a page out of Nike’s celebrity-partnerships playbook, anyone can now fall asleep to the soothing voice of Harry Styles, LeBron James, or Matthew McConaughey.
Headspace Health, a mental health company
While Calm is trending towards a direct-to-consumer and all-encompassing wellness brand, Headspace has doubled down on healthcare and a science-based approach to alleviating stress.
Again, we can draw parallels between Headspace’s broader vision and its founding story. Before co-founding Headspace, Andy Puddicombe (originally from the U.K.) spent ten years as a monk in Asia. He then set up a meditation practice in London, working first-hand with burnt-out professionals across the city. Today, no doubt inspired by the authenticity of Puddicombe’s experiences, Headspace continues to be rooted in education and the fundamentals behind mindfulness.
Headspace began actively pursuing a healthcare strategy in 2018, partnering with academics in clinical trials that could provide scientific validation to its meditation products. Following the merger with Ginger, Headspace Health takes on a decisively more healthcare-focused orientation. Together, Ginger and Headspace aim to provide support for mental health symptoms from anxiety to depression to more complex diagnoses, for all types of patient populations including consumers, employees, commercial, and Medicaid plan members. The combined company clearly pushes beyond Headspace’s direct-to-consumer meditation roots and into the broader realm of comprehensive mental health.
Ultimately, Headspace is building a brand identity around credibility and evidence-based efficacy. The company is betting on science to differentiate itself from the competition, pursuing a mental-health approach to expand its opportunity and customer base beyond the meditation-app market. This may very well turn out to be a rewarding strategy, especially as competition for consumer attention (and wallets) intensifies.
Looking ahead: Calm’s next big move?
The mindfulness industry is booming, attracting a plethora of players that could begin nibbling away at the Calm and Headspace subscriber base. Spotify has created dedicated meditation playlists, and companies like Peloton and Alo Yoga have already added meditation to their exercise platforms. For some consumers, these offerings might just be enough to fulfill their mindfulness needs.
The question then becomes: how will Calm and Headspace retain users and continue justifying subscription prices, when other bundles offer mindfulness as a complementary add-on? Leveraging their status as early entrants or betting on the power of brand might not be enough — it seems safe to assume that the quality of meditation products in more comprehensive fitness/wellness apps will only increase over time.
Headspace has already made headway in addressing market concerns. Now ‘Headspace Health’, the merger with Ginger offers a compelling opportunity to pursue a healthcare strategy and diversify beyond the confines of an increasingly competitive meditation-app industry. It also increases the attractiveness and comprehensiveness of its corporate products, giving Headspace an advantage over Calm when pitching to employers.
Calm, meanwhile, is still primarily seen as a D2C mindfulness & sleep brand. If it fails to innovate, the company could soon find itself losing a) paying subscribers to Spotify and b) corporate partners to Headspace. Independent creators could pose an additional threat, leveraging the power of community and riding the passion-economy / Web3 wave to carve their own niche around a personal brand.
To keep up with its long-time competitor, the “world’s first mental health unicorn” will need to make its next big move. The last decade has included books, scented pillow sprays, T.V. shows, and Matthew McConaughey. Assuming Calm sticks to these D2C roots and continues along its current lifestyle-brand trajectory, we might see the company expand more aggressively into a broader range of consumer-oriented verticals — a potentially interesting counter to Headspace’s healthcare strategy.
Whether we find ourselves meditating in a Calm Studio or vacationing on Calm Island, one thing is clear: the race to mindfulness is far from over.
