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Calm - The $2 Billion Growth Story
How two serial, burnout entrepreneurs started a $2 billion mindfulness app
Growth Classics
June 05, 2024
Here is what you can expect:
How two serial, burnout entrepreneurs started a $2 billion mindfulness app
State of the market and the opportunity ahead of them
Early growth breakthroughs: 10x hires, daily habits, adding sleep, price increases, and celebrity stories
Using paid acquisition to pour fuel on the fire
Building a 24/7 SEO powerhouse
Before we jump into the moment Calm was born, I want to give a quick rundown of the incredible backstories of Calm’s two founders, Michael Acton Smith and Alex Tew.
Let’s start with Michael.
“In 1998, while still in his early twenties, Michael Acton Smith co-founded the online gadget and gift retailer Firebox.com with his university friend Tom Boardman. Starting in a rent-free attic and with a £1,000 loan from Smith’s mother, their big break came with the “Shot Glass Chess Set.” Within five years, Firebox was recognized as the 13th fastest-growing privately owned business in the UK by The Sunday Times 'Fast Track 100'.
Wayback Machine - Screenshot of the website in 2003
Building on his success with Firebox, Smith secured $10 million in funding and launched Mind Candy in 2004. The company introduced Perplex City, an alternate reality game featuring a global treasure hunt with a £100,000 prize hidden somewhere in the world. The game played out across various media, including websites, text messages, magazines, live events, skywriting, and helicopters. Although it garnered positive press and was seen as the future of gaming, even earning a BAFTA nomination in 2006, it only attracted a niche audience. After three years and $9 million spent, Perplex City was put on hold.
With just $1 million left, Smith took a final gamble. In 2007, inspired by the rise of Facebook and popular kids' brands like Tamagotchi, Mind Candy launched the online world Moshi Monsters.” Source here
Moshi Monsters generated over $250 million in revenue, employed 200+ people, attracted tens of millions of users, and became the most licensed product in the UK. Michael had offers to sell the business for hundreds of millions of pounds but didn’t take any of them. Then in 2012, business suddenly slowed down due to a platform shift. Kids moved from playing games on desktops to mobile/tablet games, and Moshi didn’t adapt quickly enough. It was much harder to create a monthly subscription service at the time. Unfortunately, this business had to be shut down. Source here
Source here
Before we get to Calm, let’s have a look at Alex Tew, Calm’s other co-founder…
He is the creator of the “Million Dollar Homepage.”
“Late one night in August 2005, he lay down in bed with a notepad and brainstormed cheap things that he could sell a million of. He jotted down dozens of ideas, including a terrible product he called the “Gum Slinger” (a small pouch for used chewing gum).
Then came the once-in-a-lifetime idea: he’d start a webpage with a million pixels that could be purchased for $1 apiece.
Two days and $50 in domain fees later, the Million Dollar Homepage was born.
The concept was extraordinarily simple: for a minimum of $100, an advertiser could buy a 100-pixel block (10 x 10 grid) and display an image or logo of their choosing, with a hyperlink. The only guideline was that it couldn’t be porn.” Source here
Post-Success Void:
“Newly minted with money (about $700k after taxes) and internet fame, Tew dropped out of college after one quarter and moved to London.
His instant success was a confidence boost, but it came with unexpected consequences.
“Success can actually be bad, and can teach you the wrong things,” he says. “I was thinking about ideas that would get attention instead of provide value.”
“Between 2006 and 2010, he launched a series of ventures — Pixelotto, OneMillionPeople, and PopJam — that attempted to leech off of his Million Dollar Homepage fame. Unable to replicate the hit, he moved to San Francisco.” Source here
Here is where the stories collide and Calm is born:
Alex Tew had been pestering his friend Michael Acton Smith to try meditation for a while but after his rollercoaster journey with Mind Candy Michael was finally open to it.
Here is an extract from an interview about this time:
“I’d take painkillers every morning just because I woke up with such a headache, and my body ached. I felt like I was hit by a truck every morning, so these painkillers would kind of help me get started in the day. It was a very tricky time.” Source here
Feeling overwhelmed by business challenges, Michael took a solo trip to the Austrian Alps.
Amidst morning tennis, reading, and jotting notes, he ventured into meditation.
The practice was transformative: "The fog started to clear, and I realized mindfulness could rewire the brain."
Inspired, he returned and shared his vision with his friend Alex. "Right dude, you finally get it. Let's go," Alex said. They dreamed of making mindfulness accessible to everyone and stumbled upon the domain Calm.com.
Initially priced at a million pounds, they later secured it for less, betting their savings on this venture. Thus, Calm was born.
So many businesses are founded from a standing start. The founder falls in love with an idea without ever validating the need or desire for a product in the market. This is a part of the Calm story that really sets them apart from the rest.
Before Calm had even been officially founded, Alex Tew hit viral success after feeling perpetually overwhelmed by technology:
“I had been thinking about how we spend every waking minute of the day with access to an unlimited supply of information, to the point of information overload. I also read somewhere that there is evidence that our brains are being re-wired by the internet because we get a little dopamine kick every time we check our email or Twitter or Facebook and there's a new update. So we're all developing a bit of ADD, which is probably not great in terms of being productive.” Source [here]
Alex’s Solution?
A simple landing page with:
A beautiful sunset background image
A 2-minute countdown timer that resets every time you move
An email capture form
The Objective?
Do nothing for two minutes.
Simple, right?
The site generated hundreds of thousands of visits, amassing over 100,000 Facebook likes and a ton of high-intent email addresses.
You can never fully predict what will go viral, especially back in 2011.
However, I do think this had some fundamental components of content that goes viral:
Hits a nerve with the audience positively or negatively (e.g., beauty filters)
Framed as a challenge – everyone loves competing
Absurd – you get taken to a webpage where the objective is to literally do nothing. It’s such a novel concept people couldn’t help but share it with their friends.
You can explain the idea with just the name, making it 10/10 easy to share.
Simple – there’s no skill or thinking involved; literally, anyone with an internet-enabled device can take part.
Why Is This Even Important?
Alex has validated that there is demand for people wanting to slow down and break their addiction to distraction.
Alex amassed an audience of people who have self-selected as being interested in slowing their minds down.
Alex has generated a load of national press coverage, which was a huge traffic driver for the website but further validated him as someone interesting and innovative in the market.
What Are the Market Conditions?
I noticed that revenue for Calm and Headspace was down in 2023, so I wanted to dig further into this.
Revenue - (000’s of millions $)
Source: Business of Apps
The decline in revenue for the meditation apps Calm and Headspace in 2023 can be attributed to several factors:
Decreased User Engagement: After an initial surge in downloads and usage during the pandemic, user engagement with meditation apps has significantly declined. As people return to pre-pandemic routines, the demand for such apps has diminished. This trend is reflected in a decrease in user sessions for both Calm and Headspace (Mobile Marketing Reads) (Appfigures).
Market Saturation: The market for meditation and mental wellness apps has become increasingly saturated. Since 2015, thousands of new meditation apps have launched, providing more alternatives for users and making it harder for individual apps to maintain their user base and grow (Mobile Marketing Reads).
Economic Factors: Broader economic conditions may also play a role. With inflation and economic uncertainty, consumers may be cutting back on discretionary spending, including subscriptions to wellness apps.
Shift in User Preferences: There has been a shift in user preferences and behaviors. According to an analysis by Apptopia, fewer people are interested in using apps for guided meditation and breathing exercises narrated by celebrities. This shift has led to a general decline in the popularity of such features, which were once major selling points for these apps (Appfigures).
What’s the future opportunity for Calm?
Mental health market: “According to a recent report by Market.us, the Global Behavioral Health Market size is expected to be worth around USD 227.5 Billion by 2032 from USD 147.2 Billion in 2023, growing at a CAGR of 5.1% during the forecast period from 2024 to 2032.” Source here
Mental Health: Personal & Business: The report, commissioned by the NHS Confederation’s mental health network, calculated that in 2022, mental illness cost £130bn in human costs, £110bn in economic costs and £60bn in health and care costs. An average of 33 million days in the UK are lost each year due to minor illnesses, like coughs and colds, with 18 million days lost to mental health conditions. Personal injury firm claims.co.uk analysed Office for National Statistics’ sickness absence data from 2018 – 2022 to arrive at the results. Source here
Sleep: Additionally, the sleep economy is booming, projected to hit $585 billion in 2024, driven by increasing public awareness of sleep’s essential role in health, backed by rising investments in sleep technology. Source here
Wellness market: The United States dominates the global wellness economy, commanding a staggering $1.8 trillion—over twice the size of China’s market. Within this thriving $5.6 trillion global market, the U.S. leads in nearly every sector, showcasing a dramatic shift towards health and lifestyle optimisation. Source here Globally, an estimated 12 billion working days are lost every year to depression and anxiety at a cost of US$ 1 trillion per year in lost productivity. WHO
Growth Breakthroughs:
Just Increase Your Prices. Simple.
In the beginning, Calm was charging $10 for a subscription, but they needed something big to boost their income as they were struggling to raise funding.
So they thought, “What would happen if we just increased our prices?”
They quadrupled their price from $10 to $40 a year and saw almost no drop-off in new sign-ups.
Valuable lesson:
“Probably the single number one thing we try to get our companies to do is to raise prices. Is your product any good if people won't pay more for it?" - Marc Andreessen
Source here
Calm’s pricing model today here
Why This Pricing Model is Smart
Low Barrier to Entry with Free Trial:
Try Before You Buy: The 7-day free trial lets users experience the product without commitment, which can boost sign-ups.
Hands-On Experience: Users see the value firsthand, leading to higher conversion rates after the trial.
Annual Billing for Recurring Revenue:
Steady, Predictable Income: £39.99 annually ensures consistent revenue.
Retention: Annual commitment often means users stick around longer.
Lifetime Plan for Immediate Revenue:
Cash Boost: £399.99 upfront provides immediate funds for growth.
Long-Term Value: Great for heavy users, offering big savings over time.
Pricing Anchors:
Perceived Value: The lifetime plan makes the annual plan seem more affordable.
Choice for All: Options cater to different customer preferences.
Advantages for Acquisition:
Broad Appeal:
Options for Everyone: Both cautious new users and long-term investors find something attractive.
Reduced Churn:
Annual Commitment: Users who pay annually are less likely to leave before getting the value.
Qualified Leads: Free trial helps find genuinely interested users.
Time to Value: Users can get started immediately and get value from the product without having a price barrier stopping them from experiencing Calm.
Higher Conversion Rates:
Risk-Free Trial: Increases the likelihood of users committing to paid plans.
Immediate Revenue Boost:
Lifetime Plan Sales: High upfront payments help fund further growth efforts.
Making Calm a Daily Habit:
Here's a great insight into how Calm used a smart psychological principle to boost user engagement.
When Calm teamed up with Tamara Levitt, their brilliant meditation teacher, to create the Daily Calm, it was a game-changer.
Meditating can be tough—sitting down alone, trying to focus. But Tamara designed a unique 10-minute session every day, complete with new lessons, quotes, and motivations.
🧠 Psychological Principle:
According to the book "Hooked," this strategy leverages the concept of variable rewards, where the unique content each day provides unpredictable and exciting rewards, keeping users engaged and looking forward to the next session. This was a crucial turning point for Calm, transforming user engagement and making meditation accessible and enjoyable.
Discovering Calm Was Being Used for Sleep:
This is a great example of why being close to the customer and your data is so crucial for a business in the early stages.
Calm noticed a massive spike in app usage globally every day at 11 pm.
They realized people were using Tamara’s meditations to help them fall asleep.
They took a step back and thought about how they could capitalize on this.
They created “Sleep Stories.”
“Instead of a traditional story arc, they designed a story slope that starts interesting, engages the mind, and then gradually becomes more soporific until the listener falls asleep before the ending.” Source
It became a massive hit. So much of a hit, it is now a core component of the app’s identity.
Reflection Questions:
Do you really know how your customers are using your product?
How closely do you track product usage?
Is there a way your product is being used that you can turn into a complementary offering?
Sleeping with Matthew McConaughey
Easy now. Not like that!
Calm started knocking on the doors of Hollywood looking for a celebrity to read one of their sleep stories but came up short.
Their breakthrough moment came through one of their investors, Ashton Kutcher, who knew Matthew McConaughey.
They’d heard on the grapevine that Matthew used Calm in one of his children’s charities and was a big fan of Calm.
So they managed to get the introduction, and he was immediately up for it.
Once that domino fell, other celebrities were knocking on the door, and it made it much easier.
“Calm has built a franchise around its Sleep Story series, with several tales on the app narrated by celebrities including: Jennifer Garner, Shawn Mendes, Cynthia Erivo, Camila Cabello, Nick Offerman, Harry Styles, Michael Bublé, Matthew McConaughey, LeBron James, Regé-Jean Page, Laura Dern, Cillian Murphy, Idris Elba, Priyanka Chopra Jonas, LeVar Burton, Lucy Liu, Mandy Moore, and Kate Winslet.” Source here
Hiring 10x Talent
Hire great people and get out of their way.
It’s been repeated so many times that it has almost become a bumper sticker.
The all-time great founders always speak of how important finding great talent is.
Let’s take Steve Jobs, for example.
Walter Isaacson, who was asked by Steve Jobs to write his biography, stayed at Jobs' house for over a year following his life.
Isaacson recalled that Jobs didn't count any of his products or devices as his greatest accomplishment.
"It was the team that got put in place," including Cook, design guru Jony Ive, and marketing chief Philip Schiller.
Here are some great quotes of a similar sentiment:
“First,” advises Jeff Bezos, his laugh echoing through the Amazon rainforest, “hire the right person. Give them a good vision and priorities. That person can easily generate 10X the average employee.”
“It’s like compound interest,” muses Warren Buffett, sipping his Cherry Coke. “Invest in the right people, and their impact compounds geometrically.”
Source here
Who did Michael say was a key 10x hire for Calm?
Calm, Zynga, Virgin, Yahoo
“A lady joined us called Dunn who's just brilliant at user acquisition and she understood Facebook marketing inside out, and that was the next sort of piece of the puzzle that really started to take the business to the next level.” Source here
Deeper Look at Calm on Meta:
Calm has over 480 ads active globally and seems to have a very regular upload schedule, with new ads appearing weekly or even more frequently.
Mindful Paid Acquisition. Don’t worry, this isn’t a new buzzword.
Before taking a deeper look at Calm’s Meta strategy, I wondered how they would manage to incorporate their brand values into paid acquisition without straying from their mission of improving the mental health of their customers.
I was pleasantly surprised by the strategy they’ve taken with their paid creative.
Interactive Ad Type:
In this ad, they actually get you to interact with the ad, stop, take a deep breath, and listen to the calming sounds being played by the ad.
In a similar vein to the business Alex started prior to Calm, “Do Nothing for Two Minutes,” this ad runs counter to the dopamine-hijacking culture we are in and presents a precious space in someone's doom-scrolling to take a moment for themselves to practice being mindful.
My hypothesis behind this ad is that it preselects people who are more likely to convert by showing them the value of taking a break up front.
Considering that Calm offers a 7-day free trial and has many of these ads in their library, I think this is a successful ad for them.
The hook for this ad was, “If your brain is feeling scattered, rest here for a moment.”
Educational Ad:
Calm has a whole collection of these ads, which are based on various mental health issues that people may be facing and provide a set of 4-5 tips to help improve the issue or, on the other hand, to help people understand more about the issue they are facing.
Some of the headlines include:
How to lower cortisol - 4 proven techniques
Ever wondered why you wake up tired even after a full night’s sleep?
4 Stages of Untreated Anxiety
3 signs you need a mental health break
3 ways Calm can help with work stress
Celebrity Talent:
Variant Testing:
It’s clear from their Meta ads library that they understand creative testing and the type of content that is native to users.
A weird phenomenon has occurred on social media where users will post a video that includes a split screen. One half of the video has “sludge content,” which is normally a very satisfying video where something is completed perfectly, such as a video game or someone slicing a cake into perfect slices.
Example here:
Calm is doing lots of variant testing inside their account where they have the same opening statement:
“If your mind is feeling scattered, rest here for a moment…”
Then the opening video will be a set of videos that are very satisfying and calming.
Localizing Ads Across the World:
“Calm is being used in more than 190 countries around the globe, and our content and engagement resources have been localized into seven languages: English, German, Spanish, French, Korean, Portuguese, Japanese.” Source here
YouTube - 24/7 Marketing Funnel
Calm has a collection of videos that have tens of millions of views and are driving significant traffic to their site each and every day, effectively running an automatic 24/7 marketing campaign on their behalf.
Let’s take a deeper look.
Nearly 50% of their social traffic is coming from You Tube.
Source: Similar Web
They have 980,000 subscribers on their You Tube channel and nearly 700 videos!
If you take a look at their most popular organic videos the largest one has over 52 million views.
They are still posting this type of content today but since You Tube is one of the biggest search engines in the world these videos continue to pick up traction over time!
Dominating Organic Positioning:
When searching “mindfulness” or “mindfulness meditation,” Calm takes the first spot after the sponsored ads.
Try Before You Buy:
Similar to their Meta ads that allow users to experience the benefits of the product before trying.
Whether it’s calming sounds, a meditation, or a hack for anxiety, Calm has a video for you.
Each video has a very simple description with a clear CTA:
This takes you to a great landing page where it removes all friction in the customer journey by allowing users to take advantage of their 7-day free trial.
How Can I Take Advantage of This for My Brand?
Step 1: Understand the Opportunities
Understand the intersection between the important problems your product solves and the important problems potential customers are searching for.
Use tools such as Ahrefs, Exploding Topics, or Google Keyword Planner to understand what searches are being made in the market that are generating a lot of traffic.
Try to find keyword searches that have high traffic but limited high-quality content meeting the needs of the user.
Step 2: Create the Content
Create quality content for YouTube (as well as other social platforms) that provides value to your customers and will rank organically.
This is where prioritization will be fundamental. Undertaking this strategy will likely come at the cost of another. Even if it’s done in a scrappy way.
The goal of step 1 should be to build a business case to give you the confidence to run the experiment.
Step 3: Create a Landing Page and Drive Action
For Calm, they have an amazing 7-day free trial.
Not every business can offer this.
This might take some experimentation to find out what is best at this stage in your funnel.
Some options to test:
Personalized quiz Prose or Inkey List
Email and children’s birthday information for personalized product recommendations - Mori
Treating Content Like a Profit Centre, Not a Cost Centre
Calm’s blog is an organic traffic powerhouse.
Let’s take this top keyword and Calm article about “Ikigai,” a Japanese model for living a happy and fulfilled life.
This search term gets over 94,000 searches a month.
Generating an estimated 36,000 people a month to Calm’s blog article.
Once on the blog (which is great, by the way), Calm includes several CTAs that allow users to try the app for free.
This strategy has been repeated for hundreds if not thousands of high-traffic searches across various related topics to their app.
Love & Relationships:
Healthy Habits:
How to Calm an Anxiety Attack:
Buying Expensive TV Slots and Doing Nothing:
Calm Saved the Election (Sort of)
When election chaos hit its peak, guess who swooped in to save our sanity? Calm app!
Picture this: CNN’s nail-biting updates interrupted by serene rain falling on leaves. Genius, right?
Calm's strategy? Simple yet brilliant. They targeted high-stress moments with ads that offered immediate relaxation.
This wasn’t just an ad—it was a lifeline.
Social media exploded with gratitude. People thanked Calm for helping them breathe easier amid the election storm.
This campaign wasn’t just a win for Calm; it was a masterclass in using timely, empathetic marketing to connect with stressed-out audiences (InsideHook).
In an emailed statement to Vogue, a Calm spokesperson said the goal was to remind viewers to take a breath.
“We understand the uncertainty of this election cycle can be a source of anxiety for many of us, especially as it coincides with an ongoing pandemic. Our goal during CNN’s Key Race Alerts was to provide viewers a moment of Calm, and a reminder to take a deep breath during a stressful night,” the spokesperson said.
“As the rest of the week is likely to hold ambiguity, we refreshed our resource hub with free mindfulness tools to help us all navigate this stressful time. We encourage anyone who might need support to check out the Sleep Stories, meditations, music, and other mindfulness content available on the hub.”