How Does Calm Make Money? Business Model of Calm


How Does Calm Make Money

Founded in 2012, Calm is a San Francisco-based mobile application company that creates products to help users cope with stress, anxiety, sleep disorders, and more on a daily basis. We’ve written a lot about the business of Calm in the past, but today we’re going to focus on just one aspect: how does Calm make money?

Calm operates on a freemium business model. Calm makes money by charging a monthly fee for access to the entire library of its premium content, consisting of guided meditations, music tracks, and sleep stories.

Let’s dive deeper into Calm’s business model and find out how it generates revenue. By the end of this article, you should have a solid idea of how this company works and makes money.

About Calm

Calm, the award-winning meditation and mindfulness app, has more than 150 million downloads across its family of apps.

It’s become a go-to destination for people who are looking to learn mindfulness practices, with over 30 million minutes of audio meditations streamed every month.

What makes Calm a unicorn is its social media-driven and celebrity-driven marketing strategy and the multiple revenue streams currently available to health and wellness products.

Calm offers guided meditations from world-renowned teachers like Jack Kornfield, Tara Brach, Sharon Salzberg, and Mark Williams.

The app also offers mindfulness meditation sessions, guided breathing exercises, sleep stories, and healthy lifestyle tips that link mindfulness with healthy sleeping habits. It provides users with a holistic approach to manage stress levels and improve sleep quality.

 

Business Model of Calm

Calm has a freemium business model with some revenue generated from an EAP model. It markets its sleep, meditation, health, and wellness app through a 7-day free trial and those who want to continue can renew through a premium subscription.

It also targets the B2B market because health and wellness is rapidly growing in that sphere, as well as the brand partnership sphere. Its top competitor is Headspace.

  • Over four million users subscribe to Calm
  • 100 million people have downloaded Calm

Regarding the target demographic, the majority of users are US-based, with the Uk coming in second place at 10%. 60% of Calm users are female with a median age between 30 and 35. One-third of those who subscribe do so on the first day.

 

Product/Service

Calm is a popular sleep, meditation, health, and happiness app. They claim that their app can help you in the following areas:

  • Improving sleep quality
  • Reducing stress or anxiety
  • Improving focus
  • Self-improvement

Calm did a survey of its own subscribers. Those who used the app more than 5x per week achieved the following results:

  • 84% saw improvements in mental health
  • 81% reported less stress
  • 73% expressed higher sleep quality

 

Marketing

Because Calm has a freemium business model, a lot of future subscribers are attracted to Calm’s 7-day free trial. Moreover, Calm’s Sleep Stories feature has celebrities promoting their brand by default.

Calm is also used by large-scale businesses and EAP platforms, like Lyra Health, that use Calm for their employees and customers.

Calm has done many paid advertising campaigns through iOS products and through Facebook. With Android users they do less marketing because Apple has better CRO. Calm enhances its targeting through message sequencing and is, therefore, able to follow its target audience through every step of the customer journey.

Their advertising for the Sleep Stories feature actually has samples from these Sleep Stories, with the actual voices of the featured celebs.

These ads can appear in their Facebook ads, which cover about 80% of their ad spend, or Instagram, which covers about 1%. Calm also runs special offers for subscriptions with discounts of 25%-40% off.

Due to Calm’s EAP model (Employee Assistance Program), Calm has access not only to patients with mental health needs, but to physicians, nurses, psychiatrists, coaches, and technical health staff for mental health EAP platforms.

Lyra Health, a highly successful EAP mental health platform that employs not only medical staff, but unlicensed coaches for non-therapy coaching sessions, has Calm fully integrated into their system. Therefore, many who would normally not know about Calm, both patients and staff, are exposed to Calm through EAP platforms like Calm.

 

Expenses

Every business incurs expenses to run its operations. Be it renting a place for the office, paying software subscriptions, salaries of employees, or utilities for the office location, all these expenses need to be accrued somewhere. Calm is no different.

Calm incurs the following expenses to operate their rapidly growing business:

  • Personnel costs, including salaries, benefits, and bonuses, for the executive team, engineers, designers, and other employees; outside consultants
  • Functional services (SMS, Push Notifications, etc.)
  • Marketing and promotional expenditure
  • Data centers
  • Office equipment
  • Legal, accounting, and other administrative expenses
  • Administrative services (to make updates to your app, manage users, etc.)
  • Infrastructure services (servers, CDN, etc.)
  • IT support services (updates to your app, bug fixes, etc.)
  • iOS and Android updates
  • APIs Images data
  • Data storage
  • App update submissions
  • App development tools, libraries, and support
  • Social & chat integrations

 

Profitability

Since quadrupling its revenue in 2020, Calm has already attained profitability. Its marketing strategy will probably continue to attract new users and more revenue.

As Facebook expands its influence in China and other places, so will Calm increase its pool of new users.

As Instagram and other social media platforms increase followings, Calm will have a chance to expand to new markets and further increase its profits.

Michael Acton Smith, Calm Co-founder & Co-CEO, states that the health and wellness industry is a $4 trillion industry and that,

“Our vision is to build one of the most valuable and meaningful brands of the 21st century.”

 

How Does Calm Make Money?

As a smartphone app, Calm mainly makes its money through subscriptions, but it actually has three revenue streams:

  • B2B subscriptions
  • B2C subscriptions
  • Brand partnerships

In addition to its three revenue streams, Calm also makes money through its EAP model.

Consumer Channel (Subscriptions)

As a meditation and wellness app, Calm provides a lot of features for its consumers. It starts out with a 7-day free trial. After the trial is over, the consumer has two choices:

  • An annual subscription plan
  • Calm For Life, an unlimited subscription plan

In keeping with its freemium model, however, a lot of the free features available within the 7-day free trial period remain unlocked even after that period expires. Regardless, many users sign on for premium plans because those plans have new features constantly being added.

Such features include but are not limited to the following:

  • Guided mindful meditation·
  • Music Tracks for sleep, relaxation, and unguided meditation·
  • Sleep Stories ·
  • Daily Calm

The way the Sleep Stories feature works is that celebrities read works of fiction for users to fall asleep to. Premium users have access to 100+ Sleep Stories, which had over 140 million listens in 2018.

In addition to English, these stories are also published in Spanish, French, and German. Such celebrities include but are not limited to the following:

  • LeBron James
  • Stephen Fry
  • Harry Styles
  • Matthew McConaughey
  • Eva Green

 

Calm for Business (B2B Solutions)

Calm provides packages to businesses that want to distribute their services to their employees. These B2B packages fall within two categories:

  • Calm for Team
  • Calm for Business

Calm for Team is for 5 to 100 people. The subscription fee per user decreases as more users are added, thus increasing incentives for businesses to purchase calm in high volume for its employees.

Calm for Business is for more than 100 people. Companies known to use Calm for Business include but are not limited to the following:

  • Gofundme
  • Lincoln
  • Universal music group
  • Iterable

 

Brand Partnerships

Calm partners with different companies to promote their brands on their app in exchange for some negotiated fee. Such promotion can include the following methods:

  • Content Licensing
  • Marketing Campaigns
  • Physical Product partnerships

Calm’s brand partnerships include the following companies:

  • Uber
  • American Express
  • American Airlines
  • Apple

 

EAP (Employee Assistance Program)

In addition to large companies, Calm also has its services available to large EAP (Employee Assistance Program) platforms like Lyra Health.

Due to the nature of EAPs, some of these organizations and government agencies could have access to government money to purchase Calm for their employees.

Basically, most government agencies have EAPs for their government employees. If the EAPs for those government agencies use Lyra Health or use Calm for their employees, then government money becomes a source of revenue for Calm.

 

Calm Funding, Valuation, & Revenue

Calm has absolutely no problem with its funding, and that is an understatement!

In the four-year period from 2014 to 2018, Calm’s funding did a 28x. In the six-year period from 2014-2020, Calm did a 218x! Lack of cash will never be one of Calm’s problems.

YearFunding
2014$1 M
2018$28 M
2019$143 M
2020$218 M

Calm’s valuation has grown exponentially in the past couple of years. In the one-year period from 2018-2019, Calm’s valuation did a 4x. In the two-year period from 2018-2020, Calm’s valuation did an 8x. Therefore, Calm is a unicorn.

YearValuation
2018$0.25 B
2019$1 B
2020$2 B

Calm’s revenue has exploded over the years. From 2015 to 2016 it has more than tripled and from 2016 to 2017 it has more than quintupled.

In the three-year period from 2015 to 2018, it has increased 40x and in the four-year period from 2015 to 2019, it has increased 75x.

YearRevenue
2015$2 M
2016$7 M
2017$37 M
2018$80 M
2019$150 M

Is Calm Profitable?

Calm, the market leader in digital mindfulness and meditation has been profitable for years. With this strong foundation, Calm is focused on increasing its revenue growth while continuing to invest in innovation and marketing.

Calm has been profitable since 2016, and “quadrupled its revenue in 2018”. At that time TechCrunch had reported that Calm had over 40 million downloads worldwide with over one million paying subscribers.

As has already been stated, the health and wellness space is a $4 trillion industry, so there is plenty of room for Calm to grow.

Also, Facebook has reached out to China and, eventually, Facebook will be allowed, within China’s guidelines, to penetrate China’s firewall and compete with WeChat properly.

Being that Calm already has 80% of its ad spend invested in Facebook when the firewall in China ultimately comes down, Calm will have access to new markets. 

 

Conclusion: How Does Calm Make Money?

To sum up, Calm App is currently operating on a freemium model, making money via its premium offering. It offers monthly and yearly subscriptions. Both packages give unlimited access to the app. However, the yearly subscription comes with a discount.

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