headspace-business-model

How Does Headspace Make Money? The Headspace Business Model In A Nutshell

  • Headspace is an online meditation company founded by Andy Puddicombe and Richard Pierson in 2010. Puddicombe got the idea for the company after seeing the value of mindfulness meditation during a ten-year stint as a monk.
  • The Headspace app is free to use for those desiring basic lessons and functionality. However, there are two subscription plans for those who want to delve deeper into mindfulness as a meditation practice. 
  • Headspace also makes money through various and sometimes high-profile partnerships with corporate clients. Furthermore, the company is hoping to monetize its Headspace Health product. If approved, it would be one of the first such products to offer mindfulness as a digital therapeutic medicine.

History of Headspace

Headspace is an online mediation company founded by Andy Puddicombe and Richard Pierson in 2010. The platform provides guided meditation sessions to registered users to increase mindfulness. 

The story of how Headspace came to be is rather interesting. When Puddicombe was 22, he was standing outside a London pub when a drunk driver hit a group of his friends – killing two of them.

A few months later, a stepsister died in a cycling accident and an ex-partner passed away during a surgical procedure.

Suffering intense grief, Puddicombe decided to travel to the Himalayas and become a Buddhist monk. There, he spent the next decade meditating for sixteen hours a day. This he credits with helping him deal with his multiple losses.

In 2005, Puddicombe returned to England and opened a small mediation practice.

Richard Pierson was one of his first customers, and the two decided to go into business together after Pierson saw the value of meditation in relieving his social anxiety.

Puddicombe and Pierson spent the next few years spreading the word about meditation, which at the time was less understood in the West.

In 2010, the Headspace app was launched and was funded entirely by donations or favors from friends.

Four years later, the business was moved to Los Angeles which coincided with more significant investment funding.

Today, Headspace is more than a consumer app. The company now acts as a corporate consultant, with firms such as Google, General Electric, and Unilever employing its services.

Benefitting from pandemic-induced anxiety and stress, recent figures put the Headspace user base at around 65 million people.

Headspace revenue generation

Headspace operates in a relatively unique industry and has a business model to match.

Let’s delve into how the company makes its money below.

Headspace consumer app

Although users get access to basic lessons and features for free, Headspace offers two subscription plans for increased functionality and advanced meditation lessons.

Prices vary by country, but in the United Kingdom users can select between:

  • An annual subscription – billed each year for £49.99 with a 14-day free trial.
  • A monthly subscription – billed each month for £9.99 with a 7-day free trial.

B2B

As mentioned in the previous section, Headspace offers mediation services to corporate clients to improve employee mental health. This is otherwise referred to as Headspace for Work.

There are three packages to choose from:

  1. Foundational – featuring an employee dashboard, monthly well-being resources, live virtual events, engagement reporting, and 24/7 technical support.
  2. Guided – incorporating a more bespoke employee engagement plan, partner success manager, regular check-in meetings, and executive reviews.
  3. Advanced – similar to the Guided plan, with additional access to features allowing the organization to consult with Headspace leadership and identify joint venture or internal marketing opportunities.

Prices are not disclosed and vary according to the particular needs of each client, in any case. The total price is likely reliant upon the number of employees undertaking the training and the enterprise package selected.

Headspace Health

Headspace Health is a digital health subsidiary of Headspace seeking to pioneer new ways to incorporate mindfulness into digital medicine. 

In this context, Headspace mindfulness programs are being specifically designed for those suffering from a broad range of chronic diseases. 

At the time of writing, the company was still awaiting FDA approval of its meditation tools. To date, the company has invested millions in rigorous clinical trials to validate its product and bring it to the market.

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Related Business Model Types

Platform Business Model

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A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.

Marketplace Business Model

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A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.

Network Effects

network-effects
A network effect is a phenomenon in which as more people or users join a platform, the more the value of the service offered by the platform improves for those joining afterward.

Asymmetric Business Models

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In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.

Attention Merchant Business Model

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In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.

Wholesale Business Model

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The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.

Retail Business Model

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A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.

B2B2C

b2b2c
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.

Crowdsourcing Business Model

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The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.

Open-Core Business Model

open-core
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.

Open Source vs. Freemium

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Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.

Freemium Business Model

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The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.

Freeterprise Business Model

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A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.

Franchising Business Model

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In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.

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