Growth Newsletter #182

Calm makes $7.7M per month and has 150M+ downloads for their meditation app.

~50% of Calm’s social traffic comes on autopilot from handfuls of YouTube videos, getting thousands of views per hour on videos that are upwards of 7 years old.

You might suspect they’re all related to meditation, but they’re not. They’re almost all related to sleep:

Calm realized that their biggest usage time was between 9PM and 11PM.

Clearly, people used their app to help calm their minds and go to sleep. So targeting people who are pulling up videos to help them sleep is a high-intent audience that would be interested in their product.

It turns out related keywords have a ton of search volume on Google and YouTube:

So they created videos related to sleep: bedtime stories, rain noises, white noise, ocean sounds, and deep sleep meditations.

And then they subtly funnel viewers to their app:

There’s no other pitch besides the Calm logo as a watermark during the videos.

The beauty of this is that someone will likely pull up the same video every night and see Calm’s logo and CTA every time.

This is not only a great example of using data to find the next growth opportunity, but it’s also a great example of the law of conservation of attractive profits.

Law of conservation of attractive profits

“In the face of technological disruption, profit opportunities shift from the main product to specialized, hard-to-replicate components or services.”

This law was created by Harvard Business professor Clayton Christensen.

Chris Dixon (a16z) summarizes it with an analogy in his book Read Write Own:

“Commoditizing a layer in a tech stack is like squeezing a balloon. The volume of air stays constant but shifts to other areas. The same is true for profits in a tech stack (roughly). The overall profits are conserved but shift from layer to layer.”

For example, Google started as a Search engine and now makes over $50B per year. To maintain their profits from Search, they’ve tried to own more of the stack required to access it: browser (Chrome), device (Google Pixel), operating system (Android and Chromebook), and telecommunication network (Google Fi).

Even still, they pay Apple $12B per year to be the default search engine on Apple devices to maintain their dominance—that price would be much higher if Android didn’t emerge as a massive contender to Apple’s smartphone dominance.

Takeaway: You can steal away land from your competitor by offering what they sell for free. As Bezos said: "Your margin is my opportunity."

Similarly, IBM invests in open-source operating systems (Linux) not to “give back.”

They just don't want to share profits with corporations like Microsoft. Meta is investing in open-source large language models (LLMs), so it doesn’t need to pay to use OpenAIs.

Now, Google’s strategy is to create free and just as powerful versions of ChatGPT. So far, they are not winning that battle.

Calm has done something similar to a smaller degree.

Most people post videos on YouTube to generate ad revenue.

Calm has created a mobile app that generates $8M per month. They don’t need to monetize YouTube videos for sleep, meditation, and relaxation sounds.

Instead, they want it to have as much reach as possible and build as much affinity as possible so they can convert more people to their app.

So, Calm can have the best sleep sound video with zero ads. That matters to people. This is the most popular ad from Calm’s most popular video:

HubSpot can pump out insane amounts of free marketing content because they don’t need to make money from selling education. They make all of their money from their CRM.

Alex Hormozi doesn’t need to charge you for his book or courses because he’ll make way more money by being able to buy into your business for a low valuation because of the affinity he’s built. This gives him a big edge against other creators who have to charge or add sponsors.

Takeaway question: What are people paying competitors for that you can offer to them for free?

For deeper dives into Calm’s YouTube strategy, check out Strategy Breakdowns and Foundation.