Why Did Headspace Do That???

Ariel Ariel

This is a single insight from This Week in Apps #76 - Reaching New Highs. Check out the full article for more insights.

Earlier this week, popular meditation app Headspace announced it's merging with (not acquiring?) Ginger, which offers mental health services on-demand (aka. via app). Considering Headspace's popularity, I found the "merging" aspect of it a bit surprising.

When have you seen a good merger recently?

To try to understand why this is the path Headspace chose, I took a look at the most important number of all numbers, revenue, and see if it tells a story that isn't otherwise too obvious:

Headspace, which led in revenue back in 2017, has lost its lead to rival Calm, which took that lead and ran with it growing the gap to nearly 2x, ending July 2021 with $4M of net revenue in the U.S. vs. Headspace's $1.9M, based on our estimates.

In addition to the absolute numbers, the trend Calm is on is very healthy while Headspace, who's still growing, seems to struggle.

As we've seen again and again (and again), revenue is the king of metrics, and how many financial decisions—from acquisitions to IPOs—are made these days. I suspect that the struggling trend is what made an acquisition harder than a merger, and given the language surrounding this merger, which focuses on big numbers (employees, customers, etc.), the pair will soon seek an IPO.

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