In Peloton post-pandemic competition with gyms, it’s fitness app Strava that can win

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When this year’s Tour de France left the city of Brest on June 26, most of the 184 pro riders were logged into Strava.

So have millions of recreational athletes around the world, from runners in Rio to swimmers in Switzerland to mountaineers in Montana. There were also legions of Strava users indoors, on Peloton stationary bikes and treadmills, Zwift “smart” trainers and NordicTrack rowers.

Strava mobile fitness app tracks more than 30 different activities in real time and uploads data on speed, distance, cadence and other performance data to a platform where 86 million users can analyze their own workouts, share and compare them with fellow users and take friendly challenges engage with friends and strangers. Its popularity soared during the pandemic as gyms closed and home and outdoor exercise boomed.

“We’ve seen tremendous growth in our community,” said Strava CEO Michael Horvath. “There were months in 2020 where we had three million new registrants, and we’re now at about two million a month, double pre-Covid. That means Strava is motivating people, helping them get through that time and giving them the opportunity. cares about connecting with other people.”

From Harvard Row team to $1.5 billion start-up valuation

Strava, a private company, was launched in San Francisco in 2009 by Horvath and Mark Gainey, former Harvard rowing teammates who are now CEO and Executive Chairman, respectively. The company has approximately 270 employees and additional offices in Denver, Bristol, England and Dublin, Ireland – its overseas locations due to the fact that more than 80% of Strava users are located outside the US

More than 95% of those 86 million users have free access to Strava; the rest pay a $5 monthly subscription fee to get additional features. While Strava reports no revenue, analytics firm Sensor Tower estimates it generated $72 million last year, up from $60 million in 2019, ostensibly through sales of data, rights to challenges sponsors and subscriptions. Data, which the company says represents less than 1% of revenue, was sold on an aggregated, anonymized basis as part of the company’s Strava Metro program, but as of Fall 2020, that data will be provided for free.

Strava raised $110 million in new funding last fall in a Series F round led by TCV and Sequoia, valuing the company at more than $1.5 billion. The founders have said that it is not yet a profitable company.

Connecting to all kinds of workouts

More than 400 hardware devices can connect to Strava, including home fitness and fitness equipment, smart watches and cycling computers. The company said it uploaded more than 1.1 billion activities to its platform last year, a 33% increase from 2019. That matched the large increase in fitness hardware sales by companies like Peloton.

“Covid has brought a clear realization of how important physical activity is to people’s lives,” said Tom Cove, president and CEO of the Sports and Fitness Industry Association in Washington, DC, which represents manufacturers and retailers.

At the last count, Horvath said that “nearly 50 million Peloton activities have been uploaded to Strava,” acknowledging the synergy of his partnerships with equipment makers. “As the hub of the connected fitness landscape, we provide athletes with a place to stay connected with their communities after training is over.”

The continued success of fitness products seems to bode well for Strava.

According to retail research firm NPD Group, sales of health and fitness equipment more than doubled from March to October last year, to $2.3 billion. Exercise bike sales have nearly tripled, while treadmill sales grew 135%. “In the first three months of this year, retail sales were up 30% from that period last year,” said Matt Powell, vice president and senior industry advisor for NPD. However, March sales were flat compared to that month a year ago, which he envisions as a proxy for the rest of 2021.

Peloton specific has grown proportionally. Revenue for fiscal 2020, which ended June 30, grew nearly 100% year over year to $1.8 billion, and management revenue for FY 2021 will be brighter, to $4 billion — even taking into account remember the $165 million loss that Peloton expected for its treadmill. As of March 31, the New York-based company reported more than 5.4 million members, each paying a monthly subscription fee of $12.99 for digital access to live and on-demand classes or $39 for a comprehensive set of features, in addition from paying between $1,895 and $2,345 for a Peloton bike or up to $4,295 for their treadmill, which is currently unavailable in the US as the company is working on a fix for the safety issues.

Softening in Peloton’s demand

That demand could decrease as personal training sessions and gyms reopen. Wedbush Securities downgraded Peloton last week, claiming the company has seen a decline in customer engagement, based on social media analysis and internet search trends.

“PTON is now embarking on the next leg of its growth story, one that in a post-pandemic era will require the company to generate its own momentum through smart marketing and compelling new products,” the Wedbush analysts wrote in their note.

Peloton declined to comment on this article.

Connectivity to Strava has helped propel Zwift, a game-like online cycling platform that allows subscribers who pay $14.99 per month to create animated avatars of themselves riding inside the virtual realm. Usually a real cyclist attaches the back of his road bike to a digitally controlled smart trainer, linked to an app that simulates his avatar riding a real route – from a local favorite to a mountain stage in the Tour – seen on a monitor, tablet or smartphone. . The trainer automatically increases and decreases resistance to mimic the altitude of the route. About 75% of Zwifters upload their ride data to Strava and plug into its features.

My theory is that if you spend a few thousand dollars buying a piece of equipment for your home, it’s highly unlikely that you’re going to pay $50 a month to go to the gym and work out on the same machine.
Matt Powell, Vice President and Senior Industry Advisor for NPD

Since Zwift was founded in 2014 in Long Beach, California, 3.5 million accounts have been created. The company did not provide the current number, but said the figure doubled in FY 2021, which ended in March. Strava stated that 100 million Zwift activities have been uploaded to its platform, including thousands of grueling “Everstings,” a single virtual ride that climbs a total of at least 29,029 feet, the height of Mt. Everest. During global Covid lockdowns last year, Zwift held a virtual Tour de France, with classifications for both men and women.

“Zwift is a platform where people can hunt for whatever root they’re looking for,” said co-founder and CEO Eric Min. “Motivating people to do more is our goal.”

While subscriptions are “really where the value is for us as a company,” Min said, the company is developing its own smart trainers and indoor bikes, which are likely to hit the market next year. Zwift won’t shut down its existing hardware partners, including Wahoo, Elite and Tacx, “but we think we should be the ones setting the bar,” Min said.

Future of home fitness now that gyms open again

As Covid restrictions continue to ease, people are going back to the gym. In May, gym traffic across the country was back to 83% of January 2020 levels and just 6% less than the same period in 2019, according to research by Jeffries.

But does this mean that Zwifters, Peloton enthusiasts and other home athletes will lose their mojo and start using their equipment as clothes hangers? “My theory is that if you spend a few thousand dollars buying a piece of equipment for your home, it’s highly unlikely that you’re going to pay $50 a month to go to the gym and work out on the same machine,” Powell said. .

The challenge for the home fitness industry then becomes retaining their millions of new customers. The key, Powell said, is to keep users connected to other athletes’ communities and to “improve the experience so that people want to keep using it.”

That sounds like music to Strava’s ears, because no matter where people are working, the data can be uploaded to the platform.

Even with Strava’s success, the fitness tracking app market remains highly competitive. MyFitnessPal, which was sold by Under Armor to private equity firm Francisco Partners in October 2020 for $345 million, said it had more than 200 million users at the time of the transaction. Under Armor also owns MapMyRun and MapMyRide, which track running and cycling activities respectively, while shoe brand Asics owns RunKeeper. Apple and Google have their own health-tracking apps that include some physical fitness activities, such as walking and cycling, that are more geared towards casual exercisers.

“It’s pretty simple,” Horvath said of Strava’s retention strategy. “We are 100% committed to making Strava indispensable to athletes around the world. Doing it right will drive our community growth.”

“We think there are 700 million people in the world who wake up every day and want to be active. We haven’t met all of them yet, but we’re trying,” he said.

This article has been updated to correct the current total Peloton member base.

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