Fitness app Strava wins in Peloton competition with gyms
More than 400 hardware devices can connect to Strava, including gym and fitness equipment, smartwatches and bike computers, and the company says it has uploaded more than 1.1 billion activities to its platform over the past year.
When this year’s Tour de France left the city of Brest on June 26th, most of the 184 professional cyclists were registered with Strava.
So do millions of recreational athletes around the world, from runners in Rio to swimmers in Switzerland to mountaineers in Montana. Inside, legions of Strava users were also out and about, Peloton exercise bikes and treadmills, Zwift “smart” trainers and NordicTrack rowing machines.
The mobile fitness app Strava tracks more than 30 different activities in real-time and uploads speed, distance, cadence and other performance data to a platform where 86 million users analyze, share and compare their own workouts and on friendly Challenges can participate with friends and strangers. Its popularity soared amid the pandemic, as gyms closed and indoor and outdoor workouts boomed.
“We’ve seen tremendous growth in our community,” said Michael Horvath, Strava’s Chief Executive Officer. “There have been months in 2020 where we had three million new registrants and we are now at around two million a month, double the pre-Covid level. This means that Strava motivates people, helps them get through this time and gives them the opportunity to connect with other people.”
From the Harvard Row team to a $1.5 billion startup valuation
Strava, a private company, was founded in 2009 in San Francisco by Horvath and Mark Gainey, former Harvard rowing teammates who now serve as CEO and Executive Chairman, respectively. The company has approximately 270 employees and additional offices in Denver, Bristol, England, and Dublin, Ireland — locations overseas since more than 80% of Strava users are outside the US
More than 95% of these 86 million users access Strava for free; the rest pay a monthly subscription fee of $5 to get additional features. While Strava doesn’t report any revenue, analytics firm Sensor Tower estimates it generated $72 million last year, up from $60 million in 2019, allegedly through sales of data, rights to partners, the challenges, and subscriptions sponsor.
a raised $110 million in a Series F round led by TCV and Sequoia last fall of new funding that values the company at more than $1.5 billion. The founders said it was not yet a profitable venture.
Connection with all types of workouts
More than 400 hardware devices can be connected to Strava, including home gym and fitness equipment, smartwatches and bike computers. The company said it uploaded more than 1.1 billion activities to its platform last year, a 33% increase from 2019. This matches the sharp rise in fitness hardware sales from companies like Peloton.
“Covid has highlighted just 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 last count, Horvath said that “nearly 50 million Peloton activities have been uploaded to Strava,” and acknowledged the synergy of his partnerships with gear manufacturers. “As the hub of the connected fitness landscape, we offer athletes the place to stay connected with their community after their workout.”
The continued success of fitness products seems to bode well for Strava.
Health and fitness equipment sales more than doubled to $2.3 billion from March to October last year, according to retail research firm NPD Group. Sales of stationary bikes have nearly tripled, while sales of treadmills are up 135%. “In the first three months of this year, retail sales were up 30% from the same period last year,” said Matt Powell, NPD’s vice president and senior industry advisor. However, sales in March were flat compared to the same month last year, which he predicts as a proxy for the rest of 2021.
Peloton in particular has grown accordingly. Revenue for fiscal 2020, which ended June 30, grew nearly 100% year over year to $1.8 billion, and management projects revenue will grow as much as $4 billion in fiscal 2021 — itself considering the $165 million loss Peloton expects for its treadmill recall. As of March 31, the New York-based company reported more than 54 million members, each paying a monthly subscription fee of either $12.99 for digital access to live and on-demand courses, or $39 for an expanded suite of features will cost anywhere from $1,895 to $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 solution to the safety issues.
Peloton demand softening
That demand could ease as in-person workouts and gyms reopen. Wedbush Securities downgraded Peloton last week, claiming that the company has seen a drop in customer retention based on analysis of social media and internet search trends.
“PTON is now beginning the next leg of its growth story which, in a post-pandemic era, requires the company to generate its own momentum through clever marketing and compelling new products,” Wedbush analysts write in their note.
Strava connectivity has helped power Zwift, a game-like online cycling platform that allows subscribers paying $14.99 per month to create animated avatars of themselves riding in the virtual world from indoors. Typically, a real cyclist attaches the rear end of their road bike to a digitally controlled smart trainer connected to an app that simulates their avatar riding an actual 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 embed it in the features.
Since Zwift was founded in Long Beach, California in 2014, 3.5 million accounts have been created. The company didn’t disclose the current number, but said the number doubled in FY2021, which ended in March. Strava said 100 million Zwift activities have been uploaded to its platform, including thousands of grueling “everstings,” a single virtual ride totaling at least 29,029 feet, the height of Mt. Everest. During last year’s global Covid lockdown, Zwift held a virtual Tour de France with classifications for both men and women.
“Zwift is a platform for people to hunt down any carrot they seek,” said co-founder and CEO Eric Min. “Inspiring 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 will likely launch next year. Zwift won’t be excluding its existing hardware partners, which include Wahoo, Elite and Tacx, “but we think we should be the ones setting the bar,” Min said.
Future of home fitness when gyms reopen
As Covid restrictions continue to be eased, people are returning to the gym. In May, gym traffic nationwide was back to 83% of January 2020 levels and just 6% lower than the same period in 2019, according to Jeffries research.
But does that mean Zwifters, Peloton devotees, and other home trainers are losing their mojo and using their machines as hangers? “My theory is that if you’re spending a few thousand dollars to buy a piece of equipment for your home, it’s very unlikely that you’re going to pay $50 a month to go to the gym and work out on the same piece of equipment,” he said Powell.
The challenge for the home fitness industry, then, is to retain their millions of new customers. The key, Powell said, is keeping users connected to the communities of other exercisers and “enhancing the experience so people want to keep using it.”
This is music to Strava’s ears because regardless of where people train, the data can be uploaded to its platform.
Despite Strava’s success, the marketplace for fitness tracking apps remains highly competitive. MyFitnessPal, which was sold by Unter Armor to private equity firm Francisco Partners for $345 million in October 2020, which 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 the footwear brand owns Asics RunKeeper. Apple and Google have their own health-tracking apps that include some physical fitness activities like walking and cycling that are more geared towards casual exercisers.
“It’s pretty simple,” Horvath said of Strava’s customer retention strategy. “We are 100% focused on making Strava essential for athletes everywhere. When we do this well, it fuels our community growth.”
“We believe there are 700 million people in the world who want to wake up every day and be active. We haven’t met them all yet, but we’re trying,” he said.