How to win in consumer subscription
Learnings from Noom, Duolingo, Grammarly, Calm, Spotify, Future, Flo, and others
👋 Hey, I’m Lenny and welcome to a 🔒 subscriber-only edition 🔒 of my weekly newsletter. Each week I tackle reader questions about product, growth, working with humans, and anything else that’s stressing you out about work. Send me your questions and in return I’ll humbly offer actionable real-talk advice. Now, on to this week’s post…
Q: I’m building an app targeted at consumers, and plan to charge a monthly fee. I’d love your advice around what it takes to build a durable business as a B2C subscription app.
Think about it: When was the last time you (1) installed, (2) paid for, and (3) continued to pay for, a new app? I bet you it’s been a while. For me, it was upgrading to Twitter Blue, and I’m probably going to cancel it. I certainly pay for apps (e.g. AllTrails, Centered, Copilot, Future, and a few streaming services), but I’ve tried and discarded 10x more over the years. Consumers (e.g. you and me) are busy, distractible, always looking for something new. A couple of years ago, GP Bullhound created this map of B2C subscription apps. How many are still thriving? A very small percentage.
It’s brutal out there. But it’s not hopeless. There are a number of consumer apps that have stood the test of time, including some of my favorites: Grammarly, Duolingo, Noom, Calm, Flo, Future, and Spotify. To answer your question, I went deep into these seven companies (along with a few up-and-comers like Copilot, Centered, Mighty Health, and Greg) to understand what it takes to win in the B2C subscription space. Here’s what stood out:
An obsession with efficiency
Alignment between product strategy and acquisition strategy
A singular focus to build a magical, sticky product through rapid iteration and endless optimization
Below I’ll share stories and insights from each of these companies, but remember, a lot goes into building a successful company. Following all of this advice won’t guarantee you make it. In the end you still need to build something people want, continue to want, and make money doing it. But these tips will certainly help your odds.
Thank you, Alex Ross (Greg), Andres Ugarte (Copilot), Artem Petakov (Noom), Cem Kansu (Duolingo), James Li (Mighty Health), Nick Lisher (Flo), Nikhil Jhunjhnuwala (Noom), Rasmus Andersson (Spotify), Rishi Mandal (Future), Ulf Schwekendiek (Centered), and Yuriy Timen (Grammarly), for sharing their insights and advice with me for this post 🙏
Pattern #1: Obsession with efficiency
The most common thread across every company was an obsession with efficiency—staying small, keeping costs down, and getting profitable. They all stayed lean until they found strong product-market fit and, in many cases, far beyond that.
In the case of Calm, an early employee shared that “for years, they had a hard time getting funding, so they were left with no alternative but to make the business profitable. They were obsessed with profitability, margins, and LTV/CAC. They kept the team size under 10, worked long hours in a one-bedroom apartment in San Francisco, and sharply questioned every outgoing dollar.”
At Grammarly, Yuriy Timen (ex-Head of Growth) shared a similar story:
“Grammarly was bootstrapped, so it could go really deep on R&D without the external pressure to launch too quickly. We remained self-funded for a while, which just built a culture and operating identity of being lean, efficient, and focusing on sustainable growth. If I had to guess, Grammarly was probably 2-4x leaner than other companies of comparable scale, which also allowed us to maintain profitability. This applied to hiring as well—Grammarly always paced its hiring goals based on its ability to maintain cultural cohesion and operational excellence.”
Same with Noom, as Artem Petakov (co-founder) shared:
“We were all living and working in one apartment for two years.”
Nikhil Jhunjhnuwala (VP of Growth at Noom) went deeper:
“We were very lean in the first few years. From 2016 to 2018, I don’t think the growth team had more than 10 people (across all of creative, marketing, growth product, etc.). For context, in late 2016 we started gaining traction, ending the year at $3-4M in revenue.
Staying small forced us to develop hacking skills. I [a PM] was a top contributor to the growth repo. One growth marketer was responsible for all our spend, and always ruthlessly prioritizing. The experience helped define growth culture at Noom.
I also think it helped that we targeted one-month payback, which allowed us to immediately reinvest money into our performance marketing engine, making us less reliant on raising money to grow. We started hiring significantly in 2019 after raising a round with Sequoia, once we were well past $60M in revenue/year.”
“Efficiency, and the discipline to keep our team and footprint small, has allowed us to do something that I think category-creating consumer businesses have to be able to do, which is to be misunderstood for a number of years.
When we started Future, we felt that the broader world (consumers, investors, our friends, the press) may not fully grasp why connected coaching is a game changer until we showed it to them at scale. With this in mind, we aimed to keep our team size and cost structure small so that we could fund years of patient development and growth. To compensate for this smaller size, we’ve hired a team of talented and experienced people, where each team member is trusted with a lot of scope and decision-making power.”
It’s probably not a coincidence that the founders of all five of the biggest B2C subscription companies are immigrants: Noom and Grammarly’s founders were from Ukraine, Duolingo’s founder is from Guatemala, Calm’s from the U.K., and Spotify’s from Sweden.
Takeaway: Stay as lean as possible, and focus on revenue over growth—at least until you’ve found PMF.
Pattern #2: Alignment between product strategy and acquisition strategy
The second most consistent pattern across these companies was an inseparable alignment between the product roadmap and the growth engine. Surviving in B2C is all about finding an efficient (aka cheap) growth channel. All of these five teams found a way to grow very efficiently—either through word of mouth or highly optimized paid ads.