Thanks to all the new subscribers who got in touch. Constructive feedback from readers like you is the only thing keeping this newsletter from collapsing under the weight of its onanistic self-satisfaction.
Today’s main order of business is a thinly researched analysis of a fitness tracker-cum-social network affixed to a clickbait headline about one of the world’s most famous men. We’ve also got long footnotes on the economics of kink, and strong claims about New York City.
Let’s get into it.
Should Elon Do More Cardio?
At my first job out of college I had a strapping young coworker named Chris. I didn’t know him that well. The most time we ever spent together outside of the office was at the company holiday party, when we both went to ingratiate ourselves with the CEO and got trapped listening to his staggeringly detailed synopsis of a 2011 Harry Connick Jr. film called Dolphin Tale.
Friendships have been formed on less. Chris and I became confidants, and one morning he complained to me about what he saw as a gross injustice in our workplace social norms.
Why was it, he asked, that he would be seen as some sort of retrograde toxic meathead if he were to mention his latest bench press max, but it was considered acceptable - morale boosting even - for our coworkers who had signed up for a charity half marathon to begin the weekly team meeting with small talk about nipple chafing and running-induced diarrhea?
I didn’t have an answer at the time, but have since encountered a persuasive theory of athleisure put forward by Byrne Hobart in his piece on the gym business.
Cardio is also a way to signal status…Endurance sports are a kind of conspicuous consumption of time and willpower, demonstrating that someone with a demanding, time-consuming job somehow still has time to spare.
One of the best ways to demonstrate your conspicuous consumption of time and willpower is by posting your workouts to Strava. The app has emerged from a crowded field to become the leading social fitness tracker, especially among the serious athletic set. With over 100 million users, Strava advertises itself as “the largest sports community in the world.”1
Strava is also notable as an example of a social network that has primarily monetized through subscriptions. Users of the free version can record their activities and interact with other members’ posts, but many popular features lie beyond an ever-expanding paywall. These include gamified elements like leaderboards, custom goal setting, and performance benchmarking against other users.
The closest analogue to Strava’s freemium model might be that of dating apps such as Tinder, where the UX is the product of an optimization problem with inputs that either increase users’ engagement, or increase users’ desire to pay for features that make that engagement less annoying.2
Blue check marks and gold crowns
Another, newer analogue is the much discussed, if so far little used, Twitter Blue.
The Information reports that as of January, Twitter had signed up only 180,000 subscribers, or .2% of the monthly active user base. Compare that to Strava. Based on revenue figures quoted by CEO Michael Horvath, Bloomberg estimated their subscriber count to be between 2 and 3 million at the start of 2022, which would imply a conversion rate 10-15x higher than Twitter’s, albeit over a longer timeframe.3
The comparison isn’t apples to apples: Strava is a social network made for people looking to improve their health and fitness, whereas Twitter would appear to be a social network made for a person looking to destroy his health, fitness, and net worth.
I don’t pay for or really much use either service, which qualifies me as an ignorant dilettante objective observer. And from that privileged position, I can spot some parallels. (Including challenges around content moderation: Twitter has Donald Trump, Strava has Lance Armstrong).
An obvious parallel is how the salient value proposition for upgrading to paid versions of Twitter and Strava both revolve around methods of status signaling: Twitter’s blue check mark for verified users, and Strava’s awards for top performers on route segments (the most coveted of which is the gold crown shown on the “king of the mountain’s” profile). Also obvious - at least to people who don’t find these methods of status signaling to be a salient value proposition - is that the people who do pay for them are complete schmucks.
The announcement of Twitter Blue led to a lot of pieces from people who already had checkmarks snickering at how Elon Musk doesn’t understand their purpose. On the one hand, it’s fair to question how well someone understands the workings of a social media platform he's just spent the past six months complaining about having bought.4 But on the other hand … aren’t we all schmucks for something? Lonely little dots along a demand curve, struggling to understand how everyone else could be willing to pay so much or so little for a thing whose true value is clear - to us at least?
Maybe we don’t care about Twitter verification, or even follower count, but we’ll push ourselves to death’s brink trying to get one of the ten fastest times cycling to the top of San Francisco’s Twin Peaks. Maybe what we covet is a pixelated cartoon punk, or maybe it’s something that, as in the case of Strava’s advanced tracking features of Twitter's edit Tweet functionality, comes with a bit of utility along with status. A Superhuman invite, maybe, or a private jet.
This shouldn’t come as an original observation, because I’m pretty sure that we all read and listen to and watch the same things, and if mimetic desire is a strong enough force to convince half the internet that what’s needed now is another piece on René Girard, then it can definitely get them to pay $12 bucks a month for the opportunity to see their name on a leaderboard.
King of a smaller mountain
It goes without saying that readers of Sunk Thoughts are exceptions to that rule. You’re all special in your own way, and important too, which is why I assume most of you have better things to do than read this next section. It’s mostly anthropological musings about the peculiar culture of recreational endurance athletes.
Although Strava achieved its earliest and widest adoption among cyclists, I’ll keep the primary focus on running simply because that’s the sport I’ve done ever since being cut from the middle school basketball team.5
For those of you weirdos who are interested, I address a few differences between runners and cyclists in this footnote below,6 but up here in the main text, it’s more important to note something the groups have in common: they’re both the absolute worst and should be avoided at cocktail parties. A runner will mistake your bipedalism for curiosity about their marathon PR, then proceed to steer the conversation to “Boston” with less subtlety than a Harvard graduate. Cyclists are more dangerous yet: if you find yourself talking to one, know that you don’t have long until he whips out his phone to show you photos of him and his spandex-clad GSB buddies on their tour of the Italian Alps.
Another similarity is runners and cyclists are well-off, on average.7 This is notable in light of how Strava has and hasn’t sought to monetize.
Targeting ads to this coveted demo might seem like a good option, but paradoxically, the value of the data Strava has access to (where a user lives, when they leave for their morning run, which stores they run by, even whether their average pace has slipped in a way that suggests they’ll soon be in the market for medical care, etc.) is clear enough to users8 that privacy concerns could potentially limit adoption, even if Apple and other wearable device makers hadn’t come to place restrictions on third party data usage. Strava previously ran in-app display ads (removing them was one selling point for a paid subscription) but today, all advertising revenue comes from sponsored challenges - branded training plans associated mainly with athletic apparel and health food companies.
Strava could always monetize additional products (a marketplace for on coaching services, perhaps) but for now subscriptions are the name of the game. The way to win that game is pretty simple: you convince people to download the app, then use it, then upgrade to the paid version, then continue to pay for it. Then you charge them more.
We’ll get to that last step, which Strava is learning can be tricky. Before that though, it’s worth highlighting one of the intermediary steps that’s easy to overlook. I’ve written about sunk costs in the past. They’re relatively more motivating when the cost in question is a $2,500 Peloton+ bike rather than the 25 seconds it took to download a free fitness app. In the absence of an upfront financial commitment, Strava knows that the top of their subscriber acquisition funnel could get leaky, so it tracks KPIs like Cost-Per Strava Uploading Member in 7 Days (Or, CPSUM7D. IFYNK.) Initial activity strongly correlates with eventual paying membership - activity here being defined as uploading, not exercising.
A man can’t spend his nights typing away at a rambling newsletter he’ll send to strangers and still claim to be immune to the need for human connection. So I acknowledge the appeal of a supportive social network for athletes. I’ll even allow use of the phrase “flywheel effect.” See your friends’ workouts, feel motivated to complete a workout of your own; post your workout, get kudos from your friends, feel motivated to do it again.
Yeah, no, I mean, I get it.
But I really get how competition would be an even more powerful driver of this flywheel. (See that some random jerk who probably cheats just beat your segment record, feel motivated to take back the crown.) It would be an oversimplification to say that Strava makes connection-oriented social features available for free but not the competition-oriented features because humans are biased towards negative stimulation, and since this is a free Substack, oversimplification is exactly what you’re gonna get.
Strava raised a Series F round in November 2020 at a $1.5 billion valuation. The intervening years have been unrelentingly brutal for the most frequently cited public market comparable (Peloton) and volatile but not catastrophic for more distant cousins in the fitness family (Nike, Lululemon, Garmin). Coming on the back of Strava laying off 14% of its workforce in December, the company’s announcement (or rather, muddled rollout) of subscription price hikes of up to 50% was received by some as a sign of potential distress.
The bull case might frame such an aggressive price increase as a signal that Strava understands that it’s subscriber base is going nowhere. Other fitness tracking apps exist (some native to the wearable devices Strava depends on for data syncing) but Strava has trained millions of athletes on how to train: where to look for their stats, how to discover new routes, who they should benchmark their performance against. In doing so, it’s shaped an important part of who they are. A person can identify as a runner or as a cyclist, but they can only own a Peloton. Strava’s investors hope that’s a meaningful difference.
Squint long enough at Strava, and you might see it as an even leaner version of the “fitness as a service” business that Subscription Zaddy Barry McCarthy is trying to extract from Peloton’s husk: no complicated hardware to manufacture or expensive instructors to pay, just a high retention, high margin app. Strava claimed revenue of $170 million in 2021. At an EV / Revenue ratio of 10,9 you wouldn’t have to make any heroic assumptions about subsequent user growth or additional contribution from the price increase to believe that, despite the market turmoil, Strava could raise additional capital at a valuation slightly above what it achieved in the very different market of late 2020.
My prediction - which again, free Substack here - is that Strava will never establish itself as a truly universal social network for athletes, and shouldn’t try. In the thirteen years since launching, Strava has more than held its own against competing fitness apps, including ones from Nike (the biggest brand in athletics), Apple (the biggest brand in electronics), and Garmin (not so big, but surprisingly ubiquitous among the serious athlete set). The prize waiting at the end of the road might not be hundreds of millions of readily monetizable users, but it could be a couple million who prove to be reliably so.
No land in New York City!
“Later interest in the land developed as De Maria lived in New York City for the past eight years! This interest developed because conditions were so crowded there was no land! Hence much time was spent thinking about the idea of the land!”
- Excerpt from a September 1968 press release for Walter de Maria’s Earth Room at the Heiner Friedrich Gallery, Munich.
Strava’s co founders met on the Harvard crew team, so while 100 million users is certainly impressive, the Winkelvoss twins would argue that it’s only good enough to earn a distant second in the competition for title of “most popular social networks invented by Harvard rowers.”
An app for getting in shape and an app for finding a date are classically complementary goods, including for newly single people looking to start anew after “divorce by triathlon.” There might be a bundling play here.
And which would in turn would in turn be lower than Tinder’s, Hinge’s, and other properties in the Match portfolio. A guy can only spend so much time looking into various dating apps before his wife starts to ask questions, but it is interesting - on a purely theoretical level - to consider how these businesses are all shaped by the limits to customer LTV inherent in the matchmaking model. The most satisfied users are the ones most likely to churn, and every happy couple an app brings together represents two lost customers.
Hinge acknowledges this problem in their own advertising, positioning itself as “the dating app designed to be deleted” while trying to extract a lot more value out of their motivated users over a shorter lifetime.
Tinder seems to have transcended its origins as a dating app and embraced its new identity as an addictive game to play on the toilet - Angry Birds with more mirror selfies. LTV maximization is relatively more straightforward in this model, but does require some age-based calibration. Tinder at one time charged users in their 30s and 40s higher prices for premium features, either a) because these users are more motivated to find a match and more likely to have disposable income to pay for that service, or b) as a Pigouvian tax to correct the negative externality of having to swipe through old creeps like me.
But it’s the kink and polyamory-centric app Feeld that’s playing real six dimensional LTV chess here. A successful match doesn’t present the same zero-sum churn logic if the resulting relationship is an open one. You also have to tip your hat to Feeld for encouraging users to get real specific about what they’re into, then charging for premium privacy features that let them hide their profile from friends. The more recondite your sexual proclivities, the smaller your pool of potential partners, and the richer the fees an intermediary like Feeld should be able to collect for bringing liquidity to the market.
As Matt Levine notes, it would also be fair to question how well that person understands merger agreements.
Strava has added dozens of trackable activity types over the years, everything from rock climbing to racquetball. This looks like TAM-fluffing to me, similar to how DoorDash tries to validate its claim to be a universal last mile logistic platform by asking if I’d like to add a pack of AAA batteries to my Thai food order.
Cyclists fetishize equipment and spend insane amounts on made-up devices like hydraulic caliper adjuster kits. This can be off-putting at first, but I’ve come to view the cyclist's attitude towards money as refreshingly straightforward: pay more, go faster. That said, I’m pretty sure the purpose of the bike isn’t biking. They’re just an excuse for middle-aged men to put on tight shorts and hang out at Starbucks on Saturday mornings.
Runners, by contrast, actually do run. On any given weekend, you’ll see them plodding along in a race that shuts down half the streets in your city, or perhaps after the race, when they’re ostentatiously limping around with a foil blanket and a finisher’s medal roughly three times the size of the Purple Hearts we give to soldiers wounded in war.
Runners also have a more complicated relationship with spending in pursuit of competitive advantage. Much like members of the English gentry who refused to electrify their homes well into the twentieth century, some runners view technological advancements as gauche. Carbon-fiber plated shoes are the latest example, but heart rate monitors, GPS watches, and Gatorade all aroused suspicion at first. This snobbish attitude extends to training itself. Running too much or too fast is very much not the done thing.
These contrasting outlooks influence how cyclists and runners view Strava. Cyclists, being nerds, love nothing more than to see numbers on a screen. To them, the record of a bike ride is the purest distillation of their sport, the ride itself a mere byproduct. Runners know to affect indifference to the Strava leaderboards, and in many cases the indifference is genuine: race distances are more standardized in running than cycling, so it’s easy enough to judge someone else by comparing PRs without need for an app.
One proxy: the entry fee for the 2023 New York City Marathon is $295, though many runners secure a spot by committing to raise or donate several thousand dollars for an approved charity. Another proxy: top of the line racing bikes run well over $10,000. Put them together, add some water, and you get Ironman XC triathlons charging up to $15,000 to compete.
To the US military too. The Pentagon banned fitness tracking devices after it was revealed that Strava’s “heat maps” could be used to identify the movements of service members within overseas bases.
Approximately the midway point between Peloton’s present ratio of 2.26 and its all-time high of 18.66, or, if you prefer, in line with Planet Fitness’ present ratio of 10.46.
And Twitter doesn’t even “have Donald Trump” anymore
When do you plan to offer paid subscriptions to this Substack?