As New Year’s resolutions are made and broken,
revenue for Noom, a mobile weight-loss company, has ballooned to $237 million.
Boasting more than 50 million downloads, and users who generate the bulk of the
health app’s income, Noom’s latest number is up from $61 million in 2018 and
$12 million in 2017, quadrupling earnings.
“The industry is somewhat seasonal, although
being in the behavior change business, we don’t want people to think of January
as the only time you can get healthy,” cofounder Artem Petakov tells Forbes.
“It’s a behavior change product that requires a very subtle touch to nudge
people.”
Noom’s behavioral change weight-loss product
was eight years in the making. Saeju Jeong and Artem formed the company in 2008
and launched the app in 2016. The last few years have been a race to keep up
with the demand for their product and iterate based on user data. January, and
all its resolutions, is always a busy time for the New York-based
company.
Petakov, a former Google engineer, studied
both psychology and computer science at Princeton. Noom is a marriage of these
two fields, which aims to “disrupt the weight loss industry” by using AI,
evidence-based guidelines of physiology, psychology and cognitive behavioral
therapy. He positions the company as more like meditation apps such as
Headspace or Calm than Weight Watchers.
“Weight Watchers might focus on the latest way
of counting points, but if you think about it, all of this is a different way of
saying, ‘Eat this, not that,’ and we know psychologically that ‘Eat this, not
that’ is not a great way to change your behavior, said Petakov. “We try to
understand a habit, break it down into: ‘What’s the trigger that occurs? What
thought appears in your brain and what action does it cause you to do and can
we interrupt any one of those things?’ That process is rooted in cognitive
behavioral therapy.”
In addition to tracking and intercepting bad
behaviors, new users submit a questionnaire and establish overall goals like
losing weight or getting fit. The questions increase in specificity and at
least range from family history of diseases like diabetes or heart disease to
what time of day a user tends to eat. The app includes a messaging feature
where a coach or group of coaches interact with users to help them meet their
goal. Users can also track weight, food, exercise, blood pressure and blood
sugar. There is also a food database that includes 3.7 million items.
In the popular apps subsection of Apple’s app
store for health and fitness, there are 240 apps, including Under Armour’s
MyFitnessPal, Fitbit and Calm, which provide both physiological and psychological
solutions for improved health and are all cheaper on a monthly subscription
than Noom. The market for digital weight-loss tools is saturated—last year the
U.S. market was worth $1.4 billion and
is expected to grow. Noom ranks 23rd in the Apple app store among health and
fitness apps and is rated 3.9 in the Google Play store.
“Because we’re changing the brain, our
outcomes are durable, 60% of users one year after being on Noom are still
maintaining their weight loss,” Petakov says.
The average weight loss for people who
complete a program is 7.5% of their body weight, over four months. The age of
users on the platform is spread relatively evenly among users age 18 to 60
years old and up. The largest percentage of users on the platform are 40- to
59-year-olds at 24%.
Users can purchase subscription bundles
ranging from one month to a year, and a sliding scale 14-day trial, which costs
between $1 and $18. The average monthly price of a subscription is higher or
lower, based on the duration of the program a user selects. Monthly
subscriptions average prices range from $30 to $49, but the company
says a four-month package at $129 is most popular, which works out to $32.25 a
month. The second-most-popular plan is a six-month program at $149, or $24.83 a
month. Shorter plans of one month and two months are $59 and $99,
respectively.
“We use a variety of factors to pick a bundle
that we think would be appealing to a user and suggest it to them. A lot of it
is based around how long we think it will take them to achieve the health
outcome of what they’re trying to work on,” Petakov says. “It is a product
that’s somewhat episodic in nature; it’s not like a subscription you have
ongoing forever.”
Overall, users who need more time on the
platform to reach their goals will pay more, while the inverse is true for
users who the app’s algorithm deems can reach their goals in a shorter
time.
“We spend a lot on marketing, and we do so
profitably. If someone is only staying one month, we’re not making a whole lot
of money off that person,” Adam Fawer, Noom COO and CFO, tells Forbes.
Fawer says MyFitnessPal, for which
subscription costs are $9.99/month or $49.99/year, is little more than a
calorie-counter, and like Weight Watchers, which charges a standard monthly fee
of $19.95, doesn’t offer CBT. He offered further insight into Noom’s higher
prices.
“The longer that you’re in the program, the
more human coaching resources that you’re using and therefore the higher our
costs are,” Fawer says.
In late 2019 Noom hired 1,000 coaches to help
with the “holiday rush,” growing its employee count to 1,800 people. But the
company describes itself as “devoutly anti-gig economy,” claiming that more
than 90% of employees are full time, with benefits. Around 100 people are “core
employees,” who aren’t coaches.
“We liked that the AI, combined with the
coaching, retained an asset-light business model,” Miyuki Matsumoto, managing
partner at Aglaé Ventures, the technology-focused investment arm of Groupe
Arnault, tells Forbes. Aglaé Ventures participated in the
company’s Series E funding, in a $58 million round led by Sequoia Capital.
Noom’s success, like weight loss, did not come
overnight. This slow, steady growth attracted Goldman Sachs alum Matsumoto, so
much so that it was her first deal after recently joining Aglaé.
“What struck me most was the unbelievable
dedication, perseverance and execution of this team,” Matsumoto tells Forbes.
It’s not one of these overnight successes; it took 12 years to build. For a
team like Artem and Saeju, who worked for almost a full decade before financial
metrics kicked in, in a way, that got investors excited. A lot of it comes down
to the fact that they were dedicated to a big mission,” Matsumoto says.
Noom’s mission to help individuals lead
healthier lives continues. The company looks to branch off into healthcare
services outside of weight loss. Most recently, it’s partnered with Eversana, a
life sciences company that assists with drug pricing, on a program to
improve therapy adherence. Noom is also in partnership with Novo Nordisk,
providing education and psychological support for patients using Novo Nordisk
pharmaceutical weight-management drugs. The company is also looking to enter
new markets internationally, but investors acknowledge it won’t be easy.
“It’s going to be a challenge to decide what
to focus on next because you don’t want to be doing too many things at the same
time,” Matsumoto says. “Once they decide where to focus those efforts, they’ll
be successful in those efforts.”
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