Classy’s TAM/SAM/SOM

Classy is exploring the addition of a social feature to its platform to deepen user engagement and expand its market reach. 

This feature would allow users to share their learning experiences, connect with peers, and create a community around their classes. Inspired by social platforms like Instagram and Strava, this proposed feature includes elements like photo sharing, comments, likes, and activity feeds. Users could post about their class/course experiences, share achievements and milestones, and engage with others who have similar learning interests. The goal is to foster a sense of community and interaction beyond the classes themselves, making learning and fitness more enjoyable and motivating through social connections.

The proposed idea positions Classy to stand out from competitors by offering a richer, more connected experience, potentially resulting in taking a larger proportion of our market.

Definitions:

• TAM (Total Addressable Market) represents the total demand for a product or service if there were no competitors and the entire market could be captured.
• SAM (Serviceable Available Market) is the portion of the TAM that the product or service can actually serve, taking into account specific focus and market limitations.
• SOM (Serviceable Obtainable Market) is the percentage of the SAM that can realistically be captured, based on factors such as competition, market dynamics, and unique positioning.

For more details on these concepts, refer to these articles provided in Canvas:

• What is a Market by The Creative Founder.
• Picking a Market by The Creative Founder.
• Size Matters by The Creative Founder.

Market Analysis for Classy’s Social Feature

1. Total Addressable Market (TAM)

Classy’s TAM seeks to capture everyone interested in learning new skills and who has access to a mobile device. The rationale behind this choice is rooted in understanding both the technological access and the learning mindset of potential users:

• Mobile Device Access: According to Consumer Affairs, 95% of adults aged 18+ in the U.S. own a smartphone. We believe Classy can confidently target a massive audience that already has the tools to engage with its social features. This equates to approximately 247 million adults (of the 260 million total adults in the US) with the capability to interact on the platform, ensuring a broad base for potential growth.
• Lifelong Learners: According to Pew Research, 73% of adults consider themselves lifelong learners. From the 247 million adults aged 18+ in the U.S., we estimate around 180 million potential users meet the criteria of our TAM.

Putting this in a financial perspective:

• We estimate an average cost of $25 per session, which is a typical rate for in-person activities like a one-hour fitness class, pottery lesson, or other similar learning experiences. Since these types of classes are often taken on a weekly basis by those committed to personal development, we assume that each user would attend about four sessions per month. This results in an estimated spend of $100 per user per month. 
• Given this rate, our calculations suggest a TAM of $18 billion per month or approximately $216 billion annually.

2. Serviceable Available Market (SAM)

To define Classy’s SAM, we narrowed down the TAM to focus on individuals who not only have an interest in learning but also have the disposable income to engage in such activities. The rationale behind these criteria is to target the segment of the market most likely to convert into paying customers:

• Interest in Learning and Disposable Income: According to Forbes, about 22% of U.S. adults report having enough disposable income to spend on hobbies and learning activities. With the 190 million users we identified in the TAM, we calculate approximately 54 million potential users out of the 190 million would have the financial means to purchase Classy’s services.

Assuming users on Classy would spend, on average, $100 per month, we arrive at the estimated SAM of $5.4 billion per month or approximately $65 billion annually.

3. Serviceable Obtainable Market (SOM)

Classy’s SOM represents the realistic portion of the SAM that it can capture within the competitive landscape, taking into account market conditions, user behavior, and the strengths of competing platforms.

• Competitive Analysis: To understand the market potential, we analyze similar platforms that cater to learning and fitness, like:
  • Coursera, which currently has 142 million users.
  • Mindbody, a popular wellness and fitness platform, with 2.4 million active users.
  • Duolingo, with 8 million paying users, demonstrating strong engagement from users willing to invest in language learning.

Based on these figures and the varying levels of market penetration achieved by these platforms, we estimate that Classy can realistically target 10-15% of the SAM, translating to 5.4 to 8.1 million active users. This target percentage takes into account the existing competition, user behavior trends, and Classy’s unique positioning with its social feature. By integrating social elements that set it apart from the aforementioned platforms, Classy strives to create a more engaging and community-driven experience. This differentiation, combined with the growing popularity of community-based learning and fitness, makes these market share estimates achievable.

• Revenue Potential: With this projected user base, Classy’s SOM would potentially have $500-800 million of revenue monthly and annually of around $6-10 billion, leveraging its platform’s blend of learning, fitness classes, and social engagement. This projection supports Classy’s strategic goal of capturing a significant market share within both the wellness and education sectors.

TAM/SAM/SOM Tally

• TAM (Total Addressable Market): Approximately 180 million users in the U.S. are interested in learning new skills with access to a mobile device, representing a market size of around $216 billion annually.
• SAM (Serviceable Available Market): Narrowed down to 54 million users with both the desire to learn and the disposable income to spend on classes, translating to a potential market of $65 billion annually.
• SOM (Serviceable Obtainable Market): Targeting 5.4 to 8.1 million users, with a projected annual revenue potential of $6-10 billion annually, based on Classy’s unique positioning and competitive landscape.