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X'They Gave Up Pretty Quickly': Learning from Quibi's Quick Collapse
Sam primarily covers entertainment and media for dot.LA. Previously he was Marjorie Deane Fellow at The Economist, where he wrote for the business and finance sections of the print edition. He has also worked at the XPRIZE Foundation, U.S. Government Accountability Office, KCRW, and MLB Advanced Media (now Disney Streaming Services). He holds an MBA from UCLA Anderson, an MPP from UCLA Luskin and a BA in History from University of Michigan. Email him at samblake@dot.LA and find him on Twitter @hisamblake
When Meg Whitman spoke to dot.LA in April, the Quibi CEO struck a tone of cool patience. "I'm very focused on 'where are we after a year?'," she said. Ultimately, Whitman never got that perspective. Quibi shut down less than seven months after its launch.
The high-flying, $1.75 billion mobile streaming service attracted investors from Hollywood studios to Goldman Sachs and is now grappling with how to return whatever capital it has left. Meanwhile, investors and those inside the company are asking how it all happened.
"I think they gave up pretty quickly," said Anis Uzzaman, general partner and CEO of Pegasus Tech Ventures, which invested $35 million into Quibi. "And if it was this quick, they should have left more money on the table."
Analysts began picking apart the Hollywood-based mega startup long before its problems became apparent, as the company's self-assured messaging and enormous fundraising seemed to invite criticism.
Those criticisms included the company's miscalculation of its target demographic's preferences, its lack of social media functionality and interactivity, and that it misaligned incentives with its A-list content creators, who had little reason to provide the unproven app their best work. Then there was the pandemic, which – as founder and president Jeffrey Katzenberg emphasized – limited the on-the-go moments in consumers' lives that Quibi was targeting.
We'll never know what Quibi could have been if not for the coronavirus. Through conversations with a former Quibi employee, a Quibi investor and an entertainment analyst, however, we've picked up some insights on what it could mean for entertainment startups, venture capital and the future of mobile content.
Generational Disconnect
An ex-Quibi marketing employee, who spoke to dot.LA on condition of anonymity due to a non-disparagement agreement he signed, shed some light on how Quibi's issues looked from the inside.
One problem he saw was the disconnect between Quibi's leadership and its target demographic, which the company stated was broadly 18-44 year-olds, and more specifically 25-35 year-old millennials.
Although Katzenberg had an undeniably strong entertainment background, and Whitman brought leadership experience from atop the tech world, both were generations removed from their targeted audience.
"Especially from an age perspective, not understanding our target demographic's consumption habits and use of social media was absolutely something that hurt Quibi," the ex-employee said. "If we had leaders that were more in tune with general social media trends, habits, usage, they'd probably have a different perspective to the importance of having a platform that has a social media aspect to it."
Lack of Startup Savvy
Pegasus Tech Ventures' Uzzaman told dot.LA that, in retrospect, it would have been helpful if both founders had had startup experience. Katzenberg had some, he noted, but Whitman came from the corporate world. Uzzaman had hoped their experiences would be complementary, but he now thinks Whitman's lack of startup experience harmed the company.
"When you're a startup founder, you need to be very patient and try different things. I would have expected more of that in this case," Uzzaman told dot.LA, noting that startup problems are different from those faced by a big-company CEO.
The ex-employee said inexperience among some of Quibi's leaders limited the company's flexibility and productivity.
"There's only so far being a great business person can take you in an industry where you need expertise in both entertainment and technology and having experience of running a fast-paced startup; it's completely different from running a company like eBay or HP," he said.
"A lot of times we'd need to reframe ideas and analyses in a way that someone [less experienced] would be able to understand as opposed to someone else well-versed in the concepts, who would have been more productive in working through some of these questions or issues."
One such issue: Quibi's Super Bowl ad and Oscar's campaign had little impact in raising brand awareness and familiarity with its product. The former marketing employee said the company was slow, even reluctant, to respond to those failures.
"There was an opportunity to take some of those learnings and change our messaging or strategy and we didn't. There was already a big investment made in putting together these ads and the thinking was, 'we spent all this money on these high-production ads, so we're going to use them'," he said, adding that as Quibi's launch approached, the decision to shift the marketing strategy away from focusing on the brand and toward the content "was made too late."
"General awareness was our number one metric," he said, noting that although the marketing team didn't reach its goal of 40-60% awareness among its target audience, the number wasn't terribly weak. But, "we had a steep dropoff between awareness and familiarity," he noted.
"Through the interview process, even I didn't fully understand what Quibi was, so I knew it would be an uphill battle," he said. "Familiarity was very low – below 10%," he added.
Management's slow response struck him as part of a larger pattern of poor decision-making.
"Egos were at play, with big, well-known people involved who've been fairly successful – it gets you into thinking that 'everything I'm gonna do or start or work on is gonna be great'," he said. "There's a lot to be learned from what Quibi did well and didn't do well."
UGC vs Premium Content
For Laura Martin, a media analyst and managing director of investment banking and asset management firm Needham & Company, one big lesson is about the future of mobile content businesses.
"I think Snap is basically a successful Quibi," she said.
That is, companies that develop a user base through low-cost, user-generated content (UGC) give themselves a better and safer pathway to expanding into offering premium, paid content on mobile. Quibi tried to do the reverse, attempting to build a user base on top of its unproven premium content offering.
"Those (UGC) models are proving to be more resilient," Martin said, pointing to Instagram and TikTok in addition to Snap. "And I'm not sure the lesson is any different if Quibi had launched a year earlier."
Her takeaway: successful mobile content apps will have UGC as their basis of competition, not premium content.
What Happens Now?
Uzzaman said he expects Quibi to refund investors in two installments. The first will be a percentage of the company's remaining cash. If it is $350 million, as has been reported, that would suggest to Uzzaman that investors will be refunded 20% of what they invested – the same percentage that remains of the $1.75 billion Quibi raised.
The second installment should come once Quibi has sold its remaining assets: namely its content library, IP and technology. Uzzaman said the best-case scenario for the sale of content would likely be another $350 million, meaning that at best investors would earn a 60% haircut.
Looking forward, Uzzaman said Pegasus will be more cautious in evaluating investments. He believes the pandemic kept Quibi from being able to execute its business plan, so he will give greater weight to worst-case scenario analyses in the future. And he will place a higher priority on having founders who have run a startup in the past.
Uzzaman noted that the way Quibi grew — fundraising nearly two billion dollars before validating its concept in the market — is a relative rarity in the startup world. Its failure, he said, serves as a lesson that venture capital "should go back to the lean startup model, where you start small and grow gradually as you see market traction."
"It's the safest way to make sure that even if you have a failure" — which, he noted, is part and parcel of startups and VC — "it's not as big as this one."
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Sam Blake primarily covers media and entertainment for dot.LA. Find him on Twitter @hisamblake and email him at samblake@dot.LA
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- Roku Reportedly in Talks to Buy Quibi's Library - dot.LA ›
- Jeffrey Katzenberg Defends Quibi Failings, NFT Investments - dot.LA ›
Sam primarily covers entertainment and media for dot.LA. Previously he was Marjorie Deane Fellow at The Economist, where he wrote for the business and finance sections of the print edition. He has also worked at the XPRIZE Foundation, U.S. Government Accountability Office, KCRW, and MLB Advanced Media (now Disney Streaming Services). He holds an MBA from UCLA Anderson, an MPP from UCLA Luskin and a BA in History from University of Michigan. Email him at samblake@dot.LA and find him on Twitter @hisamblake
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TikTok’s Latest Ad Strategy: Let Brands Crowdsource Creators
Kristin Snyder is an editorial intern for dot.la. She previously interned with Tiger Oak Media and led the arts section for UCLA's Daily Bruin.
TikTok’s newest advertising program will allow brands to crowdsource content from creators.
Branded Mission, which the Culver City-based video-sharing app announced Wednesday, is currently being beta-tested. The program lets brands release briefs containing specific creative directions—such as incorporating a specific hashtag, visual effect or audio—with the goal of procuring videos that will become promoted ads. Creators with at least 1,000 followers will be compensated with cash payments if the content performs well.
Creators participating in the “authentic branded content” program, as TikTok described it, can choose which brand initiatives they wish to participate in—with each Branded Mission “page” highlighting details like how much money a creator could potentially receive for participating. TikTok told Business Insider that it’s testing various payment models, including a first-come, first-serve model as well as “boosted traffic” compensation.
“Creators are at the center of creativity, culture and entertainment on TikTok,” the social media firm said in a statement. “With Branded Mission, we're excited to bring even more creators into the branded content ecosystem and explore ways to reward emerging and established creators.”
TikTok’s previous advertising strategies have relied on creators with large followings, with the recently announced TikTok Pulse targeting users with at least 100,000 followers. Branded Mission, on the other hand, gives creators with smaller platforms a chance to make more revenue beyond programs like TikTok’s Creator Fund.
Kristin Snyder is an editorial intern for dot.la. She previously interned with Tiger Oak Media and led the arts section for UCLA's Daily Bruin.
Greater Good Health Raises $10 Million To Fix America’s Doctor Shortage
Keerthi Vedantam is a bioscience reporter at dot.LA. She cut her teeth covering everything from cloud computing to 5G in San Francisco and Seattle. Before she covered tech, Keerthi reported on tribal lands and congressional policy in Washington, D.C. Connect with her on Twitter, Clubhouse (@keerthivedantam) or Signal at 408-470-0776.
The pandemic highlighted what’s been a growing trend for years: Medical students are prioritizing high-paying specialty fields over primary care, leading to a shortage of primary care doctors who take care of a patient’s day-to-day health concerns. These physicians are a cornerstone of preventative health care, which when addressed can lower health care costs for patients, insurers and the government. But there’s a massive shortage of doctors all over the country, and the pipeline for primary care physicians is even weaker.
One local startup is offering a possible answer to this supply squeeze: nurse practitioners.
On Wednesday, Manhattan Beach-based Greater Good Health unveiled $10 million in new funding led by LRVHealth, adding to $3 million in seed funding raised by the startup last year. The company employs nurse practitioners and pairs them with doctor’s offices and medical clinics; this allows nurse practitioners to take on patients who would otherwise have to wait weeks, or even months, to see a doctor.
“This access and equity issue is just going to become more pervasive if we don't do things to help people gain more access,” Greater Good founder and CEO Sylvia Hastanan told dot.LA. “We need more providers to offer more patients appointments and access to their time to take care of their needs. And in order to do that, we really need to think about the workforce.”
There has been a growing movement in the medical industry to use nurse practitioners in place of increasingly scarce primary care physicians. California passed a law in 2020 that will widen the scope of nurse practitioners and allow them to operate without a supervising physician by 2023. Amid a shortage of doctors, there’s also the question of what will become of the largest and longest-living elderly population in recent history, Baby Boomers. Public health officials are already scrambling for ways to take care of this aging demographic’s myriad health needs while also addressing the general population.
“By the time you and I get old enough where we need primary care providers to help us with our ailments and chronic conditions, there aren't [going to be] enough of them,” Hastanan said. “And/or there just isn't going to be enough support for those nurse practitioners to really thrive in that way. And I worry about what our system will look like.”
Nurse practitioners function much like doctors do—they can monitor vitals, diagnose patients, and, in some cases, prescribe medication (though usually under the supervision of a doctor). Nurse practitioners need to get either a master’s degree or higher in nursing and complete thousands of hours of work in a clinical setting. All told, it usually takes six-to-eight years to become a nurse practitioner, compared to 10-to-15 years to become a practicing physician.
Greater Good Health’s platform puts nurse practitioners in often years-long care settings where they manage patients—most of whom are chronically ill, high-risk patients that need to be seen regularly and thoroughly. This allows them to follow up more carefully on patients they have managed for years, instead of catching up on a new patient’s history and treating them in the moment. Patients, meanwhile, don’t have to see a rotating door of clinicians and can talk to a provider they already have an established rapport with.
The one-year-old startup will use the funding to provide learning and development opportunities for its nurse practitioners and also connect them with each other through virtual support groups. Burnout has been an issue across health care during the pandemic, spurring an exodus of nursing and support staff and leaving health care facilities woefully understaffed. Greater Good hopes that keeping nurse practitioners in more stable, years-long care situations and offering them career development opportunities will help retain them and keep them in the workforce longer.
“We want them to be well-rounded and balanced both in work and life, and we see that returns us healthier, more engaged and ready nurse practitioners,” Hastanan said.
Keerthi Vedantam is a bioscience reporter at dot.LA. She cut her teeth covering everything from cloud computing to 5G in San Francisco and Seattle. Before she covered tech, Keerthi reported on tribal lands and congressional policy in Washington, D.C. Connect with her on Twitter, Clubhouse (@keerthivedantam) or Signal at 408-470-0776.
Plus Capital Partner Amanda Groves on Celebrity Equity Investments
On this episode of the L.A. Venture podcast, Amanda Groves talks about how PLUS Capital advises celebrity investors and why more high-profile individuals are choosing to invest instead of endorse.
As a partner at PLUS, Groves works with over 70 artists and athletes, helping to guide their investment strategies. PLUS advises their talent roster to combine their financial capital with their social capital and focus on five investment areas: the future of work, future of education, health and wellness, the conscious consumer and sustainability.
“The idea is if we can leverage these people who have incredible audiences—and influence over that audience—in the world of venture capital, you'd be able to help make those businesses move forward faster,” Groves said.
PLUS works to create celebrity partnerships by identifying each client’s passions and finding companies that align with them, Groves said. From there, the venture firm can reach out to prospective partners from its many contacts and can help evaluate businesses that approach its clients. Recently, PLUS paired actress Nina Dobrev with the candy company SmartSweets after she had told them about her love for its snacks.
Celebrity entrepreneurship has shifted quite a bit in recent years, Groves said. While celebrities are paid for endorsements, Groves said investing allows them to gain equity from the growth of companies that benefit from their work.
“Like in movies, for example, where they're earning a residual along the way, they thought, ‘You know, if we're going to partner with these brands and create a tremendous amount of enterprise value, we should be able to capture some of the upside that we're generating, too’,” she said.
Partnering in this way also allows her clients to work with a wider range of brands, including small brands that often can’t afford to spend millions on endorsements. Investing allows high-profile individuals to represent brands they care about, Groves said.
“The last piece of the puzzle was a drive towards authenticity,” Groves said. “A lot of these high-profile artists and athletes are not interested, once they've achieved some sort of level of success, in partnering with brands that they don't personally align with.”
Hear the full episode by clicking on the playhead above, and listen to LA Venture on Apple Podcasts, Stitcher, Spotify or wherever you get your podcasts.
dot.LA Editorial Intern Kristin Snyder contributed to this post.