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."
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.
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."
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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L.A.-based short-form social-video app Triller continues to jockey for position with rival TikTok.
On Friday the company launched a live-streaming feature that will allow users to post content in real time, similar to Instagram Live and TikTok's Go Live.
Creators can earn money through the new feature via paywalled access and fan donations. Seventy percent of Triller's live-stream income will go directly to the artist, the company said, claiming that creators are worse off on other platforms because those platforms tend to take a larger cut of the proceeds.
TikTok did not respond to dot.LA's request for comment.
Triller also announced that the first ten influencers who hit 100,000 concurrent viewers will receive $50,000 from the company.
In a statement, Triller said the new live-streaming feature is the "final integration of Halogen Networks," a Florida-based live-streaming platform Triller acquired in June.
The new feature launches amid a newsworthy week for Triller.
Earlier this week, the New York Times detailed the app's attempts to woo creators to its platform. These efforts include offering TikTok queen Charli D'Amelio a rented Rolls Royce and providing luxury living quarters to other influencers.
The Times piece also reported that Triller plans to roll out "a new algorithmically curated feed" next week, similar to TikTok's "For You" feature, the underlying technology of which has been central to the protracted negotiations regarding TIkTok's future.
On Monday, Triller denied allegations originally reported by a Business Insider piece that it had exaggerated its user numbers in October 2019, when the company came under the ownership of Proxima Media and its outspoken leader, Ryan Kavanaugh.
This followed a spat in August with third-party analytics firm Apptopia, which claimed Triller had inflated its 2020 numbers. Triller threatened to sue Apptopia, which has since begun working with Triller to sync up on data methodology in order to provide more accurate figures. A representative from Apptopia told dot.LA that a report detailing Triller's numbers could come out "at some point in time this calendar year."
Although these data discrepancies remain unresolved, in part because Triller is a private company and need not publicly disclose how it counts its users, they inevitably cast doubt among some industry observers on Triller's claims. Kavanaugh told the Times, for instance, that if a creator is going to make $300,000 with TikTok, they would "probably make $2 million with us", but provided no details – prompting music media firm Music Ally to write that "one can only imagine the raised eyebrows within TikTok."
Triller also struck a licensing deal last week with European publishing group ICE, which represents over 330,000 rights holders. The move is part of a broad trend of social video companies solidifying their copyright infrastructure as digital music legal reforms loom.
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A major Los Angeles user-generated entertainment company announced Tuesday a new self-serve e-commerce portal of more than 65,000 videos that creators and publishers can license.
Jukin Media has long worked with enterprises like major advertisers and TV networks, as well as news organizations like The Associated Press, Tribune Media, and Reuters, among others. But Jukin's new self-service platform is an effort to grow its business with the influencers and smaller-time digital publishers that have grown audiences on TikTok, Vine and Snap.
"This is our first foray into that," said Brendon Mulvihill, who heads up licensing at Jukin Media. He noted that this can help "scale the business to make this content accessible to more people at a reasonable price point."
As part of this effort, the company also announced Tuesday partnerships with two creator networks to give them discounted access to Jukin's viral content: Canadian company, BroadbandTV, and L.A.-based Fullscreen. Both companies have thousands of creators or influencers around the world, according to Mulvihill.
Jukin counts some 200 million fans on its various channels, and has paid out $25 million to video owners — through revenue shares or up-front payments — over the last five years. It has also seen success and growth even as movie studios have halted filming due to the pandemic because of its focus on user-generated content.
The self-service beta was unveiled late last year with great success, Mulvihill said. Jukin licensed more than 3,000 videos to more than 1,200 customers in more than 100 countries with early users that have included social-first and digital publishers, influencers, small businesses, brands and creative agencies, plus nonprofits.
"We are a small but mighty production team. Having efficient access to a large, navigable library of video clips makes a world of difference when curating and producing our content," said Jacqueline Munro Tapp, Motherly's creative director of video, in a statement.
"We have seen significant engagement returns on the relatable, hilarious and often very emotional UGC clips we curate from Jukin. The value and accessibility of UGC video can't be underrated—it helps us speak to our viewer on a human level and we love the raw accessibility it brings to our content."
Do you have a story that needs to be told? My DMs are open on Twitter @latams. You can also email me at tami(at)dot.la, or ask for my Signal.
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