The shutdown of the homegrown microblogging platform Koo has raised several eyebrows over entrepreneurial ventures in consumer tech sectors like social media, edtech etc. Experts believe the inability to build sustainable monetisation models and overcoming high operational costs sank Koo.
Earlier this week, the app which was once touted as a competitor to X (formerly Twitter), shut down its operations, following a series of unsuccessful attempts to sell or merge the platform.
Koo’s co-founder and CEO Aprameya Radhakrishna, took it to LinkedIn to make the announcement. He wrote, “We explored partnerships with multiple larger internet companies, conglomerates and media houses but these talks didn’t yield the outcome we wanted.”
Radhakrishna stated that most of them didn’t want to deal with user-generated content and “the wild nature of a social media company”.
“A couple of them changed priority almost close to signing. While we would’ve liked to keep the app running, the cost of technology services to keep a social media app running is high and we’ve had to take this tough decision,” he said.
That was the demise of Koo.
In 2022, Radhakrishna called Elon Musk Koo’s Chief Marketing Officer, a hit at the American Billionaire after he purchased Twitter and went at it with a sledgehammer, dismantling old teams and strategies at the US-based microblogging platform.
“We were rejoicing when our CEO took a direct jab at the now X Chairman, but little did we know that our entire team would be laid off,” said a former employee from Koo’s brand and communications team.
Koo raised $4.1 million in its Series A round in February 2021, and just three months later, raised another $31 million led by American investment firm Tiger Global, valuing Koo at $100 million. By June 2022, according to market intelligence data firm Tracxn, Koo had raised over $57 million and reached its peak valuation of $285.5 million.
Koo spent almost $16.5 million on advertising and promotions during the 2022 financial year, when its revenue was over $650,000, according to an analysis by local tech media platform Entrackr.
Cost of Operations
Kazim Rizvi, Founding Director of The Dialogue, said, “The shutdown of Koo, which aimed to compete with global social media giant Twitter, can be attributed to severe financial challenges and high operational costs. Despite a 75 percent growth in operating revenue to Rs 14 lakh in FY22, Koo’s expenditure surged over 8X to Rs 202 crore, leading to substantial losses.”
Rizvi further said, “High advertising costs, employee benefits, technology expenses, and legal fees significantly strained finances. While the founders could have diversified revenue streams, secured strategic partnerships earlier, and optimised costs to sustain themselves, we must appreciate the testing times they operated in. While brands like HDFC, Amul, and Snapdeal advertised on Koo, the platform’s revenue was insufficient for sustainability.”
Around February 2023, Koo terminated the contract with a leading PR and communications agency mid-year after signing the contract in 2022 to cut down on operational costs. “The reason they cited was lack of funds to continue the service, and they chose to continue their PR activities via their internal team,” said a former employee.
Major Advertisers Stayed Away from Koo
Kumar Awanish, Chief Growth Officer of Cheil India, said, “The only differentiation in the Koo app was the native language offerings. Otherwise, it was just a microblogging site like Twitter (now X). Advertisers think from the perspective that the content and reach have to be different. The audience base has to be unique for the genre of the content. Then it attracts the advertisers’ interest. When compared with the giants such as Meta or X, it was nowhere near, and that was the reason advertisers stayed away.”
Awanish elaborated, “I know at least 20-22 major brands who invest heavily in advertising but stayed away from Koo as a platform for advertising. A few companies in the e-commerce space did advertise on Koo, but it was just on a trial and experimental basis for a short period of time. It was mere luck that Koo managed to sustain for such a long period.”
Arijit Basu Vice president Growth & Strategy, BC Web Wise said, “While Koo managed to acquire millions of subscribers in a short span of time due to the regional penetration and digital sovereignty, they soon realized that the most important job of a product or brand is not customer acquisition but customer retention which is actually marketing 101.”
Basu said, “Koo had the genesis of being a really great and innovative platform but did not attract enough advertisers or subscription models. The lack of a steady revenue stream made it difficult to sustain operations in the long run considering the likes of global giants, so only funding was not enough to sustain.”
Did Bharat Really Want Koo?
Saurabh Parmar, Fractional CMO, said, “Koo’s closure is unfortunately one of the simplest ones. It was a product customers never wanted. The entire idea of a microblogging platform for Bharat seems to have been done without any of the decision-makers really asking, ‘Does Bharat really want to microblog? And if so, what differentiates Koo from X, the major microblogging platform?'”
Elaborating further, Parmar said, “Koo is not a marketing or fundraising failure. They excelled at both – from politicians getting onto it to media stories when the tide was against X (then Twitter), they got a lot of free PR and buzz, and despite having just a few million users, they raised $60 million.”
“It’s a business insight failure, and if any lesson is about really understanding India — which can’t be done based on reports and Excel sheets but by living and talking to the real India, which fewer and fewer marketing or business folk do. Also, if you have to keep buying users for a social network instead of word-of-mouth spread, then there is something strategically wrong. A product like Koo is built on PLG marketing (product-led growth) and not performance ads,” Parmar added.
Game of Hope: NaMo didn’t join the party
Koo gained prominence in 2021 after several ministers endorsed it amid a row between the Indian government and X, which was then known as Twitter. Hoping that the government would ban X in India, Koo’s persistent efforts to bring Prime Minister Narendra Modi and Home Minister Amit Shah on the microblogging platform failed. The microblogging platform faced another blow when Meta launched Threads, which initially gained 100 million users within a week, due to its integration with Instagram.
In 2022, Koo claimed it had an active user base of 9 million, with many users from Nigeria, where Twitter is banned, and Brazil.
A senior employee from Koo’s product development team said, “We were constantly told to try and get PM Modi and Home Minister Shah onboard along with their ministers to bank on their popularity and fan base, which failed, but similar developments had also taken place with Nigerian President Muhammadu Buhari. When Koo entered Nigeria, all the ministers and government officials followed suit.”
However, the Koo saga illustrates the precarious balance between innovation and market viability. It also reflects the broader challenges faced by tech start-ups in India. The platform’s story highlights the critical need for sustainable business models and a deep understanding of market needs.