In today's Finshots, we see why Koo finally decided to shut down.

Also, we will be referring to X as Twitter because it's a lot cleaner that way.

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The Story

Koo, an Indian social media app that was once positioned to rival Elon Musk’s Twitter, is shutting down following failed acquisition talks.

You probably remember this.

Back when there were rising tensions between Twitter and the Indian government over content and censorship, one company stood out promising to abide by local rules. That was Koo. They said there were building a Twitter for India, but one that’s best suited to adapt to the diverse needs of what is an extremely diverse country.

And yet, despite raising boatloads of money and really giving it a fair shot, the company seems to have finally shut down.

So what went wrong for Koo?

One popular explanation is that Koo raised too much money too quickly without fully validating the idea — an all too common theme among Indian startups. However, in reality, Koo probably needed the money to even stand a chance at competing against Twitter.

They raised $70 million in total.

But they started small with an undisclosed seed round and a $4 million Series A round in Feb 2021. This money helped them build a team and support the growing user base (which in early 2021 reached a high of 4.5 million). Now you may not know this, but on an app like Koo, millions of users translate to millions of tiny updates that require rapid analysis and delivery. These computations cost money and the infrastructure (tech) costs alone added up to a neat ~$3 million that year (FY22).

So the fundraise made sense.

It’s another matter that they also raised $30 million in May of that same year and a bulk of it (~$16 million) was spent on advertising and promotion revenues. That’s ~60% of their total expense. One can only surmise then that the company was spending large sums of money to drive app installs.

Kind of makes sense, but then again, you’d expect a social media platform to leverage network effects to drive app installs i.e. a friend of a friend who’s on Koo asking you to install the app because they’re on it. This is how Twitter became a thing about a decade ago. And Twitter wasn’t spending 60% of their expenses on advertising and promotion. In fact, back in 2010, Twitter was spending a meagre ~6% of its expenses on marketing and promotion. So clearly, Koo wasn’t all-organic. The founders were pumping money to drive user adoption and achieve scale.

Once again, this isn’t to say that this was a bad strategy. It could have been a masterstroke if people were hooked on Koo. But that didn’t happen.

If you’re asking why? Well, it’s probably because it’s incredibly hard to build a social media app that’s sticky. People have only so much time. If they’re spending it on Twitter, they’re not spending it on Koo. And Koo’s offering just wasn’t compelling enough.

Koo’s big promise was regional language support. But Indians who wanted to share updates in the local language were already using apps like ShareChat. Granted, they’re not the same thing. But they aren’t that different either. So in many ways, it wasn’t easy to get them interested in Koo.

There was also one other problem with the desi platform. In an interview, Aprameya Radhakrishna, Co-Founder and CEO of Koo said he didn’t like Twitter because of the incessant trolling. He likened it to a platform of hate. And he said he wanted to do something different with Koo — build a more forgiving community. How he intended to do this while building a clone — we don’t know.

But part of the appeal of Twitter is that it is a no-holds-barred digital jungle. Every word you tweet is scrutinised, fact-checked and dissected by people who seemingly revel in the act of critique. It can be an incredibly hostile space.

However, it’s also quite addictive, even for people who don’t do that much tweeting. For instance, 25% of the users generate nearly 97% of all tweets. The rest simply watch from the sidelines — like a nosy neighbour peering over the windowsill to watch a couple argue over laundry duty. You simply can’t resist the temptation.

As one user on Koo noted — “In my brief stint on Koo, I did not witness drama. There were no needless arguments, no pointless trolling and no muck-slinging. It was all a bit too plain and for a power user like myself, it was just not compelling enough.” So maybe Twitter users never saw it as an alternative to Twitter. It was something else. Something in between, like a transition. Not quite Twitter, but not quite ShareChat either.

So in the end, daily active users dipped. Costs remained elevated and there was no revenue to speak of.

Koo did try its hand at advertising, but with the active user numbers trending downward, this was always going to be a hard sell. And eventually, when the funding dried up, Koo had to throw in the towel. There was no knight in shining armour to rescue the beleaguered startup.

In the end, despite being heralded as a real desi competitor to Twitter, Koo couldn’t capture the imagination of the Indian public. Maybe, if the company had access to patient capital and constant funding, they could have figured something out. But in the absence of both, perhaps this was a foregone conclusion from Day 1.

Until then…

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