The Koo story: Bottlenecks in building, sustaining Indian competitor of X

Despite the global success of micro-blogging platforms like X (formerly Twitter), which has managed to amass and retain millions of users across the world, the Indian market has not been able to sustainably recreate a similar platform.

Homegrown microblogging platform Koo has, however, been India’s most successful attempt at recreating the X model.

After hitting the ground running in 2020 amid an ongoing tussle between the Indian government and social media platform X, Koo quickly positioned itself as an indigenous alternative to the global platform.

However, since then, the company has witnessed a host of issues such as layoffs, funding constraints, a declining userbase, among others. Therefore, to understand the intricacies of building such a platform for Indian users, one need not look past the financial ups and downs at Koo.

An explosive start

Founded in 2020, Koo is a multilingual microblogging platform that allows users to interact via text, audio, and video. It also allows influencers to network and have conversations with their fans.

The Bengaluru-based firm benefited from tussles between X and the Indian government over improper content moderation in 2020, which led to many celebrities, government officials, and citizens jumping ship from X to its indigenously built alternative.

In the three years since its launch, the indigenous platform amassed over 60 million app downloads to become the second-largest microblogging platform in the world, with more than 20 languages and over 100 brands advertising on the platform.

Since then, however, the company has faced a spate of issues. The company has, over the last two years, been at the receiving end of declining users, layoffs, and challenges in generating revenue.

Growth pains and financial woes

Cut to last week, Koo announced that it was halting salary payments of its employees for April as it grapples with financial constraints. The company, which has been “actively engaged” in discussions with potential strategic partners to infuse fresh capital into the platform, has witnessed delays in finalising partnerships which has led to salary payments being interrupted.

Its spot as the second-largest microblogging platform was also overtaken by Meta’s Threads, which amassed 100 million global users within just five days of its launch.

The company's workforce has reportedly shrunk by over 80 per cent since June 2022, leaving some 50 employees on board. The remaining employees have faced salary cuts of up to 40 per cent since October 2023.

Although the company has assured employees that salaries will resume once partnerships materialise and fresh funds are arranged, several senior employees have already left primarily due to substantial reductions in their remuneration.

The platform’s active users fell from 7.2 million in June 2023 to 2.7 million in March, marking a 62 per cent decline. The decline is partly attributed to the cessation of customer acquisition campaigns since June 2022.

Despite having raised approximately $50 million to date from prominent investors like Tiger Global, Accel, and Kalaari Capital, among others, the company has failed to secure Series C funds, which has further compounded its financial woes.

This has, in major part, been due to the company’s lacklustre financial performance over the years.

In FY22, the company generated an operating income of only Rs 14 lakh, up from Rs 8 lakh the previous year. Its losses, on the other hand, surged a massive 460 per cent year-on-year to Rs 197 crore.

How did Koo get here

A majority of the company’s issues stem from the absence of a viable revenue model, which has forced the company to heavily rely on cash burn for user acquisition. This strategy has proven unsustainable in the long term.

“To cut down on burn, Koo has greatly reduced its marketing spends. This has, however, resulted in the company’s MAUs (monthly active users) declining. If it wants to increase its user base, it would have to burn more cash on user acquisition, which it is in no position to do,” said an investor familiar with the development.

The company has not been able to capitalize on the advertising opportunity either. Factors like the reduction in advertising budgets among large brands post-pandemic and the platform’s diverse userbase have not worked in the company’s favour.

“Koo’s userbase is too diverse. To cater to specific segments, advertisers require specific user demographics,” the investor added.

Koo’s attempts at monetising its platform via initiatives like Koo Premium – which allows content creators to earn money by exclusively sharing content only with their subscribers, and Koo Coins – wherein it rewards users for spending more time on the platform, have failed to provide meaningful returns.

Moreover, it failed to retain the users that jumped ship from X in late 2020 and 2021 when the tech giant was facing government action.

The company has also not been able to differentiate itself from larger players.

“Koo does not offer much by way of differentiation from X. Hence, there is little incentive for users to use the platform. Even Threads has not caught on much, which might indicate that there is limited appetite for an X alternative in the country,” the investor quoted above added.

Management at the firm has also routinely outlined that the so-called funding winter in the Indian startup ecosystem, marked by investors tightening their purse strings, had a severe impact on Koo’s operations.

Acquisition talks

Amidst challenges, Koo has been seeking a strategic partnership or considering acquisition avenues for the past year. However, despite prolonged negotiations and potential acquihire arrangements, recent developments suggest a less optimistic outlook.

Unverified reports suggest VerSe Innovation, which owns Dailyhunt and Sharechat, is in talks to acquire Koo.

Whether the acquisition, if it materializes, is able to address the lingering challenges at the company remains to be seen.

Regardless, Koo’s struggles emphasise the challenges of building a micro-blogging platform for the Indian market. According to analysts, monetisation remains a key issue due to the diversity of Indian users. Ascertaining a proper Total Addressable Market (TAM) also remains a challenge.