Quibi Faces Uncertain Future as Year 2 Advertising Talks Loom

Key Insights:While Quibi is still collecting downloads, its growth rate hasn't met the company's own projections. Under-deliveries for advertisers and an ad sales climate centered on flexibility are both likely to affect next year's advertising discussions. Over the summer, Quibi contacted a production company with a very specific request: Pitch us an interactive game show. The ask, according to a person familiar with the show idea but not authorized to speak publicly about it, wasn’t exactly simple. An early concept was modeled off the once-popular app HQ Trivia and would have viewers tuning in live to watch the show unfold. Not only would the program have to display vertically or horizontally in Quibi’s Turnstyle format, but it would also need to include interactive elements so viewers could participate on their phones. The only problem? Quibi's platform didn’t yet support the kind of interactive features envisioned for the show and didn't have a native live video function. “What they were asking for was symptomatic of what their struggle is, which is they still don’t know what they want,” the person said. Nearly six months since its debut, Quibi is still looking to find its groove. The streamer, which attracted an eye-popping $1.75 billion in funding, is already evaluating options like a possible sale and new funding vehicles, according to The Wall Street Journal, after weathering an underwhelming first six months. “The biggest thing that they have to figure out strategically is, how do they continue to fund the company when the subscriber count is not what they thought it would be?” said Dan Rayburn, a principal analyst at Frost and Sullivan and conference chairman of the NAB Show Streaming Summit. In a statement, a Quibi spokesperson said the company would “not comment on rumor or speculation” about its strategic options. “Quibi has successfully launched a new business and pioneered a new form of storytelling and state-of-the-art platform,” the spokesperson said. “[Co-founders Meg Whitman and Jeffrey Katzenberg] are committed to continuing to build the business in the way that gives the greatest experience for customers, greatest value for shareholders and greatest opportunity for employees.” This year has been a big one for streaming media. Since March, one-third of consumers have added at least one new paid streaming video service, according to Deloitte, and 80% of U.S. consumers have at least one paid streaming video subscription. Ad-supported streaming options are also favored among about two-thirds of consumers, Deloitte found in a recent survey. But while some streamers are counting record viewers and higher-than-usual subscription signups, Quibi’s growth hasn’t met its own ambitious projections. Katzenberg previously said early results were “not close” to what the company wanted. And data analytics platform SensorTower estimated that Quibi had attracted approximately 8.5 million installs through the App Store and from Google Play as of this week. Quibi, which did not immediately respond to SensorTower’s estimates, has previously disputed the firm’s figures. It’s not necessarily that those download numbers are bad; they just aren’t meeting the company’s own projections. Quibi previously said it would have 7.5 million paid subscribers by year's end, paying either $4.99 a month for an ad-supported tier or $7.99 a month for an ad-free tier. “It’s expectations more than anything,” said Tal Chalozin, chief technology officer and co-founder of television advertising and analytics platform Innovid. “If they had come out and said, ‘We are this startup trying to create this new type of content, and we would be happy with 200,000 subscribers,’ then they would be a massive success story.” Those high audience expectations from the outset also helped Quibi secure investment from 10 launch partners and 22 big-name advertising brands—including Anheuser-Busch, Discover, General Mills, Google, Procter & Gamble, PepsiCo, Progressive, Taco Bell, T-Mobile and Walmart—which bought up all of Quibi’s $150 million first-year ad inventory. Adweek previously reported that media buyers were experiencing “significant under-deliveries” on both signups and impressions. That is almost certain to have ramifications for its second year advertising conversations. Whitman previously signaled that the company would begin holding conversations with advertisers in the fall about the next year's advertising. And while Quibi would not comment on the state of those discussions (some of the service’s year one advertisers also declined to comment), buyers said those deals will almost certainly be a harder sell. “Across the industry, most brands are being cautious about being locked in anywhere,” one buyer said. “[Quibi has] to overcome that perception of being a failing platform—which is maybe premature, but that is certainly the perception among some—and that becomes a hill to climb when it comes to locking in ad dollars that become high-value long-term.” There are signals the company is looking for other ways to keep people hooked. Quibi opted to make its ad-supported tier entirely free in Australia and New Zealand and has shifted much of its marketing muscle to center on specific shows instead of general brand-building. This month, Quibi generated approximately 1.4 million installs, up about 40% from August, SensorTower estimated. Few media businesses are grown overnight, and Whitman has said that Quibi is in for “a marathon, not a sprint.” The service has already made changes, including rolling out a connected TV casting function and the ability for people to screenshot and share Quibi on social media. About a dozen star-studded shows are returning for second seasons, and it is also rolling out new programming this fall, including an animated series with Ryan Reynolds and Samuel L. Jackson. But experts say the service needs to land a hit, like Netflix’s Tiger King, to drive people to pay. “They’re still hunting around for that show or that format that’s going to be really relevant,” said Noah Mallin, chief brand strategist of tech-media company IMGN Media. But that may not be enough. Even with a hit, what will people watch next? Rayburn noted. “If not, you churn off the service. So a handful of hits is not how Quibi can survive. It needs to get subscribers, and it needs to keep them long term.”