Home Ad Exchange News Can Quibi Live Up To Its $1.75 Billion Valuation?

Can Quibi Live Up To Its $1.75 Billion Valuation?


Quibi, the much-hyped short-form mobile video service, has racked up an exorbitant $1.75 billion in funding ahead of its April 6 launch – closing on a second round of $750 million just last Wednesday.

With a bet that people will pay $4.99 per month for 10-minute scripted series supported by ads, Quibi is attracting major buzz, thanks in large part to its high-profile founders, former DreamWorks CEO Jeffrey Katzenberg and former HP CEO Meg Whitman, as well as its lineup of shows starring Hollywood names like Sophie Turner and Reese Witherspoon.

Quibi is also betting that spending big on advertising will raise consumer awareness and drive subscriptions. In addition to a media blitz on social and digital to reach a young target, the app shelled out $5.6 million for a 30-second Super Bowl spot this year.

While it’s uncertain if consumers will sign on, advertisers, eager for a place outside of Facebook and Google to put their dollars against premium video, are already buying in, with brands including Walmart and Pepsi making $150 million in upfront commitments pre-launch.

But Quibi is launching in the midst of the streaming wars, and must compete for attention and wallet share with heavyweights like Disney, WarnerMedia and NBCUniversal, not to mention Netflix, Hulu, Amazon Prime, Facebook, Instagram and YouTube.

And without an established model, organic appeal and a slate of shows that people already know and love, Quibi has a steep hill to climb in a very competitive market.

“It’s much harder to create a category rather than redistribute stuff we already love,” said Tracey Scheppach, CEO of Matter More Media.

Is Quibi’s content good enough?

Quibi’s first challenge is getting people onto the platform. While it doesn’t have a lot of organic awareness, it’s invested in a marketing blitz.

“There’s a lot of people in their demo who don’t know what Quibi is,” said Mike Bloxham, SVP of global media and entertainment at Magid. “The name obviously needs to be built to be memorable.”


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From there, Quibi’s content will need to have sticking power – but that’s where analysts are most optimistic.

“You have some experienced hands at the wheel there,” said Eric Schmitt, analyst at Gartner.

Quibi will launch with 50 shows and plans to grow to 175 shows and 8,500 pieces of across news, entertainment, comedy, reality TV and scripted drama by the end of the year. With Katzenberg at the helm, the service has already signed on star power from Steven Spielberg to Chrissy Teigen.

“They’re bringing in the right people to bring in buzz,” said Brad Stockton, VP of video innovation at Dentsu Aegis Network.

With a focus on short-form content, Quibi is tapping into an underserved market as people consume more snackable video on their phones, Scheppach said.

While Quibi is putting advertising behind its star power to drum up awareness and sign-ups, will people want to pay for ad-supported video when they can access it for free on YouTube, Snapchat or Instagram?

Also, the appeal of watching content on-the-go is concentrated in major metro areas where people are commuting on buses and trains, Gartner’s Schmitt said. Watching a scripted show requires more attention than scrolling through videos with the sound off on Facebook while standing in line at the grocery store.

“You’ve got all of these bets on utilization,” Schmitt said. “You can see how people could get hooked on a daily series and keep coming back. But there’s also the risk that it’s a novelty, and novelty wears off.”

Without a back catalogue to draw on for immediate appeal, Quibi will have to bank on great reviews from the start to inspire sign-ups.

Quibi doesn’t have the bundling advantage

 Quibi is offering a 90-day free trial to users who sign up prior to launch. But without a broad distribution tie-up such as the Disney Plus Verizon promotion, which helped the streaming service rack up 10 million subscribers on day one, it will be difficult for Quibi to scale quickly – especially at $4.99 per month.

“The hang-up is $4.99,” Scheppach said. “They need to look for a way to get that entry point to zero. I don’t see how else you can grow in such a crowded space.”

Quibi’s decision to launch a paid service with ads is contrary to the direction the market is moving. And no matter how much money Quibi pumps into driving awareness through advertising, getting people to sign up without any familiar anchor shows makes the challenge that much bigger.

“To go sub-by-sub without some kind of critical mass out of the gate in the crowded and noisy environment we have today seems nearly impossible,” Schmitt said.

Like competitors, Quibi will have to deal with churn as the switching costs of streaming are essentially zero. Subscriber growth and retention is a tough balancing act.

“It’s so easy now to rotate through these subscription packages,” Scheppach said. “We’re going to see a lot of volatility in sub counts.”

Quibi’s proposition to advertisers is attractive

Quibi is offering an extremely buzzy, brand-safe mobile video proposition, Stockton said. The service will maintain light ad loads to keep the user experience high while allowing brands to target audiences and measure engagements such as impressions, viewability and completion rates.

“We get the same mobile tracking we’re able to garner from any vendor,” Stockton said. “It’s premium content that can be measurable and trackable.”

But despite the attractiveness of this offer, it’s unclear if Quibi can provide a scaled audience, which is what big advertisers want in an environment like Quibi.

“They have goals they need to achieve, and we’re going to make sure they can adhere to that,” Stockton said.

And unless audience numbers scale within the first year, advertisers will have to rethink renewing their commitments.

“They have to pull off this hat trick of content, distribution and utilization, and boy are there a lot of bets stacked on top of each other,” Schmitt said.

But keep an eye on how Quibi is able to evolve after testing its proposition in market, Bloxham said.

“There was a point where Amazon and Netflix were untested,” he said. “They came into the market with big, bold propositions and more than a few people cast a skeptical eye in their direction. Quibi will undoubtedly evolve as well.”

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