Koo's Flight Cut Short: Twitter Challenger Grounded by Merger Collapse

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Beleaguered microblogging platform Koo, once seen as a home-grown rival to social media giant X (formerly Twitter), has shut down its operations, the company’s founder Aprameya Radhakrishna announced in a LinkedIn post on Wednesday.

"Here’s the final update from our end. Our partnership talks fell through, and we will be discontinuing our service to the public. We explored partnerships with multiple larger internet companies, conglomerates, and media houses, but these talks didn’t yield the outcome we wanted," Radhakrishna stated.

He added that most interested parties “did not want to deal with user-generated content and the wild nature of a social media company. A couple of them changed priorities almost close to signing.”

Unverified reports suggest that VerSe Innovation, which owns Dailyhunt and ShareChat, was in talks to acquire Koo.

Radhakrishna explained, “While we would’ve liked to keep the application (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.”

Koo's Entry into the Startup Dead Pool

Koo’s closure comes amid a challenging period for startups known as the "funding winter." In 2022, as many as 5,868 startups shut down due to macroeconomic headwinds. However, this figure has decreased to 1,720 in 2023 and just four in 2024 so far, as conditions have improved, according to data from market intelligence platform Tracxn.

A Strong Start

Founded in 2020, Koo was a multilingual microblogging platform allowing users to interact via text, audio, and video. It allowed influencers to network and engage with their fans. The Bengaluru-based firm gained traction during disputes between X and the Indian government over content moderation, leading many celebrities, government officials, and citizens to switch to Koo.

In three years, the platform amassed over 60 million app downloads, becoming the second-largest microblogging platform in the world, with support for more than 20 languages and over 100 brands advertising on the platform. At its peak, Koo had about 2.1 million daily active users and 10 million monthly active users, and was “just months away from beating Twitter in India in 2022,” according to Radhakrishna.

Growth Pangs and Financial Woes

Despite initial success, Koo faced declining users, layoffs, and revenue challenges over the past two years. In April, Koo halted salary payments due to financial constraints. Its spot as the second-largest microblogging platform was overtaken by Meta’s Threads, which gained 100 million global users within just five days of launch.

Koo's workforce reportedly shrank by over 80% since June 2022, including senior-level exits, leaving about 50 employees. The remaining staff faced salary cuts of up to 40% since October 2023. Active users fell from 7.2 million in June 2023 to 2.7 million in March, marking a 62% decline, partly due to the cessation of customer acquisition campaigns since June 2022.

“A prolonged funding winter which hit us at our peak hurt our plans at the time, and we had to tone down our growth trajectory. Social media is probably one of the toughest industries to break into, even with all available resources, as you need to grow users to a significant scale before revenue becomes feasible. We needed five to six years of aggressive, long-term, and patient capital to make this dream a reality,” Radhakrishna said.

Financial Challenges

Despite raising roughly $57 million from prominent investors like Tiger Global, Accel, and Kalaari Capital, at a peak valuation of $285.5 million, Koo failed to secure Series C funds. This compounded its financial woes, largely due to its lacklustre financial performance over the years.

In 2021-22, the company generated an operating income of only Rs 14 lakh, up from Rs 8 lakh the previous year, while its losses surged by 460% year-on-year to Rs 197 crore. The absence of a viable revenue model forced Koo to rely heavily on cash burn for user acquisition.

Factors like reduced advertising budgets among large brands post-pandemic and the platform’s diverse user base did not favor the company. Koo’s attempts at monetizing its platform via initiatives like Koo Premium and Koo Coins failed to provide meaningful returns. Furthermore, it failed to retain the users that switched from X in late 2020 and 2021.

“Patient, long-term capital is essential to build ambitious, world-beating products from India—be it in social media, artificial intelligence, space, electric mobility, or other futuristic categories. It will need a lot more capital when the space has a global giant already,” Radhakrishna concluded.