Two weeks ago, Meerkat CEO Ben Rubin sent an email to his company’s 48 investors laying bare an observation that he’d made peace with months earlier: Meerkat, the livestreaming app that played the role of darling one year ago at the annual SXSW festival in Austin, Texas, was failing.
“The year started on a high note. … But over the year, it became rougher waters,” the email read. “Mobile broadcast video hasn’t quite exploded as quickly as we’d hoped. The distribution advantages of Twitter/Periscope and Facebook Live drew more early users to them away from us and we were not able to grow as quickly alongside as we had planned.”
In other words, the livestreaming business is hard. Going up against two established social networks offering virtually the same product makes it exponentially harder.
So Meerkat, in true Silicon Valley fashion, is pivoting. Actually, it’s been pivoting since last August, when Rubin realized that his startup focused on livestreaming broadcasts was headed for a black hole.
Today the company has all but abandoned the livestreaming model we’ve become familiar with in favor of something new: A social network where “everybody is always live,” Rubin told Re/code in an interview earlier this week. (More on that below.) The Meerkat app still works, but its creators have shifted time and resources elsewhere.
“It was a fucking hard decision to say ‘it’s not going to work, thank you everyone for the support,'” Rubin said. “One-to-many [broadcasting] is not more than a feature on top of a platform, and if we want to be independent we have to change the course.”
The Darling of South-By
In March of 2015, Meerkat caught a break. Whether by design or by coincidence, the app launched just weeks before SXSW, the media and technology “brand orgy” that also helped launch a little microblogging service by the name of Twitter almost a decade earlier.
Rubin’s Meerkat was tech’s hottest commodity, a good role to have during one of the industry’s biggest conferences. Attendees were “going live” on Meerkat throughout the week from seemingly every bar and BBQ joint on Sixth Street.
“I don’t remember any of it,” he laughed. “It was a very blurry 72 hours in which I didn’t sleep and didn’t eat.”
The company raised $12 million in venture funding within weeks from numerous VC firms, including Greylock Partners. It also took fire from Twitter, which cut off Meerkat’s access to its social graph in favor of its own livestreaming service, Periscope, which would make it harder for Meerkat users to find people to follow within the app.
The real problem, though, quickly materialized: While Meerkat could find an audience to consume live video streams — Rubin claims viewership on Meerkat is still growing — it had trouble finding people willing to broadcast with any consistency. The number of broadcasters on Meerkat peaked in May of last year. One source estimated the total number for the month at around 100,000 people. That number never grew despite numerous new features, including an integration with GoPro in July. (According to the company’s blog history, Meerkat hasn’t made any notable product updates since September.)
“By June, what was clear with both Periscope and Meerkat was ‘I’m using them less than I was two months ago and I’m not finding and discovering new concepts and new moments at all,’” explained Josh Elman, Greylock VC and Meerkat board member.
Here’s how Rubin described the broadcasting issue in his email to investors:
“It’s different than sharing photographs — think of it this way: before Instagram, people already knew what constituted a beautiful photo and tried to take them. With live video no one really knows what ‘good’ live video they can create is.”
In retrospect, the writing was on the wall almost from day one. A BGR report just weeks after SXSW pointed out how the tech press was elevating an app that wasn’t performing on any app charts. Indeed, it never got higher than number 140 in the U.S. app store rankings, according to App Annie, and with the exception of a random three-day stretch in mid-August, it hasn’t cracked the top 1,500 apps since early May 2015.
Research firm eMarketer also piled on. A report published last June found that only 20 percent of U.S. Internet users were even interested in trying livestreaming.
By August, just six months after launch, Rubin conceded that his business needed a makeover. Periscope was getting lots of love from Twitter, and Facebook had launched its own livestreaming feature.
Chloe Sladden, a former Twitter exec and current adviser to the company, said the pressure from Twitter and Facebook was one catalyst. So, too, was the realization that Meerkat was building a product for broadcasting that did little to actually connect its users, which was Rubin’s initial mission with the company.
“It was very clear that the product itself needed to be something entirely different if we wanted to get to radical participation,” she said.
Rubin brought the staff to his native Israel on a company retreat, decided that something had to change, and alerted his board in October that he wanted to pivot the business to build a new video social network instead. Around this time, some employees left the company for various reason, including Meerkat’s VP of engineering. But for the most part, Meerkat has been working on the social network idea ever since.
“Basically I was like, ‘Guys, we can double down on media, we can have fun with the smoke up our ass and think that we’re great, we can double [our partnership] budget … and in a year from now we’ll sort of smell that the money is out and we’ll probably sell,” he explained.
The Future for Livestreaming (And Meerkat, Too)
Rubin won’t talk much about his company’s new focus. It sounds more akin to Google Hangouts or Skype, with a priority on smaller, group video chats with people you know versus strangers tuning in.
The Meerkat story is not uncommon in Silicon Valley. Startups often run into bigger, richer competitors. They pivot. To Rubin’s credit, he identified the issue less than a year into his project, meaning he still has 75 percent of his venture funding left and a board willing to try something new. (“Almost [all investors], except a few, were super supportive and sharing the same feelings,” he said.)
The company’s core issue though — that it could never get users comfortable broadcasting — might be troublesome for others like Facebook and Twitter that are making major investments in this space. Meerkat added new users every month, but the vast majority of them didn’t stick around. The churn was high, an issue Rubin believes is probably industry-wide.
Facebook is getting very serious about livestreaming. Sources within the company say that CEO Mark Zuckerberg is prioritizing its livestreaming feature over other video efforts, and COO Sheryl Sandberg is making trips to LA to try and lure celebrities to its platform with promises of cash.
At Twitter, Periscope is starting to integrate into user feeds and CEO Kayvon Beykpour has been named to Twitter’s executive team.
Meerkat’s pivot eliminates a potential competitor, perhaps, but it also signals the challenges of breeding an industry that requires immense user output to succeed.
In the meantime, Meerkat is all in on its new social network. Rubin says the company should have something in the next three months or so, and talking with him leaves little doubt that Meerkat’s struggles have not dissuaded his belief that connecting people over live video is worth pursuing.
“It’s a startup. It’s hard,” he said. “It’s going to be less hard if you’re going to be reflective on changes and understand your metrics and make decisions and be reactive. … We just don’t want to be a cable TV on mobile.”
Added Elman: “I think there’s a lot of opportunity. … It was a bold decision to go heads down and build something new. If it works, it’s going to be the best decision the company ever made. If it doesn’t work it’ll be one of a long line of startups going after ambitious things. I’m glad to be on the journey.”
This article originally appeared on Recode.net.