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HQ could use another win.
The company behind HQ Trivia, the once-viral game-show app created by the same guys who invented Vine, is facing a pivotal moment.
HQ is preparing to launch a new game show, one that it hopes will legitimize its place as a rising player in the world of mobile entertainment. But it’s also dealing with some serious issues, including a declining audience for HQ Trivia and the aftermath of a dramatic change of CEOs.
Publicly, it’s clear that HQ Trivia’s viral ride is over. The app, where users can win cash prizes for correctly answering trivia questions presented live by a wacky host, captured the internet’s attention late last year. Some saw it as the future of media, and HQ Trivia spent much of January and February in the Top 10 list of most-downloaded free iPhone games. It’s now fluctuating between No. 250 and No. 500 on that list in the U.S. The audiences it pulls for its trivia shows, while still in the hundreds of thousands, are a fraction of what they were earlier this year.
Privately, HQ is going through different growing pains. The company recently forced out its CEO, replacing one co-founder with another following a contentious boardroom battle between the two, Recode has learned.
Adding to the drama is the fact that an HQ employee filed a formal complaint to HR in August against new CEO Colin Kroll for his aggressive management style, according to multiple sources. The alleged behavior was not sexual, these sources said, but was elevated to HQ’s board of directors.
HQ’s board was made aware of the complaint before Kroll was appointed CEO, but felt comfortable promoting him after an outside investigator looked into the alleged behavior.
Recode reached out to HQ and Kroll with our reporting. A company spokesperson sent the following statement:
A complaint was filed during the course of the leadership transition. We initiated an external investigation through a 3rd party to vet the complaint, and that investigation yielded no concerns. We take pride in our company culture and strive to create an environment where everyone feels safe, respected and valued.
It’s been a lot of drama for a young company, and all of it comes at an important time. HQ recently announced its second game show, a “Wheel of Fortune”-style game for smartphones called “Words,” and many close to the company believe this new game needs to be a hit.
HQ expects to do more than $10 million in revenue this year, according to sources, but has also taken millions in venture funding and has a $100 million valuation. The belief is that HQ can’t survive on one trivia show alone — not if it wants to become a legitimate media business and live up to its outsized expectations.
Whether that one hit, HQ Trivia, is still a success depends on how you look at it. HQ Trivia used to draw more than a million players per contest and had more than two million for some of its largest games with the biggest prizes.
A large part of that audience has vanished. A recent Sunday night contest with a $25,000 prize drew 580,000 players. Last Sunday, a Disney-themed contest drew a more sizable 818,000 players, but mid-week shows have been in the 200,000 to 400,000 player range.
On the other hand, HQ Trivia makes enough in sponsorship deals and in-app purchases — users can buy “extra lives” in case they get a question wrong — that the show pays for itself, according to multiple sources. HQ’s user numbers are similar to the audience size that some cable networks pull in for Sunday night prime-time windows. Disney Channel, for example, averages 836,000 viewers in Sunday night primetime, according to Nielsen.
The reality, though, is that Disney maintains this audience for a three-hour window. HQ gets it for just a few minutes. HQ needs to find a second act.
“HQ commands the largest live audience on mobile daily,” a company spokesperson told Recode. “We’re excited to introduce new interactive shows that will continue to engage and entertain them in new ways.”
HQ co-founder and recently replaced CEO Rus Yusupov was more blunt on Twitter. “Games are a hits business and don’t grow exponentially forever,” he admitted in a tweet in August. “More soon!”
As HQ’s prominence has died down, disagreements between its founders and investors have started to increase.
Over the summer, HQ’s small board of directors started discussing the idea of replacing then-CEO Yusupov. HQ Trivia’s audience was declining, and some believed that Yusupov wasn’t executing fast enough on the company’s product roadmap.
Instead of spending time and money developing new trivia game shows, Yusupov, who is design- and content-focused, was blowing out the production for HQ’s flagship game show with big prizes and celebrity guests, these sources say. HQ has launched a U.K. version and a sports-themed spinoff of HQ Trivia, but the plan for some time has been to create even more themed spinoffs and other games outside of the HQ Trivia format.
In August, Kroll and Lightspeed’s Jeremy Liew, an early investor who is on HQ’s board, decided that Kroll should take over as CEO. The company’s two founders had at times been at odds with how to manage HQ’s operations, like how and where to invest company money, according to multiple sources. Kroll was also HQ’s “technical” co-founder — the engineer who some believed could better execute in getting the company up and running as a platform for hosting and launching multiple shows.
Those differences, plus the decline in HQ’s audience, were enough to convince the majority of the board that a change needed to be made.
HQ’s only other board member, Founders Fund’s Cyan Banister, refused to get involved, sources say. Founders Fund operates under a strict founder-friendly code, boasting on its website that “Founders Fund has never removed a single founder.” Banister viewed a vote in favor of one of HQ’s founders as a vote against the other.
She technically gave up her board seat, and thus her vote, to avoid the conflict. She is now a board observer, according to multiple sources, and it’s unclear if she will rejoin the board at a later date.
It was a two-against-one decision: Kroll and Liew on one side, Yusupov on the other. Yusupov was out as CEO and Kroll was in.
Then came the complaint. Shortly after a decision to swap CEOs had been made — but had not yet been formally voted on by the board — an HQ employee filed a formal complaint with HR against Kroll for what was described by one source as “inappropriate and unprofessional” management behavior. The complaint includes allegations that Kroll used aggressive language in the office, according to two sources.
The complaint was elevated to HQ’s board of directors and set off alarms, given Kroll’s past. He was previously fired from Twitter for poor management, and his behavior toward some female colleagues during his time at Twitter made some people uncomfortable. Word about that behavior started making the rounds in Silicon Valley last year while HQ was trying to raise a new funding round and prompted some investors to pass on an investment, Recode reported at the time. Kroll has since apologized.
An outside investigator hired by the board looked into the new complaint and found that Kroll’s behavior “yielded no concerns,” according to the company’s statement. The board of three then voted unanimously to appoint Kroll as CEO.
In an email announcing the change to company investors, Yusupov, who is now HQ’s chief creative officer, said that he “stepped down”; he characterized the move as “just an evolution of our partnership as we grow as entrepreneurs and leaders.” In reality, Yusupov was upset. He technically voted for the change, but only after seeing the writing on the wall. He wasn’t happy to lose his job running the company, according to multiple sources.
Games are a hits business and don’t grow exponentially forever. HQ has massive early traction and still millions playing daily. Also developing new game formats, one of which we think is really special and complements Trivia nicely. More soon! Until then thanks for playing https://t.co/wnAcztBuJU
— Rus (@rus) August 14, 2018
That saga was the latest in what has been a long history for HQ’s founding team. Yusupov and Kroll have worked together for years, mostly on mobile video projects. They’ve had a lot of success. They co-founded the looping video app Vine, which they sold to Twitter for millions in 2012. It was a cultural force in helping spur a new wave of internet celebrities before it was ultimately shut down in 2016.
The duo started another company together in 2016 called Intermedia Labs, which is the parent company of HQ Trivia. Their first few mobile video apps never took off, but HQ was a quick hit. After launching in August of 2017, HQ routinely pulled in more than one million viewers per game, sometimes twice per day.
About six months after launch, HQ was attracting interest from major advertisers like Nike and celebrity guest hosts like Jimmy Kimmel and The Rock. The show’s regular host, Scott Rogowsky, became such a wild internet star that he generated Justin Bieber-like hysteria when he spoke at an event for Jewish teens and community leaders early this year.
But the relationship between Yusupov and Kroll hasn’t always been smooth. Yusupov was unaware of the extent of Kroll’s issues at Twitter, according to multiple sources, and it created a “rough patch” for the co-founders earlier this year when that behavior was affecting the company’s fundraising efforts. Then, of course, Kroll replaced Yusupov at HQ.
Despite all this, those close to him believe that Yusupov will stay at HQ and help build out the production of the company’s new shows.
But questions remain.
Can Kroll succeed as CEO? He was fired from Twitter for what he himself described as “poor management,” and now there’s the formal complaint from an employee at HQ. Kroll and Yusupov are both working with an executive coach, according to multiple sources, which is not uncommon for business executives. But their prior management experience was one of the reasons investors were wary of investing in HQ. Employee complaints don’t alleviate those concerns.
Then there is the business itself. The company has multiple game shows in the works, according to a source, including ideas centered around comedy and shopping. Is HQ capable of creating another hit show? Or was this a one-hit wonder?
Correction: An earlier version of this story said that an email from Yusupov was sent to HQ employees. It was sent to HQ investors.
This article originally appeared on Recode.net.
