MRKT 690 Week 4 Individual Research Report: Growth Strategies Example

Individual Research Report: TikTok and Quibi in the Short-Form Mobile Video Boom, a Success and a Failure in a Growth Market

The Growth Market

Around 2020, short-form video watched on phones was one of the fastest-growing markets in media. Smartphone use was nearly universal among younger adults, mobile data had become cheaper, and the pandemic lockdowns of that spring gave people more time at home and more reasons to seek entertainment and connection online. Two companies entered this market with very different strategies at almost the same time. TikTok, owned by ByteDance, expanded rapidly in the United States after merging with the lip-sync app Musical.ly in 2018. Quibi, founded by Jeffrey Katzenberg and Meg Whitman, launched on April 6, 2020.

The Success: TikTok

TikTok's strategy rested on three choices. First, the app was free and opened directly to a full-screen feed of short videos chosen by a recommendation algorithm, so a new user saw entertaining content within seconds without following anyone. Second, it made creation easy, with editing tools, music and effects built into the app, which turned viewers into creators and supplied an endless flow of new content at no cost to the company. Third, its videos traveled: users could download and share them to other platforms, where the TikTok watermark advertised the app to people who had never opened it. In September 2021, TikTok announced that it had reached one billion monthly active users worldwide (TikTok, 2021).

The Failure: Quibi

Quibi bet on the opposite approach. It offered professionally produced shows and films cut into episodes of under ten minutes, made with well-known actors and directors, and charged $4.99 a month with advertising or $7.99 without. It was designed for phones alone, and at launch users could not watch on their televisions or share clips easily. The company raised about $1.75 billion before launch. Six months later, the founders announced that they were shutting it down, writing that the idea may not have been strong enough to justify a standalone streaming service or that the timing, launching during a pandemic, had worked against them, and probably both (Katzenberg & Whitman, 2020).

Analysis

Diffusion research explains much of the difference. Rogers (2003) identifies five attributes of an innovation that shape how fast it is adopted: relative advantage, compatibility with existing values and habits, low complexity, trialability and observability. TikTok scored well on all five. It was free and immediately entertaining, compatible with how young people already used phones, simple to use, trialable at no cost and highly observable, since its videos appeared all over other platforms. Quibi struggled on several. Its relative advantage over free video on YouTube or Instagram was unclear, it was incompatible with the way people watched at home during lockdown, on televisions, and its content was barely observable to nonusers because clips did not circulate. Its 90-day free trial helped trialability, but trial alone could not overcome the other weaknesses.

The two companies also defined their customers differently. Quibi described its audience as busy adults filling short gaps in the day, such as commutes and waiting rooms, and priced its service like a premium subscription for that segment. The pandemic removed many of those gaps just as the service launched, and the people with the most time on their phones, teenagers and young adults, already had free alternatives. TikTok, by contrast, built its strategy around the behavior of young users who wanted to watch, make and share videos with friends, and it let that core segment pull in older users over time. In a growth market, a segment definition that rests on observed behavior rather than on an assumed need is more likely to survive a sudden change in conditions.

Funding and early entry did not save Quibi. Golder and Tellis (1993), studying about 500 brands in 50 categories, found that almost half of market pioneers failed and that later entrants who led the market as it grew were more successful. Quibi was not the first short-form video service, but it entered a growing market with more money than almost any start-up in media history, and the lesson is similar: resources and timing matter less than a strategy that fits how customers actually behave. TikTok won the growing market by letting its users do its marketing, while Quibi spent heavily on content that its users could not easily show anyone else.

Lessons for Growth Markets

Three lessons apply beyond video. First, in a growing market, strategies that lower the cost of trying the product, ideally to nothing, let adoption spread quickly. Second, products that customers can share or show to others carry their own advertising, which matters most when a market is forming and many potential buyers have not yet decided. Third, compatibility with existing habits deserves as much attention as content quality. A company entering a growth market should ask not only whether its product is good, but whether it fits the way customers already live, and whether each customer's use will bring in the next one.

References

Golder, P. N., & Tellis, G. J. (1993). Pioneer advantage: Marketing logic or marketing legend? Journal of Marketing Research, 30(2), 158-170. https://doi.org/10.1177/002224379303000203

Katzenberg, J., & Whitman, M. (2020, October 21). An open letter from Quibi's founders. Medium.

Rogers, E. M. (2003). Diffusion of innovations (5th ed.). Free Press.

TikTok. (2021, September 27). Thanks a billion! TikTok Newsroom.