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The Psychology Behind Quibi’s $2B Fail

It’s one of the biggest fails in business history — Quibi.

You may think you know the story:

Business royalty raise almost 2 billion dollars to start the latest and greatest streaming platform — and it falls flat on its face in record time.

Only 7 months from launch to shutdown.

But contrary to popular belief, Quibi was not a bad idea.

In fact, it was pretty ahead of its time.

Even if it was a huge marketing disaster.

Today I’m breaking down some of the sneaky psychological traps that the Quibi team fell into … and you could too.


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1. Quibi's "Dream Team" 

In 2018, the world of streaming content was a warzone.

Big players like Netflix, Hulu, and Amazon were spending billions of dollars creating original content — locked in a cutthroat race for the eyes and wallets of the American public.

Quibi entered what was one of the most contentious and competitive markets on Earth.

And they knew that they’d need to be armed with patience and big pockets.

So they raised a ton of money.

$1.75 billion to be exact.

Now that might sound like a lot to you and me, but in the world of streaming — where companies like Amazon and Netflix spend tens of billions every year on content, it was a drop in the bucket.

But Quibi’s founding team were optimistic, they were — after all entertainment and business royalty.

Co-founder Meg Whitman was the ex-CEO of Hewlett Packard Computers and eBay, and a true expert in growing technology brands.

The other co-founder, Jeffrey Katzenberg, had been the chairman of the Walt Disney company for 10 years, co-founder and CEO of Dreamworks Animation, and was the K in that SKG that appeared below the Dreamworks logo.

(The other two are director Stephen Spielberg and billionaire business magnate David Geffen.)

To the layperson, Quibi seemed set up for success — they had a great team, a unique idea, and lots of money.

But that was the problem.

🧠 Quibi fell victim to a cognitive bias — or error in thinking — called the Halo Effect.

The Halo Effect describes how one positive trait of a person can affect our judgements of the rest of their personality, performance and potential.

Meg Whitman and Jeffrey Katzenberg were some of the most successful business people in the world.

Quibi’s investors included entertainment bosses like Disney, NBCUniversal, Sony, AT&T, and banks like JP Morgan and Goldman Sachs…

And when people and institutions of that caliber are involved with a startup, it gives a bit of shine to the project at hand.

That kind of history makes people feel like it can’t go wrong.

(See also, WeWork, FTX, and Theranos.)

But in the real world, being successful in the past doesn’t necessarily dictate how successful you’ll be in the future (even if we feel like it should).


2. If we like it, other people must like it too (right?)

The Quibi target customer was the busy daily commuter who up until that point was forced to watch their favorite streaming shows a few minutes at a time — on the subway, on a bus, or on their lunch break.

Basically fitting in content where they could.

So Quibi had a great idea:

Studio quality shows with episodes that were only 5 to 10 minutes long.

That way people could watch an entire episode while they waited in line for their morning Starbucks.

That’s right, Quibi was one of the first short form video platforms.

In fact the name Quibi is short for Quick Bites.

And on the surface this approach made total sense -

In 2018 people were spending more than 3 hours a day on their phones, and platforms like Instagram and Snapchat were driving billions of views a day on short form content.

In an interview with Vanity Fair, Jeffrey Katzenberg told a reporter:

“What you’re doing today, if you’re in our core demographic of 25- to 35-year-olds, is you’re actually watching 60–70 min of YouTube, Facebook, Instagram, and Snapchat.

That growth is now a well-established consumer habit that Quibi is sailing into.”

But there was a big problem with this strategy -

Quibi was only looking at data about how people behaved without thinking if their product gave people something they couldn’t get anywhere else.

In their minds the answer was yes because

🧠 Katzenberg and Whitman fell for a cognitive bias known as the False Consensus Effect.

This describes peoples’ tendency to think that our own beliefs, behaviors, and thoughts are more common in the general population than they actually are.

In other words, we think other people like what we like and do what we do.

If we eat at McDonald’s once a week, we assume that most other folks eat there just as often.

If we fly first-class, we think most other people have probably done that at some point too.

And if we think 10 minute episodic mobile shows are amazing, we think other people will love them, too

Even if in real life, customers just didn’t see the point.


3. Ignore the social side of your product at your peril

By focusing on short form content, Quibi created two problems for themselves:

😨 First, they painted themselves into a corner with their insistence on short form content.

There wasn’t any existing studio quality short form episodic content — so Quibi had to create everything on the platform from scratch.

Even though established players like Netflix spent billions every year on original content, they still got most of their views from older long-form shows like the Office.

But Quibi couldn’t pad out its content with existing shows, so it faced a huge, expensive, uphill battle to get enough content on its platform to get customers interested.

😨 The second way Quibi cursed themselves was by ignoring the social side of its product.

You see, the app didn’t let customers grab screenshots.

Which meant these new shows could NOT gain traction in wider pop culture, because people couldn’t make reaction gifs and memes or create any buzz for these short form shows.

Quibi was so afraid that people would steal their content that they turned a blind eye to how social media could help create a streaming hit.

And streaming platforms live or die on their original programming.

Disney+ got popular after the Mandalorian became a hit.

Hulu took off after The Handmaid’s Tale and Netflix conquered streaming with House of Cards.

But Quibi didn’t have a hit show that made the platform a “must subscribe”.

So there was no real way to drive demand.

Now compare that approach to a platform like Spotify, who doubled down on the social side of its streaming platform.


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