KIK CHASING CHAT CUSTOMERS.
CEO plans to turn chat app into ‘third great network’ after telephone and Internet, and he has the cash to do it
It’s quite likely you’ve never heard of Kik, a Canadian-made mobile chat app with 200 million registered users and ambitions to be North America’s dominant chat app.
Ted Livingston, Kik Interactive’s founder and chief executive, is neither surprised nor overly concerned about that, because most of us are almost certainly not in his target demographic. Kik’s pursuit of the youth market has kept the Waterloo, Ont.based company largely off the mainstream radar.
“I think we’re the most under-the-radar company of our size in Canada, certainly. If you were to go to the average Canadian and say, ‘Have you heard of Kik?’ probably everybody would say, ‘No,’ ” Mr. Livingston said.
“And yet, on Christmas Day, if you were to look at the top free apps on iTunes, Kik was the only Canadian company in the top 100 (at No. 7).”
Securing mainstream attention isn’t a priority for Mr. Livingston. He’s primarily focused on adding new users, many of them teenagers. The company claims it adds 250,000 users a day, but won’t say how many actually stay as active users.
Mr. Livingston said his goal is to create the “third great network” (after telephone and the Internet). That goal may seem far-fetched for a mere chat app, but if Mr. Livingston is to achieve it, he must boost Kik’s profile. “We need a much bigger reputation,” he said. “We need to be known as a hot company.”
Founded in 2009 by a group of University of Waterloo students, Kik has raised a total of $70.5 million, including $38.3 million late last year.
Mr. Livingston is using the money to become the Western equivalent of Weixin, the widely popular Chinese social messaging app. (The North American version is called WeChat).
Like Weixin, (as well as Line in Japan and Kakao in South Korea) Kik is attempting to be more than a chat app.
“These companies have turned core chat into portals. Now, you can do all your banking through WeChat. You can get a mortgage through WeChat. You can buy new clothes through WeChat. You can find games and spread them among your friends on WeChat. There’s music and movies,” Mr. Livingston said. “Our ambition is to do a similar thing in North America.”
The company claims 40% of American youth (ages 13 to 25) are on Kik. The target demographic is clear: young users who have grown up with mobile technology, and who are not yet set in their spending ways.
“It’s great to have lots of 30-year-olds on Kik. But those 30-year-olds are very sophisticated consumers. They already have very strong loyalty to where they shop, where they bank, and to what games they play. It’s very hard to use chat to change what services they use in each of those categories,” he said.
“Compare that to a 13-, 14- or 15-year-old, who doesn’t have any of those services yet. They haven’t chosen. They don’t have any loyalty.”
Thus Mr. Livingston is making a long-term bet: “Twenty years from now, we’ll have every 33-year-old.” That is, if everything goes to plan.
The company faces some challenges, including the decision to remain in Waterloo, Mr. Livingston admitted. A Pando Daily article from 2013 described that decision as a “straitjacket” to its growth. And Mr. Livingston doesn’t fully disagree.
“Being in Waterloo is our greatest strength and our greatest weakness. It’s our greatest strength because we’re beside what we think is the best source of technical talent in the world,” Mr. Livingston said of the University of Waterloo, where he and 60% of Kik’s employees studied.
“But then it becomes a big disadvantage when we want to work with partners to build services on top of Kik. The top clothing brand in the world is not in Waterloo. The top banks in the world are not in Waterloo. The top entertainment brands are not in Waterloo.”
The company responded by opening a five-person office in New York, an office in San Francisco, and it is considering an office for Los Angeles. “We’ve absolutely considered [relocating],” he added. “We just think it would be a losing proposition.”
But for Julie Ask, a mobile technology analyst at Forrester Research, Kik’s main challenge is big North American competitors that are also trying to be the WeChat of the West.
“It’s actually a bit shocking that the other players who are chasing this space haven’t done better so far,” she said.
“Facebook is chasing this with Facebook Messenger. They have deep pockets and own Whats App. Google is chasing this with Google Messenger and Google Chat. There are some big companies that want this.”
Ms. Ask pegs Kik’s active user base at about a fifth of its 200 million registered users, which she says is just OK. Still, she calls Kik an obvious acquisition target.
Kik receives buyout offers “all the time,” Mr. Livingston said. “It’s such a hot space,” he added.
For now, Kik is the acquirer, having made its first acquisition — Toronto-based Relay — in November.
“The biggest challenge for Kik in 2015 is very simply hiring more people. We’re a team of 60 people. We’re significantly smaller than all our competitors. If we’re going to play at the next level, we need to double, triple or quadruple the size of the team this year,” Mr. Livingston said.
“We’re looking at every possible way we can do that. Part of that’s press, part of that is acquisitions,” he added.
“Where it makes sense, we will buy as many companies as we can.”