Kik was controversial success story. Now its future is up in the air
For nearly a decade, Kik Interactive Inc. was the controversial success story of the Waterloo tech community.
Now, the company’s future appears very much up in the air.
In a blog post Monday evening, chief executive Ted Livingston announced that he’s shutting down the company’s signature Kik Messenger service, which once boasted more than 80 million users.
The move — which was accompanied by layoffs to all but 19 of its more than 100 employees — leaves the embattled company betting on its nascent cryptocurrency, Kin, which is already the subject of a U.S. Securities and Exchange Commission lawsuit alleging its initial coin offering constituted an unregulated securities sale.
Livingston said the company will continue to vigorously fight that case.
“We are all in. And despite these hard decisions my confidence in Kin only continues to grow,” Livingston wrote. “Together we will show the power of the Kin Ecosystem. Together we will get millions of people to buy Kin to use it. And together we will build a new economy that offers equal opportunity to billions of people. Together we will win.”
But without the millions of users from the messaging service to jumpstart the cryptocurrency — Kik itself had previously said it planned to “leverage its large existing user base to drive mass adoption” of Kin — it was unclear how they were going to achieve that.
The shutdown is the latest twist in the Kik saga, which saw the startup grow into one of Canada’s first tech unicorns, despite a series of controversies along the way.
Livingston, who had previously worked at BlackBerry Ltd., started Kik in 2010 and amassed more than a million users within weeks of launch.
But BlackBerry sued within months, alleging patent infringement and ethical violations.
The two companies eventually settled the lawsuit in 2013, and around the same time Kik eclipsed BlackBerry’s storied BBM messaging service, boasting 80 million users to BlackBerry’s 60 million.
The company’s rise continued, and Kik was at its zenith in 2015 when Chinese tech giant Tencent invested US$50 million in venture capital funding, at a reported valuation of US$1 billion.
But as Kik became more established, it came under scrutiny for other reasons.
The app was known to be popular with teens; because it did not require a phone number to sign up, users could achieve total anonymity, raising concerns about exploitation.
In 2018, the BBC reported that the app was involved in more than 1,100 child abuse cases, and several other international media outlets have reported on widespread sexual exploitation on Kik.
In an emailed statement, Kik associate counsel Ryan Tremblay said the company has been committed to working with law enforcement and building features to combat online exploitation, and he denied that the cost of policing the messaging service was a factor in the decision to shut down the service.
“Online safety has been a key priority for us. We’ve always wanted our users to safely enjoy Kik, and have meaningful conversations. Sadly that is now coming to an end,” Tremblay said.
Online safety has been a key priority. We’ve always wanted our users to safely enjoy Kik, and have meaningful conversations. Sadly that is now coming to an end
Ryan Tremblay, Kik associate counsel
Despite the messenger’s apparent popularity, Kik continually struggled to monetize the service, which led Livingston to embrace cryptocurrency as an avenue to remain viable.
Kik raised around US$100 million in 2017 through an “initial coin offering” with plans to jumpstart the Kin digital currency by integrating it with the Kik app.
But earlier this year, the SEC filed a legal complaint alleging that because Kin’s success was so closely tied to Kik’s corporate performance, the ICO was in effect an unregulated sale of securities.
In his blog post Monday announcing plans to shut down the Kik Messenger service, Livingston said the company will continue to fight the lawsuit. He said that by laying off all but “an elite 19-person team” and shutting down the messenger app, the company can reduce its cash burn rate by 85 per cent, giving it enough runway to fight the SEC.
In a legal filing in August, Kik argued that the SEC misrepresented facts and took quotes from company executives out of context to paint a false picture in the original legal complaint.
Beyond the SEC case, observers were unsure how the company would manage as a pure crypto offering.
“Their unique differentiator is that they provide complete anonymity,” said a member of the Kitchener-Waterloo tech business community, who asked not to be identified. “There’s nothing unique about their crypto except that it was going to be combined with an anonymous messaging platform.”