Zwift Layoffs, Discontinues Zwift Hub Trainer
TL;DR -- Zwift is transitioning from a startup company with insanely high valuation, to a startup company that can't raise more capital. And oh yeah, Zwift Hub is going away.
From DC Rainmaker: Zwift Lays off 100+, co-CEO Resigns, Zwift Hub Series Discontinued From Zwift: We have seen accelerated growth over the last year but in the current environment, we must focus on sustainable and efficient growth. Translation: Our infinite source of money has dried up, because we didn't grow fast enough to satisfy investor greed. |
How much does it cost to keep the current servers running? It seems to me as long as the data center cost is covered they can still break even.
2.5 million users x $16.50/mo is a lot of dollars cash flow. How do you go broke with $41 million dollars a month? Is it that they are not profitable, or is it they are not profitable enough? |
Originally Posted by base2
(Post 23151358)
Is it that they are not profitable, or is it they are not profitable enough?
The CEO stated that he wants to grow subscriptions to 10 million and go public. Not likely. |
probably has more to do with results than greed regarding the drying up of VC money. and not every subscriber is a full time subscriber so 41mil/year is probably very generous.
what is the cost to run a server farm? maybe salaries are too high for some? |
Could be part of the Wahoo lawsuit that went away, so they got out of the hardware business.
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That last round of funding was good for one year and covers at least those who were laid off. That's how the game is played. I'm surprised the VC let go of the man they brought in and kept the original founder. I guess they still see a return and postpone the immediate IPO route. Kurt must have pissed off the wrong people.
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One oneders if they will continue to sponsor the TDF Femmes.
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Originally Posted by base2
(Post 23151358)
How much does it cost to keep the current servers running? It seems to me as long as the data center cost is covered they can still break even.
2.5 million users x $16.50/mo is a lot of dollars cash flow. How do you go broke with $41 million dollars a month? Is it that they are not profitable, or is it they are not profitable enough? |
As mentioned in the other thread on this.
The zwift hub deals have to be loss leaders, and maybe they are not paying out. At $600 per with free shipping, no doubt they lose money on each trainer - then 1 year free memberships. Lost money on the trainer and at least 12 months before they see any cash in return. I was getting into a smart trainer this year no matter what. Was ready to purchase a trainer and a zwift membership, as was my FIL. Instead, we got the zwift hubs and free memberships, then we also got my son a hub. I know I will re up next year - but my FIL and 12 year old son?? |
I think the way to get new subscribers is to add new worlds/routes. Improving the graphics would help too. Cutting staff seems to gut the ability to do either of those. AI might help with both of those. When I saw the discount "while they last" I thought the Zwift trainer was history.
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Originally Posted by base2
(Post 23151358)
How much does it cost to keep the current servers running? It seems to me as long as the data center cost is covered they can still break even.
2.5 million users x $16.50/mo is a lot of dollars cash flow. How do you go broke with $41 million dollars a month? Is it that they are not profitable, or is it they are not profitable enough? the typical SaaS business doesn’t spend more than 10% of their revenue on server hosting. maybe zwift is a little higher than usual for one reason or another, but it’s still not going to be a sizable percentage. although you could make it your goal to cut everything else but that, doing so would be a quick way to irrelevance and failure. |
Originally Posted by Viich
(Post 23151987)
2.5 million users means 2.5million created accounts, not paying subscribers. They have NEVER released numbers of paying accounts.
Originally Posted by mschwett
(Post 23152051)
that’s oversimplifying their business, a lot. things go wrong. platforms or protocols change around you. users demand things be compatible with their new gear. users get confused or break things and need support. competitors will pop up and new features need to be considered or developed. payments need to be processed / payment processors paid. taxes need to be paid and tax laws in dozens of countries change. web pages need to be updated and maintained. you need people to do all of the above, and those people need to be paid, have benefits, have a place to work, that place needs to be maintained and run and paid for, etc etc etc.
the typical SaaS business doesn’t spend more than 10% of their revenue on server hosting. maybe zwift is a little higher than usual for one reason or another, but it’s still not going to be a sizable percentage. although you could make it your goal to cut everything else but that, doing so would be a quick way to irrelevance and failure. If 10% is the cost of delivering the product,(server farm) then that leaves 90% left over to sustain and develop the business under whatever regulatory requirements apply. What are they doing with that 90%? My guess is buckling under the pressure of initial VC contractual requirements to pay back "x" dollars by "x" timeframe. If that's the case, then the issue isn't so much as product viability, it's how hard VC wants to squeeze the golden goose. That issue can be negotiated. |
Originally Posted by base2
(Post 23152095)
…
If 10% is the cost of delivering the product,(server farm) then that leaves 90% left over to sustain and develop the business under whatever regulatory requirements apply. What are they doing with that 90%? My guess is buckling under the pressure of initial VC contractual requirements to pay back "x" dollars by "x" timeframe. If that's the case, then the issue isn't so much as product viability, it's how hard VC wants to squeeze the golden goose. That issue can be negotiated. venture is profit motivated, of course, but it is also a highly competitive space with multiple sources of capital competing for the same founders. we’ll never know the exact terms of their deal but the idea that zwift could continue to deliver their product with 10% (or some other random <50% number) the cost if they didn’t have to pay back the people who paid to build their business does not compute. |
Zwift is an interesting experiment in finding the least amount of visual and physics realism that you can have and still retain users. The climb portals and descending physics reveal that the floor is pretty low.
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Originally Posted by RChung
(Post 23152199)
Zwift is an interesting experiment in finding the least amount of visual and physics realism that you can have and still retain users. The climb portals and descending physics reveal that the floor is pretty low.
Since I recently subscribed to Rouvy, I haven't used Zwift once. Rouvy feels real. Experiencing an iconic route without leaving home is pretty darn great. I fake-climbed Mt. Lemmon yesterday. It was bleepin' long, and my butt is paying the price today, but the immersive scenery was pretty great. The downside of Rouvy is that now I want to travel everywhere to ride these roads. Or maybe that's an upside. |
Originally Posted by base2
(Post 23152095)
That makes perfect sense. It's been so long since the free trial, I have no idea what functionality a free account may/may not have. If it works acceptably well with out a need to pay, then that right there is something that needs to be addressed.
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Originally Posted by base2
(Post 23151358)
How much does it cost to keep the current servers running? It seems to me as long as the data center cost is covered they can still break even.
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Originally Posted by mschwett
(Post 23152146)
i think if we’re going to oversimplify their business, the better way to state it than “10% is the cost of delivering the product” is that 10% of their costs is the equivalent of the raw ingredients at a restaurant. you still need the recipes, the chefs, the restaurant, and a hundred other things.
venture is profit motivated, of course, but it is also a highly competitive space with multiple sources of capital competing for the same founders. we’ll never know the exact terms of their deal but the idea that zwift could continue to deliver their product with 10% (or some other random <50% number) the cost if they didn’t have to pay back the people who paid to build their business does not compute. I'm not daft. Sustaining cruise control is good 'till it ain't. But if their floor of existence to simply deliver the service and nothing more is "x" What are they doing with the rest? Paying taxes and global accounting can't possibly suck up 100% or more of the 90% that remains. That doesn't compute either. We don't disagree. We are just coming at it from opposite ends. To play off the restaurant analogy: After the initial startup cost & build out, even a Fro-yo place has 1 employee, the service is all automatic. There is a lot of margin there to be had somewhere. Even a vending machine works for a time between servicing. Perhaps with all the hard work of world development and game mechanics accomplished they are simply "right sizing" their workforce to more of a "sustain" mode. There is a right size for everything. Forcing growth/expansion beyond market demand is a sure-fire way to implode. Radio Shack, Quiznos, come to mind. Making the hard decision to reassess and course correct is the mark of a smartly run organization. |
Originally Posted by RChung
(Post 23152199)
Zwift is an interesting experiment in finding the least amount of visual and physics realism that you can have and still retain users. The climb portals and descending physics reveal that the floor is pretty low.
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Originally Posted by terrymorse
(Post 23152224)
Zwift has all but lost me as a customer. Maybe the gaming features and look appeal to folks who are accustomed to that stuff, but I really want a realistic experience. I have never played games on a computer, so that gaming stuff is mostly just annoying.
Since I recently subscribed to Rouvy, I haven't used Zwift once. Rouvy feels real. Experiencing an iconic route without leaving home is pretty darn great. I fake-climbed Mt. Lemmon yesterday. It was bleepin' long, and my butt is paying the price today, but the immersive scenery was pretty great. The downside of Rouvy is that now I want to travel everywhere to ride these roads. Or maybe that's an upside. the number one reason why i liked zwift was that i could turn down that road, or this road...and it was always nice having some rabbit to chase, or some dog to run from. i only get a littel of that in Rouvy. |
The Zwift hub experiment was nonsensical. I don't know if the free year really hurts them much, but it does seem that people that buy smart trainers often intend to subscribe to zwift.
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Is the Hub One only designed to work with ZWIFT?
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Originally Posted by rsbob
(Post 23152456)
Is the Hub One only designed to work with ZWIFT?
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Originally Posted by base2
(Post 23152422)
There is a right size for everything. Forcing growth/expansion beyond market demand is a sure-fire way to implode. Radio Shack, Quiznos, come to mind. |
Originally Posted by RChung
(Post 23152199)
Zwift is an interesting experiment in finding the least amount of visual and physics realism that you can have and still retain users. The climb portals and descending physics reveal that the floor is pretty low.
Maybe it's an interesting experiment in finding ways to turn a traditionally solo and closed off activity into a social and enjoyable activity. Gamifying and socializing something that many have historically found to be boring or a chore is pretty cool for a lot of users. But sure, someone could look at all of it with your perspective too. Ends up that we all have different priorities when deciding what we value or use. Wild, right? |
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