[Music] in 2014 the action cameram maker GoPro ipoed to Great Fanfare the company was initially valued at $3 billion and within a few months that had risen to well over10 billion led by its Ecentric founder Nick Woodman GoPro was a Pioneer in action cameras GoPro had become a cultural icon as people Ed it to film breathtaking Wilderness videos as well as extreme sports 10 years later the company's Outlook has worsened significantly their stock price has declined by more than 90% putting them just barely above penny stock status and despite their massive brand name they found it surprisingly difficult to operate at a profit GoPro is a story of unexpected success corporate arrogance and the brutal reality of free market competition join us as we explore how GoPro grew to a 10 billion company and how it all came crumbling down next up if you've been thinking about ways to increase your income while working from anywhere in the world there's no better option than Tech according to indeed 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trying to figure out your next career move try talking to a triple 10 adviser today just click the link in the description below for a free career consultation improve your career today by using our code Wall Street for 30% off on all their programs and now back to the video gopro's founder Nick Woodman was born into a wealthy family with his father being a successful investment banker in California upon graduating college in 1997 Woodman created two Doom startups that both failed in the early 2000s he was was unemployed and spent his time surfing in exotic locations including Australia and Indonesia when he surfed an impressive wave he wanted to take pictures of it to show off to his friends but this was almost impossible to do while disposable waterproof film cameras did exist they were impractical to operate while surfing so he thought of an idea he would make his own wearable waterproof camera if you could strap a waterproof camera onto your wrist this would allow you to quickly take photographs while surfing with no risk of dropping the camera into the seat so we went home to California bought a cheap water resistant film camera and used the sewing machine to create a fabric wrist strap he used the e-commerce platform Alibaba and found a contract manufacturer in China that could mass-produce his Custom Design thus in 2004 GoPro was founded he called the first camera the hero and advertised it at trade shows in QVC it was a smashing success generating $150,000 of sales in the first year Woodman had single-handedly created a new product category the action camera it's a camera that you don't use to film other people but instead used to film yourself while you're engag in some type of activity with the success of the first product GoPro was able to raise capital and develop more sophisticated designs in 2006 they released the digital Hero 1 this was a digital camera and in addition to taking pictures it could take videos up to 10 seconds long in 2012 they launched the Hero 3 which was capable of shooting 4K videos If you use a 64 GB SD card it could record 3 hours of 4K footage the Hero 3 was a game changer for GoPro the ability to shoot long highresolution video dramatically increased the use case if you're kaying or hiking or just walking around the neighborhood you could now easily make long duration highquality videos around this time YouTube was rapidly growing in popularity GoPros quickly became indispensable tools for millions of amateur vloggers and other content creators with the massive success of the Hero 3 gopro's Revenue was exploding this was the perfect time time to do an IPO in 2014 the company raised $400 million at a $3 billion valuation in the following months the share price skyrocketed giving the company a peak valuation in excess of $10 billion Intoxicated by the hype around their Blockbuster IPO GoPro greatly expanded its Ambitions they thought they could be far more than just a camera company GoPro customers were taking breathtaking videos of nature in extreme sports in some cases these videos R viewed millions or even tens of millions of times these videos effectively acted as free advertising for the company but GoPro wanted to take it a step further they set up an entertainment division that was tasked with scouring the internet for interesting GoPro footage and paying the owners for licensing rates they would create compilations of this user generated content and sell them to other companies for example the airline Virgin Atlantic paid GoPro to include this footage on their inflight entertainment screens they also started creating original film productions for brands for example Ford paid GoPro to make a video about a guy driving his Ford SUV to a mountain for mountain biking this was all shot on a GoPro their next expansion plan was to create a consumer drone called the karma which they unveiled in 2016 to much fanfare the karma was designed to be Compact and easily portable also the camera was mounted on an arm in front of the Drone allowing it to capture footage without obstruction from the propellers these new growth initiatives didn't come cheat in the 3 years following the IPO GoPro more than doubled its employees head count from 700 in 2013 to more than 1,500 in 2016 this caused a proportional doubling in the company's operating expenses the idea was for increased revenue from the entertainment business in karma drone to pay for this expansion in headcount however this did not happen Revenue did increase to a peak of $1.6 billion in 2015 but this was due to strong sales of their action cameras the entertainment division only contributed minuscule revenue and the karma drone had not yet been launched in in 2016 their revenue declined by 27% despite launching the karma drone when the company ipoed in 2014 they were profitable the massively expanded expense space coupled with declining Revenue caused them to report a $370 million operating loss in 2016 so what went wrong why did their two growth initiatives fail to deliver Revenue growth on the entertainment side GoPro was indeed able to create epic compilations of user generated content but there was already an almost Limitless quantity of epic GoPro footage available for free on platforms like YouTube very few companies were willing to pay GoPro real money for these compilations the original Productions they made for Brands were an even bigger flop because GoPro had to hire actors they were very expensive to produce yet they weren't very effective for example in this Ford collaboration it's just using a Ford car to drive to a mountain for mountain biking the video is mostly about mountain biking with the Ford car only playing a minor role the video doesn't explain any features of the for Ford car its Effectiveness as a Ford advertisement is Highly Questionable and if a brand really wanted to shoot a commercial with a GoPro they could just buy a GoPro camera and film it themselves there's no need for GoPro to make the commercial gopro's much-hyped Karma drone was also a disaster because of poor design choices the battery could easily come unlatched while the Drone is flying causing it to lose power and fall out of the sky within a month of launch GoPro had to recall all the Karma drones to fix the faulty design they eventually fixed it and relaunched lach the product but by this point the Karma's reputation had been greatly damaged and very few people wanted to buy it within a year they gave up and completely discontinued the program between 2014 and 2016 GoPro burned through most of their IPO proceeds to pursue two new Ventures that ended in complete failure after shutting down the entertainment and drone divisions they laid off 660 employees almost half of their Workforce while GoPro was distracted in its ill-fated expansion plans their Core Business of action C Camas languished if we look at their product timeline they've released a new flagship camera every year but the last truly Innovative product they've released is a GoPro Fusion in 2017 the fusion has two ultra wide lens cameras one on each side each camera has a field of view greater than 180° the footage of the two cameras is combined to create a 360° video the camera software automatically cuts out the selfie stick you use to hold it it thus gives the illusion that you're being filmed by a drone after the fusion new GoPro models have only had incremental improvements to resolution battery life software features Etc but nothing groundbreaking there hasn't really been a whole lot of innovation since 2017 with only incremental improvements each year it's hard to convince people who already own GoPros to spend over $300 to buy the latest model if you look at gopro's annual spending on research and development it massively increased in 2015 and 2016 as they were developing the karma drone after squandering most of their IPO proceeds they were forced to massively cut back this limited innovation in their Core Business gopro's recent lack of innovation left a wide opening for competitors when GoPro reached a$1 billion valuation following their IPO other companies took notice and want to get a piece of the action for themselves for the first decade or so of gopro's existence they were in near Monopoly but now they are two main competitors the consumer drone giant DJI and another company called insta 360 both of them have Flagship action cameras with similar functionality in price points to GoPro while the insta 360 a pro is slightly more expensive than the GoPro Hero 12 black its quality is far superior modern digital video cameras have software that automatically improves the quality for example most action cameras have image stabilization which automatically adjust for small movements in the camera's position to make the video appear more smooth they can also make color adjustments resolution upscaling and real-time autofocus in most of these aspects insta 360 is superior to GoPro the insta 3 60 Ace Pro is powered by a 5 Nom processor while the GoPro Hero 12 black has a less Advanced 10 Nom processor the more limited computing power of the hero 12 means that it can perform nearly as much software optimization to the raw footage in an attempt to keep up with the competition GoPro creates more advanced software for each new model but this has become too much for its weak CPU to handle leading to a laggy touchscreen in frequent crashes GoPros become notorious for poor reliability as evidenced by their horrible reviews on trust pilot perhaps the biggest competitive threat for GoPro doesn't come from rival action cameras but instead from smartphones every year smartphone cameras become more advanced for the vast majority of people their smartphone is much more important than their action camera if a consumer wants to upgrade a device each year a new smartphone will give them much better bang for their Buck than a new GoPro if we look at the number of cameras GoPro sells per year it peaked at 6.6 million in 2015 as competition has increased their market shares declined precipitously in 2023 they sold Less Than 3 million cameras with Revenue declining they've been unable to generate consistent operating profits gopro's decline can largely be attributed to corporate arrogance Nick Woodman invented the action camera in 2004 allowing GoPro to dominate this new market in the early years Woodman thought the power of the GoPro brand was too strong for any competitor to dislodge this complacency is best exemplified by an interview he gave to Bloomberg on the day of the IPO what about the competition I mean okay we are still using these but there are a lot of other small wearable camera makers out there um how do you sort of the the barriers to entry are so low how do you differentiate yourself well truth be told uh we've had uh competition since well since the beginning but in in volume uh since about 2008 when GoPro really started to have some success we started to see lowcost competitors knockoffs show up and then we've had some of the bigger uh consumer electronics companies in the world compete with us for the last 2 or 3 years and we've only seen our market share grow during that time period because we recognize that when our customers capture and share compelling content of uh exciting interesting life experiences and they tag title describe their content as GoPro our customers are virally driving awareness and enthusiasm for our our company our brand and our products are and to compete with GoPro you have to have millions of people capturing and sharing their experiences and giving you credit for it and that's why our competitors have not made any inroads Woodman assumed that whenever people saw GoPro footage online this would make them want to buy a GoPro themselves but these videos aren't cool because they were filmed by GoPro specifically they're cool because they are filmed with action cameras when consumers do research online they can easily see that competing Brands offer Superior Products GoPro spends huge amounts of money sponsoring dozens of athletes to make GoPro videos this overemphasis on marketing distracts resources and management attention from improving the core product the idea behind GoPro was indeed Innovative Woodman caught lightning in a bottle by developing an easy-to-produce product that consumers loved and he turned this into a multi-billion dollar brand but if you failed to continuously innovate any brand no matter how strong can eventually fall into obsolescence and it looks like that's exactly what's happening to GoPro all right guys that wraps it up for this video what do you think about GoPro let us know in the comments section below as always thank you so much for watching and we'll see you in the next one Wall Street Millennial signing out
