Don't Believe the Hype
Why Clubhouse isn't the Next Big Thing
Every so often a new consumer social media app comes on the block and gets some prominent marketing muscle behind it. This is, of course, how Facebook, Instagram and Twitter started. Turns out they're doing pretty well now.
But for every Facebook, Instagram or Twitter, there is a Friendster, MySpace or Vine. They had their time in the limelight, and then disappeared into irrelevance. There are fine margins when it comes to making it as a social media app.
Clubhouse became all the rage in early 2021, and was tee'd up to be the Next Big Thing.
What happened and why should you not believe the hype?
What is Clubhouse?
Clubhouse is an audio-based social media app. The concept is that users will sign into a 'Clubhouse' (room) and listen to presenters discuss an interesting topic. Think a Zoom webinar but without the video and you're pretty close. The sessions aren't recorded to give a sense of immediacy and to facilitate FOMO (fear of missing out) amongst those who weren't there to listen.
Like most social media apps, when you first sign in the first user journey involves selecting topics that interest you. This then feeds into an algorithm that will surface similar topics in an attempt to gain and retain your attention. Fairly standard.
Clubhouse is a new entrant to the market, as it was launched in March 2020. It has taken the path well trodden for B2C tech apps, taking several rounds of funding from prominent venture capital firms, including A16z. The most recent round, their Series C, valued them at a reported $4bn.
Clubhouse hit headlines when Tesla founder Elon Musk interviewed Robinhood founder Vlad Tenev following Robinhood's Gamestop fiasco where they stopped letting people execute trades, leaving thousands of traders out of pocket. (There's certainly an irony when a company called Robinhood steals from the poor and gives to the rich). Regardless of the background story, being able to get Elon Musk tweeting about your social media app and hosting a talk on the platform is certainly impressive.
The issue that Clubhouse is facing, is that downloads are not trending upwards in the classic hockey stick chart that the investors will want to see.
Unsustainable Growth Hack
Of the growth drivers that drove Clubhouse to experience some early growth, exclusivity was perhaps the primary one.
The issue with using exclusivity as a growth hack, particularly in B2C businesses, is that the novelty wears off. Consumers are fickle and will move onto the next hot thing, and you can't really be exclusive for 10 years, it doesn't work.
Clubhouse make each room exclusive, capping listeners at 5,000. An interesting call given the demand for the aforementioned Elon Musk x Vlad Tenev discussion, but perhaps there are some underlying technical limitations that make this exclusive 5,000 more convenient rather than strategic.
Another factor that played up the exclusivity side of Clubhouse was that it was only available to iOS users - 22% of the total smartphone market share, and declining. This facilitated an element of FOMO and the natural progression from FOMO which is to ask a bunch of questions about it. This cycle then ends up getting more organic traffic to Clubhouse as more and more people are talking about it. In fact, it was only a few weeks ago when Clubhouse made themselves available to Android users.
One element of exclusivity that was most certainly by design was the fact that you had to be invited into Clubhouse. So, just like a traditional Clubhouse, really. This then fed into people's egos as they felt important when they received an invite and felt important when they gave someone an invite to join. And this brings me to my core issue with Clubhouse.
My Core Issue with Clubhouse
Clubhouse doesn't work primarily because of the people in Clubhouse. The type of people who fit into the Clubhouse demographic tend to be those who put several grandiose statements in their other online bios: Serial Entrepreneur / 4 x Best Selling Author / Property Investor Guru / Crypto Bro. They enjoy talking into an empty room to hear their own echo.
I have yet to see anyone mentioning Clubhouse discussions that they found materially different from what you see on LinkedIn or Twitter everyday. To be balanced, I am sure there are some very good conversations on Clubhouse, hidden in some dark corner of the Clubhouses (is that plural for Clubhouse? Who knows). It's just that I don't personally see the value in hearing people with inflated egos bigging up their accomplishments and me sitting there listening via audio with no ability to go back and re-listen or read a transcript at a later date.
This isn't the only issue I have with Clubhouse as a viable, sustainable business concept, as you can see in the below tweet.
This is yet another app to keep track of and one that, when you peel away the exclusivity factor, doesn't actually add any value over and above other social media apps or communication applications like Zoom.
Survival of the Fittest
There are only so many social media apps that people can stay on top of, and only so many that people will actually want to use regularly. I've seen this first-hand over the first 5 years - I can't name one person I know under the age of 40 who uses Facebook regularly, but everyone is on Instagram. The younger generation now seem to eschew Instagram for TikTok and Snapchat, so trends change over time and according to demographic.
Where does this leave Clubhouse? Not in a great spot, and that was before it became apparent that the incumbents are incoming.
Twitter have launched Spaces, their version of Clubhouse. Spaces has no limit in terms of audience numbers and is available to anyone with over 600 followers.
"Spaces might also be something more authentic than Clubhouse, with fewer hustlers." - John Koetsier, Forbes
Twitter's 350 million users vs Clubhouse's 15 million makes this a strong challenge to Clubhouse's future. Twitter doesn't need to find users, it already has them. Not to mention those who prefer to communicate with their audience and/or peers in various mediums can post out written tweets, photos, videos, as well as the audio chat room. To me it's a no brainer. Larger potential audience, more options to communicate, less apps to keep on top of.
Although, there do seem to be some Clubhouses which could be quite a fun listen. Exhibit A:
Social media apps are a fickle business, with only a few chosen ones becoming a sustainable business. Others, like Clubhouse, will likely burn through VC money and then implode (if they don't pivot). The aspiring influencers/hustlers who are in the few that actually care about Clubhouse will move onto the next new thing, hoping that they are eventually a pioneer in the next big thing as they can then add that to their online bios as well.