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Home Technology

Lex Midweek Letter: Clubhouse is becoming less clubby as it grows

April 7, 2021
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Lex Midweek Letter: Clubhouse is becoming less clubby as it grows
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Dear readers,

Clubhouse copycats are getting out of hand. First, there was Twitter’s “Spaces”, then Facebook wanted to have a go. Now workplace messaging app Slack and CV website LinkedIn are working on plans for their own audio-only chat rooms too.

Lex has written before about the clone wars under way in social media. Facebook used Snap’s disappearing posts idea for Instagram. Snap aped TikTok’s short video format. So did YouTube and Instagram.

The repetition is boring but the strategy is sound. Existing platforms do not want to give users and advertisers any reason to jump ship and join a new network. If a format is popular elsewhere, why not copy it and see if engagement rises?

Clubhouse’s popularity is still on an upswing. Oprah Winfrey has appeared. So has Tesla chief Elon Musk, who then made headlines by suggesting that Russian president Vladimir Putin join him. Membership doubled between the end of 2020 and the start of February to 2m weekly active users — Clubhouse’s preferred metric.

But how many short video channels and audio-only social media networks are necessary? Lockdown boredom explains the rapid jump in popularity of both TikTok and Clubhouse. Without schools and workplaces open, internet use has soared. According to an Ofcom report last summer, UK internet users spent four hours and two minutes online each day on average, including more than an hour on social media sites. This is up by more than half an hour from pre-pandemic levels. It is not hard to imagine that these numbers will fall back when lockdowns end.

Nevertheless, Clubhouse’s star is still rising in the investment community. Bloomberg reports that it is in talks for another round of funding that will value the private company at $4bn, up from $1bn in January. This for a business that is just one year old, still has no Android version of its app and remains closed to the general public.

Funding will probably go towards developing an Android version and working out revenue streams. For now, the company’s focus is on content. It has just added a payments feature with Stripe so users can pay content creators. If successful, Clubhouse could perhaps develop a shared monetisation model with them. It has said in the past that it does not plan to rely on advertising revenue.

What’s in it for investors? Clubhouse remains tiny compared with networks such as Facebook and Twitter. But pundits believe audio is the future of social media. There is also a theory that investment firm backer Andreessen Horowitz hopes Clubhouse can become a forum for tech news that will bypass traditional media. This is seen as overtly hostile by many in the industry.

Chart showing number of social media users

Yet the bigger Clubhouse gets, the less intimate its audio rooms become. Early users raved about the experience of dropping into a room and listening to well-known VCs engage in unguarded chat. As Clubhouse grows, the experience is more like listening to a conference. New users are unlikely to be addicted in the same way early adopters were.

There is a very good Twitter thread on this problem by Shaan Puri, former chief executive of defunct social networking site Bebo and now a venture capital investor. Replicating the magic experienced by tech insiders who joined the app and heard people in their own industry talking is impossible, he says. The larger the pool of users, the harder it becomes for new joiners to open it up and find people talking about something that interests them. As that happens, growth will slow and user churn will rise. Clubhouse co-founder Paul Davison made a similar point when he explained that scaling up too quickly risked making the discovery experience worse for new users.

Can Clubhouse become a phenomenon outside the Silicon Valley faithful? It will be a struggle unless the business can find a way to connect new users swiftly to compelling content.

Enjoy the rest of your week,

Elaine Moore
Deputy head of Lex

 
 
   
Tags: clubbyClubhouseGrowsLetterLexMidweek
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