The end of Clubhouse?
In December 2019, there were rumours that the outbreak of a new virus cruising around East Asia would be of little threat to the world. But that wasn’t the only conversation that died quickly. Clubhouse has been facing the harsh realities of capitalism this year. Launched early in lockdown, they exploited the willingness of consumers to try new experiences whilst locked at home. And although they might have struck a goldmine with group voice chats, daily downloads have plunged more than 90% since a peak in June 2021, and daily average users have been down almost 80% since February 2021.
Amid the Silicon Valley-induced hype, three problems have surfaced.
Competing in an oligopoly
Clubhouse competes for people’s digital attention in a harsh market. The average user spends just 1h 50min per day on social media. Meta-owned firms have perfected their attention-grabbing techniques over many years, resulting in an oligopoly of 6.3 billion users across their top 3 apps. And although group voice chats have generated a lot of buzz, competing in a market full of established firms with a wide-ranging set of features guarantees a fast track to failure.
Social media is known to satisfy instant dopamine craves. People typically spend 28min on Instagram every day, and they can consume content as often as they’d like. In comparison, Clubhouse requires more time commitment. Conversations in rooms can span for hours, and if part of it is missed, it could ruin the experience. So users are left either searching for another room, or forced to leave frustrated.
Add to that the fact that Clubhouse can be easily replaced. Spotify has long been the king of audio streaming. And despite their focus on recorded audio, they acquired Betty Labs in March 2021 to accelerate their entry into live audio. 3 months later, Spotify Greenroom was launched. Facebook, Twitter, LinkedIn and others have been quickly following suit.
Lack of monetisation has also been influential. Creators want to be compensated, either financially, or otherwise, for the quality of content they share. The launch of their payments initiative might have come in too late. And with more lucrative options available immediately, creators have been encouraged to go elsewhere.
Making the app exclusive
Contrary to popular belief, restricting people’s freedom to join a community might be the best way to grab their interest. Scarcity adds value and consumers generally want things that are valuable. Take Monzo for example, a UK challenger bank. Through an invite-only sign-up process, they grew their user base by 223% per year on average between 2017 and 2021. And although similar growth hacking techniques might charm early adopters, attracting mainstream users poses a different challenge. Clubhouse’s unparalleled growth reached a quick halt, after daily downloads and daily average users plunged. It’s iOS-only launch might have been a mistake.
The global iOS share amounts to only 26%. And despite launching on the Google Play store in May, most key Clubhouse markets have ~50% share of iPhones which suggests that the American startup might have struggled to succeed in the Android-dominated markets.
Social media creates value through network effects. And once apps reach critical mass, growth explodes. It’s hard to predict if and when this will happen, however it’s not uncommon when a new type of feature is introduced in the market — think Snapchat or TikTok. Onboarding users during peak interest is key as it avoids disrupting network effects. But if the total addressable market only covers 1 in 4 smartphone owners, it will be harder to get the other 3 onboarded after interest dies down. And that’s what happened to Clubhouse — Google searches rose slightly after their Android launch. Yet this didn’t translate into downloads and average users. They missed the ship with their Android users — the bigger share of the market.
Poor content quality and curation
Even though different social media apps have different value propositions, features tend to be homogenous. And similar types of communities have sprung up across various platforms — knowledge & learning, memes & humour, etc. With so much similarity, high quality content and relevant curation become differentiators.
Generally, platforms can attract high quality content by both encouraging users to create through incentives, and expertly moderating rooms. Clubhouse’s solution to its incentive struggles might have come in too late. Moderation on the other hand remains an unsolved problem. And unchecked, has significantly lowered content quality. Many apps in the space have faced the same question before: how can live content be moderated in real time, at scale? Twitch’s answer has been to delegate moderation to the users themselves.
Firms in the space are also expert curators. Instagram shows posts based on likes. Spotify’s discover feature is tailored to users’ streamed music. TikTok has endless video scrolls. But Clubhouse struggles to surface relevant content. Rooms are stacked on top of each other and endless browsing can lead to decision paralysis. It’s also not possible to follow topics, only people — the assumption being that consumers will enjoy all the content each creator will share. But how often do people like every single song by their favourite artist, or every tweet by their favourite influencer?
Unlike Covid19, Clubhouse’s spread has slowed down. Their jagged rise is reminiscent of Snapchat’s early days. They introduced expiring image posts that revolutionised social media blogging, but features were quickly copied by competitors. Growth by daily active users plateaued between 2017 and 2019 due to its Facebook rivalry, and now only 300m use the app compared to 500m using Instagram stories. But Snapchat got out of the trenches by finessing their product and partnering with brands and media firms. They also struck gold with Covid19. Whether Clubhouse will follow in Snapchat’s steps isn’t quite clear yet. What’s clear is that group voice chats are here to stay. ■
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