TECHNOLOGY TREND

Clubhouse: The Next Big Thing in Social Media or a Hype Created by FOMO Marketing?

In the past several days, Clubhouse suddenly became the most popular word in my social circles. It was frequently mentioned in WeChat Moments & Chat Rooms. I received numerous requests from my friends asking, “Do you have an invite code? Can you get me into Clubhouse”? A few days ago, I did the same thing, requesting to be invited into this “Invitation Only” audio app. Some E-commerce sites in China like XianYu and TaoBao even started to sell invite codes for 150–400 yuan ($23 — $61) to waiting-listed users of Clubhouse. They don’t mind buying their way into Clubhouse.

To understand how popular Clubhouse is, let’s take a look at some data points. Clubhouse app is now ranked as #4 in the “Social Networking” category in App Store in 2021, right behind Facebook, Messenger, and WhatsApp. It has a 239K rating with a 4.9-star review score. If we look at the app download data, we can see a very steep J curve.

Within the past month, they tripled the size of their user base, growing it from 2M to 6M, according to tech writer Vajresh Balaji. It is truly amazing to see such a quick ramp-up of the user base.

Table 1. Breakdown of Clubhouse User Growth Over Time

This viral growth further accelerated last weekend after Elon Musk tweeted about his first appearance on Clubhouse on Jan 30. He nearly broke ClubHouse with more than 5000 listening to him discuss some popular topics such as COVID-19 vaccines, crypto, AI, and GME drama. The conversation quickly pushed the app to its limit. With recent extraordinary growth, it's not a surprise that the app has made a name for itself as the latest Silicon Valley darling. The company raised a Series B round from AZ16 and others with a $1B evaluation, becoming a new shiny unicorn in the social media domain. To put that in perspective, its previous valuation in May 2020 was $100M. This latest round means a 9X increase from its previous valuation within less than one year.

If we look back at what happened in the cross-section of content sharing and social networking in the past 10-15 years, we can see an evolution of user preferences and technology adoption. It started with long user-generated video content, and YouTube became a leader in that wave back in 2005. Then short video sharing became popular. A leader in that race is TikTok. Now Clubhouse is getting popular with its audio-based social networking offering. Is Clubhouse the Next Big Thing or just another hype created via FOMO marketing? Is this growth rate sustainable? What would the monetization of Clubhouse be? Before answering these questions, let’s understand what the app does first.

• What is Clubhouse?

Clubhouse is a drop-in spontaneous audio chat room app. It was created by Silicon Valley entrepreneurs Paul Davidson and Rohan Seth. In Clubhouse, audio is the only means for users to communicate with each other. There is no support for text, images, and video. The idea is similar to a chat room except in the early dates of the Internet. The difference is that Clubhouse is real-time audio-only instead of instant messaging. Just as its name indicates, it is a house occupied by a club or used for club activities. Clubhouse is a community space. Once you are invited to the club, you can access any activities within it.

In the current implementation of Clubhouse, you don’t need to friend anyone. The relationship is simple, following or being followed. Users can join different clubs and rooms. Rooms are created as a temporary virtual place for hosting the club activities for its participants. It can be set to be Open (i.e., open to everyone), Social (i.e., with people you follow), or Closed (i.e., with people you choose). Users are free to jump from room to room. Each room can be created with a topic on-the-spot or scheduled ahead of time. There are multiple roles defined in the room: moderator(s), speaker(s), visitors followed by the speaker(s), and general visitors.

Everything is live in Clubhouse; Conversations will not be recorded. All rooms in Clubhouse will be removed after the live discussion is over. If you are not present when the live chat happens, you missed your chance forever. There is no recording that you can listen to afterward through the app, although some people do their recording on the side using a different app and make clips to post on Youtube and Twitter. To some people, being in the live audio session with Elon Musk makes a night and day difference compared to listening to a clip of the same content on Youtube. Combined with the fact that it’s Invite-only, this allows ClubHouse to capitalize on users’ FOMO, which is an often-used marketing tactic to drum up hype, especially in the social-networking domain.

When Clubhouse was initially launched last year, it was known primarily among Silicon Valley VCs and tech elites, supporting only a few thousand users in a close private beta testing. It was exclusive and symbolized users’ elite status. Now it gradually started to open up to more users, and the topics became more diverse. You can find conversations covering various topics. Whether you are passionate about cryptocurrency, knitting, politics, or niche areas such as astronomy and theoretical physics, you will likely find people discussing it in Clubhouse. You might also discover conversations that you never expected. However, because of its invite-only exclusivity, Clubhouse is still not an app for everyone yet.

• Why is Clubhouse becoming so popular?

We can partially contribute the popularity of Clubhouse to the feeling of social isolation that the pandemic has left many people with. Because of COVID-19, people cannot travel; They cannot meet their friends during weekends or have water-cooler conversations with their colleagues; Indoor and outdoor group gatherings were prohibited by laws to prevent the spreading of the virus, which at the same time took away the opportunity to meet new people and establish social connections. Lack of social interaction with people outside of the few households makes people feel socially isolated. Therefore, for Clubhouse users, the app becomes not just another social network but also an emotional and social outlet for them to interact with people and establish new connections and relationships. For the same reason, other social networking apps such as Zoom, Discord, and Houseparty all became very popular.

For users in China, freedom of speech is another strong reason to get into the app. Clubhouse is probably the only app that the Great Firewall hasn’t blocked, and they can use it to talk freely about any topic, including politics, with people around the world. This reason alone helps Clubhouse attract many Chinese users from its middle to upper classes, especially those in the IT industry, closely following Silicon Valley’s tech trend.

The simplicity of the app also helps to boost its popularity. On Clubhouse, it only takes one click to join a room of your interest, and you can jump anytime from one room to another with a few clicks. Every click is seamlessly connected, creating a very smooth user experience. Just providing live audio-chat simplifies the interaction among users, who only needs to concentrate on their voice instead of worrying about how they look in front of the camera. Relationship building and maintaining are also made easy. You can follow or unfollow someone with a simple click. You don’t have to send requests to friend someone like WeChat and Facebook do. When you want to leave a room, you can do that quietly, without bothering or notifying anyone. You don’t have to spend time maintaining a chat group’s liveness because it would be destroyed automatically after the conversation is over. You will also not be bothered by your friends’ super successful life staged in their posts or videos. This simplicity of relationship and connection building helps relieve people from the social anxiety and pressure brought by more mature and complex social networking products such as Facebook, Instagram, or Twitter.

Finally, courting celebrities and social media influencers such as Elon Musk, Mark Zuckerberg, 21 Savage, Drake, and Meek Mill help create lots of buzz and attract more users by capitalizing on their FOMO. The app’s name, ClubHouse, perfectly captures how people long to be part of the in-crowd.

• Potential competition for Clubhouse

To a certain degree, Clubhouse is not entirely unfamiliar to many users. Sony PS4 provides a Party Voice Chat feature that offers similar functionality, but the voice chat in PS4 may be recorded for moderation. When I asked my 11-year-old daughter to describe her first impression of the app, her response was, “It feels like Microsoft Teams + Zoom without video and messaging. “ Although that statement is not very accurate, it shows the idea itself is not as groundbreaking as how the VCs describe, i.e., “the most revolutionary and interesting app in social media category in the recent ten years.” By the way, Teams offers video and audio, but my daughter is not a fan because of its usability. Instead, she prefers Zoom due to the numerous hours spent on remote learning in the middle of COVID-19.

Many Clubhouse users in China probably recognize even more similarities between Clubhouse and the apps they have used. WeChat used to offer a real-time interactive audio feature for its WeChat group members. DiZhua (递爪) from GuoKr.com allows 4–6 users to chat interactively in an audio-only room, and it was launched before Clubhouse. Unlike Clubhouse, where users choose a room to join, DiZhua uses the algorithm to randomly select 4–6 people from its online users and create a voice chat for you, mimicking the real-world live chat session in a friendly gathering.

In the US market, the startup is also facing competition. Twitter is working on a similar product with a new feature called Spaces. Although it has not generated the level of hype Clubhouse has yet, given the size of the Twitter user base, it could eventually have the upper hand once it gets directly integrated into Twitter. I will also not be surprised if Facebook, Snapchat, TikTok, and other social media platforms offer similar features to their users. When all those platforms with established large user base start to do that, it remains unknown whether Clubhouse can retain the attention from celebrities and social media influencers and keep up the momentum.

• Challenges that Clubhouse is facing or will face

Speaking of challenges, the first one that comes to my mind is detecting toxicity in voice chat. The real-time conversation is hard to moderate and apply policing rules to. I am unsure whether Clubhouse is equipped to handle moderating harmful speech and abuse on its platform, especially as it scales so rapidly. Clubhouse’s founder Paul Davidson openly recognized this as his biggest challenge. In the early dates of Clubhouse, there were no content moderation policies, content auditing, or even basic safety features such as blocking or the ability to report harassment. Although the app recently added some tools to enhance its safety features, detecting aggressive communication in real-time and preventing toxic and inappropriate comments showing up in voice chat remains a challenge because of all kinds of nuances of languages that exist. The live element of Clubhouse and the fact that the app does not record the conversations makes it even more challenging.

Another challenge that Clubhouse might face is the lack of a strong technology entry barrier, making it easy for copycats to replicate the idea. The Clubhouse app is built around audio streaming, and currently, this core technology is being provided by Agora, who is also the audio provider for Zoom. In the area of real-time audio moderation, Clubhouse hasn’t shown any strong technical muscles in dealing with them, either. Perhaps with the new round of funding, it will be able to hire additional talents. But it remains unclear what durable differentiators Clubhouse can provide.

The monetization size of Clubhouse also remains unclear. In yesterday’s Clubhouse chat with Paul Davidson, he mentioned that they would only consider a direct monetization model instead of secretly selling user data. Soon enough, they will start experimenting with monetization via tips and fee-based attendance. This monetization model described by Paul is nothing new, and it is sometimes called Fee-based Social Learning. Unless Clubhouse changes its product positioning in the future, the live audio-only model might limit its monetization potential. Once users need to pay for joining in the audio-only chat, will they still find Clubhouse more appealing than joining a live event where you can interact with speakers via the omnichannel, including texting, audio, and video?

For now, it seems that Clubhouse has no real head-to-head competitor. But the headwind is strong with the competition from established adjacent players in social networking. Whether Clubhouse will go mainstream and become the Next Big Thing or its popularity fades as the initial hype is over remains too early to tell. It will be interesting to see what the future holds for ClubHouse.

[ This article was also published in Linkedin ]