Clubhouse is dying. Why?
Reviewing the product fundamentals of a forgotten darling: what are the deep reasons why Clubhouse is turning into a haunted house?
Hello, and welcome to my eclectic newsletter. My name is Ev, and every week or so I publish a blog about product, technology, career, or life in general. But usually it’s the first three. 😉
In early 2020, Andreessen Horowitz and several smaller VC firms poured $10M of Series A capital into Clubhouse. Even though the company’s product had 1500 measly users, it was valued at $100M at the time.
What followed was a flawlessly executed go-to-market motion that made Clubhouse invites a hot commodity — first in the US tech circles, then elsewhere.
At the peak of its popularity in early 2021, Clubhouse felt like a global cultural phenomenon. Riding the wave of never-ending media attention, the company raised a $100M Series C which reportedly valued it at $4B.
The party didn’t last. At the dawn of 2022 and in the third year of the pandemic which fueled its meteoric rise, Clubhouse is less relevant than ever. Mentions of the streaming sessions are gone from LinkedIn newsfeeds. Media attention is back to where it was before Clubhouse launched, i.e. in crypto.
The ranking of Clubhouse in the US Apple App Store Social Networking category paints a clear picture: Clubhouse dropped from Top 10 in January 2021 (App Radar) to #67 on November 27, 2021 (Sensor Tower).
One caveat, though: once the Omicron variant began to spread in the United States in early December, Clubhouse climbed back up to top 10. I don’t know whether those two events are correlated, and it remains to be seen whether the inevitable decrease in cases leads to further changes in user sentiment.
Setting aside the popularity spike in December 2021, Clubhouse is pretty much dead. Why did this happen?
Let’s take a look at the basics of Clubhouse as a business, not as a cultural phenomenon.
Clubhouse as an invention
When analyzing Clubhouse, we must ask two fundamental questions:
Did Clubhouse make a product breakthrough that created an outsized gain in user value?
Was the product differentially attractive enough to pull and retain users?
My answers to those questions are: “It did not”, and “Not at all”.
On the basic level, Clubhouse is a network that serves listeners and creators, also known as hosts.
Clubhouse gives listeners an audio-only live streaming platform with a talk-back functionality. By itself, this is a weak value proposition.
When it comes to listener behavior, Clubhouse’s true competition is on-demand content. The convenience factor of such type of content is hard to surpass. There’s a reason why broadcast TV couldn’t compete with streaming: streaming is simply more user-friendly. More about this below.
When it comes to creators, Clubhouse does not give them an opportunity to engage with audiences in a novel way. All it does is letting them speak live. From a competitive perspective Clubhouse offered nothing new or different to creators: internet live streaming has been around for years (Twitch, Youtube, and many other, smaller players such as Telegram).
The issues with live content
Clubhouse launched with a promise of scaled live audio streaming. Live content, however, is much harder to work with than recorded content. It’s much easier to build and improve a content recommendation system when you have all of it recorded and labeled, and such systems that are key to helping audiences discover new content and engage continuously.
Moreover, recorded content is evergreen. Creators can curate it and distribute it outside of the platform, which allows them to grow their audiences.
Clubhouse doesn’t have true network effects
The key strategic meaning of a network effect is that the benefit to other users increases with the size of network. While Clubhouse managed to gain a lot of viral traction, the benefit of its network to the users — creators and listeners — didn’t increase with the network’s size.
Specifically, building an audience on Clubhouse is close to impossible. Instead, each creator has to bring their audience with them. However, those audiences gain nothing in terms of convenience when joining Clubhouse, as described above.
Even if creators manage to gain followers on Clubhouse, those followers don’t have much reason to come back because they can’t consume content on demand, and neither they can get content recommendations from Clubhouse. Effectively, Clubhouse placed the burden of curation the listeners themselves.
While Clubhouse recently launched a playback feature, that motion came after a steep decline in popularity, and at this point I don’t believe it will be sufficient to regain the growth momentum.
We often talk about products in terms of switching costs. If you were to leave Spotify, Apple Music, or Netflix, you would have to leave your content, playlists, and a your unique recommendation profile. If you were to leave Facebook, Twitter, or LinkedIn, you would have to leave your communities.
Unlike those examples, the cost of switching from Clubhouse to an alternative is effectively 0, because as a platform Clubhouse failed to facilitate lasting creator <> listener relationships, and thus it failed to offer a sufficiently diverse content discovery experience to the listeners.
In short, if you left Clubhouse as a listener, you lost nothing. If you left Clubhouse as a creator, you also lost nothing because you’d still have your audience elsewhere.
The past 10 years of tech teach us that startups like Clubhouse are too big to die fast. Backed by aggressive venture capital firms and led by monomaniacal founders, such companies don’t easily let go of their dreams to reach massive scales. Instead, they fade slowly until their boards finally decide to cut losses.
Case in point: Path. For those who don’t remember, Path was a social network whose most distinctive feature was that it capped your number of friends at 150. After raising $66M by 2014, or about $77M in today’s money, Path failed to sustain traction. It gained regional popularity in Indonesia and was sold off to Kakao in 2015.
My prediction is that Clubhouse will follow a similar trajectory. It will establish itself as one of the popular niche products in a growing region outside of the US, and by end-2023/2024 it will sell to a more successful local company that sees Clubhouse as a way to augment its product portfolio.
According to multiple media outlets, at it’s peak Clubhouse’s most engaged audiences were in Germany and Japan. Recently, the app has picked up in India, and the country is reportedly becoming a focal point for the company’s leadership (source).
What do you think will happen with Clubhouse? I’d love to read your comments.