And fend off competitors from Twitter, Instagram, and more
Clubhouse, an audio-only content platform founded last April, has gained immense popularity in recent months. The startup was most recently valued at eyewatering $1 billion in a Series B funding round led by Andreesen Horowitz. Yet, despite this valuation, the company is still pre-revenue and its path to monetization remains unclear.
Because Clubhouse is so new, there’s a lot of debate about what Clubhouse actually is. Is it a social media company? What about a competitor to Spotify and podcasts? Or maybe, depending on how one thinks the content will evolve, it could even become a virtual conference platform?
Importantly, each classification has implications for its potential revenue and profitability. Here’s what revenue models would likely look like under each scenario:
1. Social Media. Clubhouse as a social media company would suggest revenue built on ad integration within the feed. Think: Instagram, Facebook, and Twitter. The difficultly here is that Clubhouse’s feed isn’t optimized for endless scrolling.
2. Audio Shows. The Spotify/podcast vertical would imply Clubhouse should integrate ads between dialogue. But podcasts are pre-recorded, so hosts have time to find a good spot to fit an ad. Clubhouse is live — an ad in the middle of conversation would be awkward and disruptive. Twitch can integrate ads into live streams because (1) people can see when the streamer is taking a break (i.e. not audio-only), and (2) it’s relatively easy to pause a game (which is the majority of Twitch live stream content). It’s much harder to pause a conversation.
3. Conferences. Clubhouse conferences could generate ticket sales or subscription revenue. Yet with this model, two issues come to mind. First, who would pick an audio-only conference over one that also includes video? Audio-only unnecessarily limits how people can present data and share ideas. Second, firms are likely already paying for Zoom. What company wouldn’t choose Zoom over Clubhouse, and circumvent any fees Clubhouse may (eventually) charge for hosting rooms?
The problem with all three of these models is that they frame Clubhouse as a product. But what if Clubhouse didn’t have to stand on its own? What if it was a feature that could be integrated into existing organizational infrastructures?
One of the biggest downfalls with remote work has been the loss of spontaneous interactions. In a virtual environment, there’s no bumping into people by the water cooler or casually seeing what colleagues are working on as you walk by.
Clubhouse could fix this, especially for large organizations.
Currently, Clubhouse’s feed (often referred to as a “hallway”) seems to promote rooms based on the number of participants listening, speakers’ follower counts, or shared connections. This tends to create an ad hoc assortment of suggestions, from millennial dating rooms (like the Shoot Your Shot room) to VC hangouts (like a16z’s “Boss Talk”) to discussions on NFTs and just about everything in between.
Imagine a hallway, but for only internal company purposes. You could pop in and out of rooms discussing what’s going within different areas of the firm. There could be a club for “operations,” another for “sales,” and so on. Feeds would be less cluttered and more relevant. Employees would also have the chance to connect with colleagues beyond their direct teams in a way that feels much more personal and spontaneous than an email or Slack message. The background noise from room chatter while you’re working could even mimic the subtle buzz of conversation present in pre-pandemic offices.
Benefits of Clubhouse as an Organizational Feature
At the moment, Clubhouse seems to have little defense against competitors from large tech companies. Consider Twitter Spaces, Twitter’s Clubhouse competitor. Twitter has nearly 200 million daily active users (DAUs); Clubhouse has around 10 million total users. Twitter is building off a bigger, more engaged base. Network and scale should enable Twitter to accelerate growth and improve Spaces faster than Clubhouse can iterate. Notably, we’ve seen this type of dynamic before. When Microsoft introduced Teams in 2017 as a competitor to Slack, Slack had around 6 million DAUs. Now, in 2021, Slack has 14 million DAUs and Teams has 115 million. Existing infrastructure matters.
For Clubhouse to defend against Twitter (and other competitors), they need to pick an arena where Twitter doesn’t have such strong infrastructure. That arena is the private sphere. Businesses that want internal audio channels can’t use Twitter Spaces — it’s public and, because it’s a feature of a social media platform, will likely remain so.
Selling to corporations also creates a viable path for charging subscriptions — firms are often willing to pay for software and services that improve productivity and enhance the workplace. In this sense, Clubhouse would compete with companies like Zoom, not Spotify.
To be clear, the current version of Clubhouse is still very much a (relatively) public platform for live audio conversations. What I’ve described above is what I believe Clubhouse could (and possibly should) become.
Importantly, this wouldn’t be a stretch for Clubhouse. Companies pivot and companies build. Amazon started as an online bookstore, yet almost no one’s first thought would be “bookstore” when trying to describe Amazon today. Clubhouse’s recent surge in popularity has strengthened its brand and legitimacy. They should use this momentum to build and expand, but to do so strategically and in a way that leads to revenue. In my opinion, that path is as a feature for organizations, not as a product for individuals.