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What is Clubhouse, the Invite-Only Live Audio App Everyone is Talking About?

Editor, TRANSFIN.
Apr 5, 2021 5:27 AM 5 min read
Editorial

Back in April 2020, below the omnipresent talk about the raging pandemic, incessant lockdowns and a “new normal” governed by work-from-home, face masks, hand sanitisers and social distancing, murmurs grew about a new iOS app.

Its name was Clubhouse, a drop-in, invitation-only audio social network. Within a month, the app had amassed significant interest among Silicon Valley elites and boasted a valuation of $100m - all with barely 1,500 users, for an app still in beta stage.

Fast forward a year, and this audio-chat platform has garnered 10 million users and become a unicorn. Along with NFTs, high bond yields and whatever it was that Elon Musk tweeted about yesterday, Clubhouse seems to be the talk of the town.

What is Clubhouse Exactly? How Does It Work?

Two things you need to know about this app.

One: It’s an audio chat platform. Users are of two kinds - the speakers and the listeners. The former can include bigshots like Mr. Musk, Mark Zuckerberg and Robinhood’s Vlad Tenev as well as celebrities like Oprah Winfrey, Lindsay Lohan and Perez Hilton. The latter (listeners) includes everyone else.

The speakers host audio chat rooms where they discuss (in real time) a particular topic of interest - which can range from business and geopolitics to art history and LoFi music. Listeners can tune in for the conversation - but they can’t contribute unless invited to by the speakers or moderators.

Think of it as a one-way conference call or a live podcast. Sort of like a mix of Zoom, Spotify, HouseParty and Twitter. Oh, and with the added ephemerality of Snapchat. Which brings us to...

Two: It’s an exclusive platform. You can’t just download the app and create an account. You need to be invited by an existing user to join the platform. So only a select group of fortunate folks can boast about being Clubhouse users. Sort of like real world elitism, but virtual, as The Guardian put it.

This invite-only aspect about Clubhouse may seem off-putting - even nonsensical. Why would you limit customer acquisition? More the merrier, right? However, the exclusivity is part of Clubhouse’s lure. Nobody likes not being invited to a limited-access party, but everybody wants to be invited to a limited-access party. If only for bragging rights, if only to rub shoulders with the crème de la crème of society. (It is worthwhile to note that a similar ploy was deployed by Facebook during its infancy, which was a key piece of its initial roll out strategy!)

Once you’re in, you can choose from a myriad of topics or interests and the app will recommend “rooms” for you. These are basically places where live conversations are happening where you can join as a listener. Once a talk is over, the room closes - but unlike a live video, users won’t be able to access the chat again. The platform’s rules forbid recording conversations (but that hasn’t stopped people from trying).

 

Elon Musk and Clubhouse

For a long time, Clubhouse was talked about only under the radar, mumbled about in passing with certain intrigue but not much enthusiasm. Only the who’s-who of the tech and VC worlds seemed to be bullish about the app. And both speakers and listeners were tech-heavy and a cabal-like minority.

Not to mention, many of them were probably online simply because they were bored being stuck at home all day. So, maybe the Clubhouse hype was just castles in the air.

Then came January 31st 2021. That was the day Mr. Musk hosted an audio chat with Mr. Tenev. It maxed out the room’s 5,000-member limit, was streamed on other social media platforms, and propelled the app to the top of the charts. Soon, the startup world was abuzz about the app: there was a scramble for invitations and talk of it becoming the next big social media network.

BTW: This scramble for invitations is a big deal. Currently, existing users only have two invites available at first. But invitations are also on sale on e-commerce websites, sometimes for as much as $400.

 

China and Clubhouse

Then, Clubhouse went international when the Chinese government banned it in February. Since its inception, the app became particularly popular in the one-party state. The reason was its exclusivity and anonymity - users created rooms and spoke freely about otherwise politically contentious topics like genocide in Xinjiang, suppression in Tibet, bullying of Taiwan or Beijing’s autocratic hold over the Middle Kingdom.

They spoke freely knowing that state authorities were not elephants in the “room”, so to speak, and that recordings of their conversations would not exist. Obviously, state authorities were not pleased with this, and shut down the app. This happened around the same time as the Musk-Tenev talk, so it helped add to the hype about Clubhouse.

 

What is Clubhouse's Revenue Model?

Even though the platform is valued at around $1bn and is ad-free, it is yet to make money. It is currently afloat thanks to fundraising rounds. Over time, though, it will obviously have to settle for a workable revenue model.

It is mulling several options - VIP subscriptions, ticketed shows, paid communities and crowd-funding aka tips for creators. Also on the table is a paid subscription model (something that Twitter is considering too).

 

Competition Beckons: The Rise of the Audio-Only Format

One way to interpret Clubhouse’s meteoric rise is by reasoning it as a reaction to the pandemic’s stay-at-home culture. People are simply bored, so just as they are bingeing more of Netflix, they are tuning in to more of Clubhouse. But once the pandemic subsides and people venture out, the app’s lure might fade away.

But this argument doesn’t factor in that the popularity of the audio-only format predates Clubhouse. We have been living in a golden age of podcasting where there was always substantial demand for audio content (and substantial supply too). Clubhouse is merely tapping on to this and capitalising on the zeitgeist’s well-documented love for the audio format.

However, it won’t be easy for Clubhouse to become the audio tsar. For starters, while its rise has been impressive, its audience is still a droplet in a sea compared to its competitors’.

Second, there’s competition a-brewin’. Twitter has gone live with a similar audio-only feature called Spaces. Spotify recently acquired Clubhouse rival Betty Labs. Discord, Facebook, Slack and LinkedIn are working on live audio offerings too.

And third, Clubhouse has its share of criticisms. Its exclusivity, high barrier of entry and iOS-only presence usually elicit opprobrium. But so does its content moderation policy, which is lax and user-driven. This is not the best way to tackle hate speech and harassment, and the app’s disappearing recordings feature makes it harder to track hate. 

 

The Bottom Line

All tech platforms evolve over time. In their early stages especially, they are prone to experiment - a lot. Sometimes, the direction they take is commendable. (Remember when “Poke” used to be a prominent feature on Facebook?) Other times, they backfire. (Like when Tumblr tried to ban all “adult content”.)

Clubhouse is still a young platform in the nascent stages of its development. It’s still growing - the company says it will be available to Android users and the general public in the near-term.

Going forward, as the app’s revenue model materialises and its user base increases, its identity would take shape. We can deliberate on whether Clubhouse is indeed capable of achieving its exalted goal - of becoming “the go-to public forum for global conversations and ideas”.

FIN.
 

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