Can viral app Clubhouse break into the mainstream?

February 5, 2021 0 By boss


Clubhouse, the fastest-growing social media app in the world, has a familiar group to thank for its recent success: a tight-knit band of Silicon Valley insiders who have willed the company into virality.

Since January, Clubhouse has climbed up the rankings of app stores in countries from Germany to Japan, drawing new users to audio-based conversation “rooms” on topics ranging from entrepreneurship to local politics.

Late last month, thousands of people tuned into a discussion between Elon Musk and Robinhood chief executive Vlad Tenev about the brokerage app’s controversial decision to limit trading in GameStop and other popular stocks. The conversation drew so much attention that some users resorted to viewing a YouTube stream after missing the room’s 5,000-person cut-off.

The event was a boon for Clubhouse and its early investors, who have fused capital with content creation, spreading the app both inside and outside of Silicon Valley’s clubby confines.

Andreessen Horowitz, the venture capital firm, has played a central role, investing tens of millions of dollars in the platform. Last month, it led a $100m financing that valued the company at about $1bn, according to people familiar with the deal and Clubhouse’s incorporation documents.

Now, as the app moves into new communities, it must prove that it can grow safely, compete with clones from deep-pocketed players and outlast the pandemic.

“It was just exquisitely well timed,” said Rahul Vohra, chief executive of the email service Superhuman and an early investor in Clubhouse. “It started to take off in a world that was, in many senses, falling apart.”

‘Its next big issue is trying to expand’

Already, however, the challenges of explosive growth are looming. On Thursday, Clubhouse was apparently hit with technical difficulties following a spike in traffic when Mark Zuckerberg appeared in a room.

Meanwhile, with a staff of about 10 employees, the company has at times struggled with content moderation, facing criticism last year for hosting anti-Semitic discussions.

Clubhouse’s growing popularity in the west is also extending into China, where it has played host to heated political debates, raising concerns that it could be banned in the country.

A representative for Clubhouse declined to make founders Paul Davison and Rohan Seth available for an interview. 

“It has all the ingredients to be something sustainable and big,” said Ben Rubin, co-founder of the workplace conversation start-up Slashtalk and an investor in Clubhouse. “Its next big issue is trying to expand.”

vlad tenev and elon musk
Robinhood chief executive Vlad Tenev and Tesla’s Elon Musk

Instead of photos or text, Clubhouse hopes to popularise audio as the next big social medium. It has drawn comparisons to Snap for its explosive early growth and LinkedIn for its professional crowd. Conversations on the app are ephemeral, leaving no public trace after they conclude.

The company has not settled on a business model, though its founders have discussed subscriptions, a move that could deter some people but also appeal to privacy-conscious users who are wary of ad-based networks.

Clubhouse, which is still invite-only and requires an iPhone to access it, has been downloaded about 3.4m times since it first opened to users early last year, according to the data provider App Annie. Almost 940,000 people installed the app in the last week of January alone.

The recent growth spurt has pushed Clubhouse beyond its most loyal group of users, setting up a test of the app’s appeal and its ability to manage community standards across different cultures and languages.

Garry Tan, managing partner of the venture firm Initialized Capital, said he took a break from Clubhouse in the latter half of last year before returning in January, and has since made new friends. “Those conversations feel just like the cosy backchannel conversations we had in April and May when there were 1,000 people on the app.”

‘This is going to be the next Twitter’

Clubhouse’s value has ballooned with its popularity. The financing that valued the company at $1bn came months after Andreessen led a round of funding that pegged its worth at one-tenth that mark.

Many of Clubhouse’s earliest and most avid users have also invested small amounts — in the thousands of dollars — through a special-purpose vehicle with more than 150 backers, according to regulatory filings and people familiar with the set-up.

Andreessen’s partners have played host to some of the app’s most viral moments, including the discussions with Musk and Zuckerberg.

Andrew Chen, who represents Andreessen on the board of Clubhouse, said in a blog post this week that the company “grows explosively through viral loops”, the process users go through between joining the app and inviting new people. 

In another blog post, Chen gave credit to the Andreessen investor Chris Lyons, who had “introduced valuable creators to the app in its earliest days”. Andreessen declined to make Chen available for an interview.

According to Sean Ellis, a consultant who coined the term “growth hacker” in 2010, Clubhouse’s growth would slow if it opened up to the general public too soon, a decision that would eliminate the feeling of exclusivity generated by personal invites.

“I’m certain that they have really good growth,” said Ellis. “But will they be able to retain users who come on the platform, or are they just replacing faster than they’re losing?”

Others warned that the app could prove to be a pandemic-related fad for entertainment-starved professionals.

“Clubhouse is filling the void of [conferences],” said one senior advertising executive, who declined to be named. “This is an impromptu keynote platform in a world where no one can travel. And when the world opens up and you can go to events, it may not survive.” 

Clubhouse is also facing early signs of competition from larger social media companies. Twitter has begun testing a copycat, Spaces, what will sit within the platform.

The app’s backers remain undeterred. Tan, who was on stage in the room that played the backdrop to Musk’s appearance, said he had invested his own money in Clubhouse. He said he did not know Tenev would be joining the conversation ahead of time, and Musk had the idea to include him.

“If they can get growth with retention,” Tan said, “this is going to be the next Twitter.”



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