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Clubhouse: The Controversial Audio Drop-In App that Rattled The Tech Industry

Image: Marco Verch / Flickr

Despite having only been released for a year, Clubhouse has quickly become an international hub for the verbal exchange of information, filling the big gap left by lockdown restrictions.

Today, this highly contested application has 10 million active weekly users, 8 million of which joined in February 2021.

Estimates value the company at roughly $1bn, though if the rumours are true, Twitter were eyeing up a $4bn takeover last month.

What then, is the hype with Clubhouse and why is it controversial?

The Clubhouse hype  

Clubhouse is an audio-only App that allows users to drop into a chatroom and listen to content on a wide range of topics in real-time. It essentially works like a virtual lecture, and the speaker has the power to allow listeners to chime in. 

A key feature of the App is its aspect of exclusivity. Since it operates on an invite-only basis, users cannot access these lectures unless they are invited by an existing user, making the app available to only high-profile ‘elites’ for a substantial time. 

From tech moguls such as Mark Zuckerberg and Elon Musk to rappers like Drake and Kanye West, the flexibility of the platform has allowed a wide range of users to discuss a plethora of topics.

Most notably, Elon Musk recently broke through the 5000-person limit per room, as he discussed subjects including space travel, Covid-19, Mars colonies, and video game-playing monkeys.

Since his appearance, Clubhouse has gained a staggering 4 million additional users.

By striking a communication balance that is more intimate than texting and less constrained than video call, Clubhouse has clearly found a gap in the market. In the process, it has drawn in speakers by allowing them to profit and accumulated listeners through its flexible ease of access following initial invitation.

With great growth comes great competition

Clubhouse is in direct contention with other audible formats such as audiobooks and podcasts, and it still has a long way to go in attracting the bulk of user attention. 

With roughly 116 million monthly listeners and estimates that 57% of Americans have listened to a podcast at least once, Clubhouse still has a mountain to climb. 

Apple Podcasts and Spotify currently dominate the listening sphere, accounting for a 30.5% and 28.1% market share, respectively. 

From December 2020 to March 2021, the number of podcasts  fell by 35%, yet the listening trend continues its single-digit annual growth, which has been consistent since 2006. The case is no different for audiobooks, as predicted user growth rates vary from upwards of 25%. 

The path towards listening dominance will also not be easy since many tech firms have responded to these changes promptly. 

Source: SensorTower

When witnessing social media giants such as Discord introduce ‘Stages’, Facebook introduce ‘Hotline’ and Twitter introduce ‘Spaces’, it is evident that these own-brand versions of Clubhouse are a direct response to the App.

Controversial Clubhouse  

With this level of exponential growth managed by only 9 employees, it is no surprise that there are issues that the developers have been unprepared for.   

Concerns have emerged regarding a data leak that exposes the data of 1.3 million Clubhouse users. Though the CEO has denied the report by claiming that this information is accessible to anyone, many other firms like Facebook and LinkedIn have (also) been affected.  

More serious concerns have been raised over content moderation, as many far-right personalities have hijacked the platform to spread misinformation.   

User  previously banned from mainstream social media platforms such as Facebook and Twitter are not vetted when invited to Clubhouse. 

This has afforded power to figures such as Ali Alexander - the man behind the ‘Stop The Steal’ movement, who used his 23,000 person following to spread conspiracies about election fraud.   

More sinister topics amongst these far-right channels include discussions on sexism, racism, and rape. It is a challenge to police real-time audio since the conversations are recorded but deleted instantly if the channel is not reported.

Final thoughts

Clubhouse has found a gap in the market, and this is evident in other companies’ reaction to it. But will it pave the way for its established competition? When analysing the business, at the moment there seem to be more questions than answers.   

It is clear that Clubhouse is not generating money quite yet, as all profits go directly to speakers. Whilst it aims to eventually do this by introducing subscriptions, for the time being, it is heavily reliant on funding.

For the past year, the firm has been able to stay afloat by receiving $110 million  in funding from the prominent venture capital firm Andreessen Horowitz, but who will keep up its funding if Twitter does not step up?   

It is also a lot harder to share information from the App since it is impossible to record content through in-app plug-ins at the moment.  Will it then succeed pre-recorded information or even live lectures when restrictions ease?  

Perhaps the central question is: does this surge in demand signal an actual gap in the market or is it merely a handy alternative to in-person listening during lockdown, only riding the wave of Elon Musk’s promotion?  

We will have to wait and find out.  

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