The new voice-chat app Clubhouse recently made waves by raising its first institutional round of financing, which reportedly valued the company at more than $100 million. Many considered this number shocking given that the app is still in private beta and is used mostly by a handful of Silicon Valley insiders. It also lacks any obvious immediate path to monetization or scale.
People are right to be generally skeptical of financing rounds priced like that, especially in the uncertain context of a global pandemic. However, I think it is a mistake to dismiss the product or the financing out of hand. Whether or not Clubhouse is able to capitalize on its idea, the app has exposed the potential for a major new consumer behavior and network based on verbal “conversations” that will eventually become meaningful in the world.
As I explored last December in The Four Paths Forward for ‘“Social Products,” the innovative format Clubhouse has hit upon represents a lot of potential value, if it is able to shape the content into a defensible and unique new network.
The Context: A Brief Overview of the Clubhouse App
Clubhouse is an extremely simple audio chat-room app. You log in as a user and see a handful of conversations (usually one or two right now) going on with lists of who is listening and who is speaking in each. You don’t see any other context about the topic.
You can choose to enter a conversation as a listener, at which point you hear—much like talk radio—the live conversation of whoever is speaking. You can be invited to speak, ask to speak (raise your hand) in an existing conversation, or start a new conversation that others can join.
Small, subtle details keep conversations flowing smoothly. For instance, the conversation keeps going even when you leave the app on your phone (it is actually quite challenging to turn off the audio once you enter a conversation, which encourages people to linger and listen to others talk). The app also does some smart things with push notifications to help people engage in conversations.
The best analogy for the app overall is that it feels like being in the lobby of a conference between scheduled sessions. You see clusters of people gathered. You likely recognize some of them, but not all. You can choose to walk over and join a circle and hear what people are talking about and perhaps participate, and if it turns out the topic is not of interest, you can move on.
The app offers something similar to those spontaneous miniconference conversations. You get to briefly see and hear from people whom you might like but don’t generally spend time with. Every once in a while you hear something interesting you wouldn’t have otherwise heard or thought of. And it can be fun and interesting to hear directly from luminaries—people you wouldn’t normally have access to—who happen to be hanging out in the app.
The Over: Why Clubhouse Could Evolve Into a Great Next-Generation Social Network
Three fundamentally interesting aspects are driving the excitement about the app. The first component is the authenticity of the speakers, second is the inclusiveness of the voice format, and third is the uniqueness of the content that the format yields.
On the first topic, social platforms have been searching for ever more authentic formats through several eras of the internet. People crave authentic relationships with other people and want to hear the authentic voices of those public figures they admire. But, sadly, authentic mediums tend to quickly erode into managed channels. The general pattern in social media is that a new “format” starts out providing authentic connections—but as it gains importance and value, it becomes curated and managed. For instance, when status updates and photo posts were introduced, they provided a direct connection with celebrities that their publicists and PR teams didn’t manage. Over time, that channel became important, so the tweets and posts from your favorite celeb are now likely to be professionally managed rather than authentic. The same goes for the stories format.
The spoken voice of a celebrity, or really anyone for that matter, in a real-time live and unscripted conversation—like what is present in Clubhouse—feels highly authentic because it is hard to fake or manage. As a result it creates a sense of authentic connection and a real voice that is compelling. On Clubhouse, unlike elsewhere on the net, the Russian bots would be very obvious. While I am sure the voice format will over time become managed as well, for now hearing the real, live voices of people you admire and celebrities in a seemingly private medium captures a sense of authenticity and intimacy that is really compelling.
On the second topic of inclusiveness, there is no question that voice chat as a medium is far more accessible than almost any other format. Most people find the act of writing difficult. Photos and videos are slightly more inclusive because they are easier to generate, but in 2020 on the internet they are also performances that leave people feeling very anxious and are hard for many to master. Voice, however, is nearly as fundamental to humanity as breathing. Monologues are hard, because they rarely occur naturally. But we spend our entire lives talking to others.
In this sense, what Clubhouse captures for the U.S. market is a format where nearly everyone is comfortable participating on a consistent basis (and it is already very popular in places like China and India). Opening the aperture of any social media platform with a format that invites participation is a big opportunity. One of the major problems with social products is getting the vast majority of people to contribute content rather than just lurk.
On the final topic, the uniqueness of content, the medium of Clubhouse tends to lead to conversations and content that people simply will not share in written form, photos or video, or a podcast-like monologue. Think of it like talk therapy. Everyone has so many ideas and so much knowledge locked away that they find hard to access even for themselves. But in a natural dialogue with others, people are able to share things that might never otherwise occur to them to think—let alone share. In other words, the conversations-on-demand framing of Clubhouse uses other people (and in many cases an audience) as the bait to draw new ideas out of people.
So—in sum—if you want to understand the excitement around Clubhouse, consider that the app has struck on a deeply human format—the spontaneous on-demand conversation—that is more authentic and more inclusive, and that generates a stream of new digitized content that simply doesn’t exist on the internet today. By lowering the barrier of communication and bringing a digital product all the way back to the most primordial and simple pattern of human interaction, Clubhouse is poised to unlock a flood of new voices, content and knowledge.
The Under: Why Clubhouse as Currently Designed Won’t Work
If the fundamental excitement is real, so too should be the deep skepticism that the Clubhouse team will create something of lasting value out of this breakthrough rather than a flash in the pan that will inform other such efforts in the future.
The Clubhouse product has three big problems today. The first is that the vast majority of the content and conversations on the app are not engaging. The content is just like the idle chatter of people in the real world, and likely will never be as engaging as more curated media.
The second problem is that the app is selling the conversations as ephemeral rather than permanent. This might make people feel more free to speak, but it could prevent Clubhouse from managing user trust in the medium to long term. It also poses major challenges to the app’s ability to create value on top of the corpus of content users generate inside it.
The third problem is that the app might wind up as a feature that is easy to bolt on to other social products (like stories) rather than a truly new medium with a new content format and a new graph.
The first issue of low content quality is the most immediate and obvious from my experience of the application. When you ask people to have largely open-ended and unscripted conversations, you simply get lower quality per minute than when you have highly scripted and refined material.
Consider this from two perspectives. First, compare Clubhouse to a TED Talk. In a TED Talk, the speaker addresses a big topic in just a few minutes, which means the material is highly compressed, and they work hard to make their few moments of attention engaging. You can’t go very deep in a TED Talk, but every moment is high impact. In open-ended conversations on Clubhouse, you have the opposite effect. Conversations wind around forever, so the average production quality and value of any moment is quite low.
Second, contrast Clubhouse with TikTok. Its short-video clips are a highly scripted and constrained format. Because people only have a few moments and it is so easy for a viewer to simply flip to the next video, the medium tends to yield highly engaging material in short bursts. Because the content TikTok shows you is explicitly algorithmic, you are there for great content rather than specific people. Clubhouse’s unscripted “do it live” approach gets you exactly the opposite. Consuming a Clubhouse conversation is an exercise in extreme patience, waiting for a moment of value in a sea of not very interesting chatter. The reason to show up today is not for the content but for who is speaking—and while novel, I think it has limited stickiness.
If it turns out that Clubhouse’s engagement was a Covid-19 driven flash in the pan, it will be because we are in a particularly strange point in human history where people are “getting to the end of Netflix” and running out of higher-quality scripted content, and turning late at night to Clubhouse for more unscripted content. When higher-leverage uses of time crop back up, the engagement will go away.
On the second topic of ephemerality, Clubhouse currently promotes conversations as live only and not recorded. This works well for engagement because it creates intense fear of missing out so that users want to be in the app. It also in theory makes people feel more comfortable speaking freely, thinking they are not recorded.
However, I think this stance is a big mistake for two reasons. First, promising that conversations will remain “private,” restricted to the live participants, is making a promise that can’t possibly be kept and that promotes a false sense of security. It is far too easy for participants to record any conversation on Clubhouse, and there is no real way to stop them. Evolving privacy norms will likely land Clubhouse in hot water should the app become a hit. In this one respect, you have to give a lot of credit to Twitter, whose tweets from day one have been explicitly public. As a result, while Twitter’s growth and engagement have been limited, it has been able to maintain trust in its simple and self-consistent model.
The second challenge of ephemerality is that it forces the app to forego major opportunities around leveraging the corpus of content into more useful formats. The quality of content is low per minute, but if Clubhouse conversations were recorded and public by default, there would be ways to index that content and create value from the diamonds of information and entertainment hidden in the rough. Without this expectation, however, there is no way to refine the base content in the app into something that has deep user value.
In this respect, consider the relationship between the public internet and Google. The public internet by itself, if you were to try to read it all, is extremely low quality. What unlocked the web for users was the search feature. Google search crawled all the public content, indexing and delivering the best components in any given moment.
In the future, it is fully possible that voice conversations could represent a new internet of content—and by far the lowest-friction way for everyone in the world to share their thoughts, ideas and beliefs. However, as a consumer you are not going to want to listen to the raw content. What you are going to want is a search index on top of that content to find the most interesting and relevant information, entertainment, and connections to the right people via the corpus. None of this works, however, if the content is ephemeral—it needs to be permanent, indexable and searchable to be valuable (for more on this topic, check out this link to hear the founder of Clubhouse discussing this specific issue with me last month on Clubhouse).
These challenges all come to a head in the question of whether Clubhouse can become its own network, or whether the content format it is working on is destined to become a bolt-on to other existing networks like Twitter and Facebook.
The way Clubhouse becomes a fundamentally valuable network is if the set of people I want to interact with, listen to and talk to becomes separate and distinct on the app. If I can “discuss” my way into greater reputation, reach and influence on the platform, distinct from other mediums, and if I can find new voices uniquely through the platform that entertain me and teach me things, then the platform could have a very bright future.
I could see a scenario where before you hire someone you listen to their conversations on Clubhouse, or if you need an expert you use a Clubhouse graph to find who has spoken most deeply on the topic. I can even imagine making new friends and dates based on listening to what people have said on Clubhouse rather than how they look on Instagram. This will eventually happen, but it remains to be seen if it will happen on Clubhouse.
The Next Year of Clubhouse
So far, the Clubhouse team has done a good job of building a lot of exclusivity around access to the app, creating a palpable FOMO among tech industry people. People want Clubhouse to be the next Twitter, and they want to be able to say they were on it first.
The team has also done a good job of shielding their early creation from the brunt of the world’s attention, which if exposed today to the app would certainly break it. One of the first ever columns I wrote for The Information in 2015 spoke to strategies for making sure that startups have [“shade” to grow] into their potential, and the Clubhouse team has done a good job of erecting early barriers so they can learn before they grow.
What remains to be seen—but we will see in the next year—is if the app lives up to its own potential, or if insiders will remember it as the start of an interesting idea, but one whose value others ultimately captured.
I am sure that conversations as a deeply authentic and low-friction way to generate new content will become important in the world. With an index built on top of this new medium, it will offer a potentially deep and broad new well of content that will create important new opportunities for reputation, knowledge and entertainment.
I will be rooting for the Clubhouse team to get there, and I don’t think the reported financing is such a bad deal for investors who are buying an option on a big possible future with limited downside.