- Clubhouse is a social app that allows thousands of people to communicate with each other in audio chat rooms. At one point the company was worth $4 billion and boasted users such as Mark Zuckerberg and Elon Musk.
- Clubhouse fell into decline because it rode the wave of pandemic lockdowns and suffered when people resumed their normal routines. The decision to remove the invite-only feature also caused a rapid influx of new members and removed any exclusivity.
- Clubhouse management also failed to define a business model and was unaware of the components of a successful social media site.
Clubhouse is a social app that allows thousands of people to communicate with each other in audio chat rooms. It was founded as a social-media start-up in 2019 by Paul Davison and Rohan Seth who initially intended to host podcasts under the name Talkshow.
Clubhouse was valued at $100 million soon after it was launched in 2020 with investors such as Ryan Hoover and VC firm Andreessen Horowitz involved in Series A funding.
By February 2021, the platform surpassed 10 million followers. Interest in Clubhouse accelerated thereafter thanks to the invite-only nature of the platform and notable users such as Elon Musk, Naval Ravikant, and Mark Zuckerberg increasing its attractiveness further.
However, after reaching a peak valuation of around $4 billion, Clubhouse slipped to the 60th most popular social media app in December 2021 behind no-names such as Skout and Chispa.
So what happened to Clubhouse? Its decline is down to a few main factors.
Loss of initial appeal
Clubhouse was successful early on because it appealed to those who wanted to discuss topics with like-minded individuals.
Over time, however, sensible and mature discussions became polluted with commentary that was divisive, racist, false, and unsubstantiated.
With the platform also set up to encourage conversations around controversial topics and no system to monitor or moderate them, it was inevitable that users would lose confidence and trust.
The platform become more unattractive when the company decided to remove the invite-only feature and open up the platform to anyone.
In response, the quality of conversations deteriorated and users jumped to the next interesting platform once Clubhouse lost its exclusivity.
Post pandemic emergence
Much of Clubhouse’s popularity was due to the pandemic with users stuck at home and unable to interact with others in person.
As restrictions eased and people went back to their pre-pandemic routines, the number of daily active users decreased dramatically.
This drop in users was no doubt exacerbated by the hype of the invite-only system and celebrities who were known to use the app.
Once celebrities (and the users who follow them) deserted the app, there was little need for anyone else to use it either. Eventually, the time and effort to find a worthwhile conversation became too much to bother with.
Failure to define a business model
The meteoric rise of Clubhouse surprised the company’s management to such an extent that it was not prepared for it.
As the platform became larger, they could not devise a way to establish stronger relationships with users or scale self-sustaining communities.
Management also failed to understand the fundamental nature of a social media platform and lacked a clear path to profitability. It did not provide user, creator, or room analytics data to users which resulted in millions in lost advertising revenue at its peak.
Further to this point is the idea of curation. While platforms like YouTube and Instagram use likes and shares to provide users with curated content, this was simply not possible on Clubhouse.
Perhaps through no fault of its own, it was impossible to curate live conversations to determine the content most worth sharing.
What’s more, in a failed attempt to grow the user base, management hoped to encourage social media influencers to become part of Clubhouse.
The only problem was that most influencers were unaccustomed to interacting with live audiences via audio and thus could not provide the quality content the platform so desperately needed.