Marc Andreessen, a venture capitalist and cofounder of Andreessen Horowitz, has been a major supporter of Clubhouse.
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- Clubhouse, a breakout app of the pandemic, is struggling to stay relevant and keep creators happy.
- "No one really talks about it anymore," one venture capitalist said.
- The startup has plenty of funding. Trying to raise more would risk a "down round," another VC said.
In May 2020, when the pandemic raged, the comedian and TV writer Marlena Rodriguez got an invite to a new app called Clubhouse that offered the homebound online masses a way to spend some of their suddenly abundant time.
In the ensuing months, Rodriguez jousted in a chat room with the celebrity Ashton Kutcher, gained more than 13,000 followers, and started a party room on Fridays that frequently swelled to over 1,000 people. She wrote a play, "Once Upon a Clubhouse," and hired actors to perform it on the app. "I was in love," she said.
Today, "I question why I'm even still on Clubhouse," Rodriguez said. Her Friday-night room has dwindled to about 30 people.
More than any other startup, Clubhouse epitomizes the venture-capital-backed euphoria that swept the tech industry since lockdowns shut millions of people inside and pushed them online for connection, entertainment, and information. Marc Andreessen has called the app "the Athenian agora come to life," referring to the hub of democracy in ancient Greece. It has raised more than $100 million from his firm and other top VCs, garnering a $4 billion valuation.
But with vaccinations rising and more people returning to normal life, Clubhouse has been hit particularly hard. Daily downloads of the app have plunged more than 90% since a peak in June, while daily average users are down almost 80% since February, Apptopia data indicated.
Insider interviews with creators, advertisers, VCs, and others in the tech industry show a platform struggling to build an audience and keep it. Moneymaking opportunities are also slim, which makes the app a tough sell for creators and users as there are many other options online and off.
The buzz in the tech-investor community may be fading, too. "To be honest, no one really talks about it anymore," said one VC, who asked to remain anonymous to avoid upsetting industry counterparts.
Clubhouse user metrics
November 16, 2021
Downloads (Peak on June 4)
Daily active users (Peak on February 27)
Monthly active users (Peak on July 2)
Chart: Andy Kiersz/Insider Source: Apptopia
When it launched in March 2020, Clubhouse was already valued at $100 million. By early this year, the app had 10 million downloads, and Elon Musk and Mark Zuckerberg started to make surprise appearances. Twitter considered a $4 billion acquisition of the startup, Bloomberg reported.
The startup was even cited as an example of how competition was still healthy in the tech industry, a counter to broad media coverage of a crackdown by antitrust regulators. But this year has been a textbook example of how established social-media platforms with large existing audiences have an advantage over younger companies wooing users from scratch.
Instead of buying Clubhouse, Twitter built a copycat feature called Spaces and made it available to its almost 200 million users. It pushes chat rooms to hosts' followers and to those who follow certain topics that may be discussed, leveraging a trove of user data to promote the new offering. When Spaces first rolled out in April, monthly downloads of the Clubhouse app fell under a million for the first time in 2021, App Annie data indicated. The downloads recovered a bit, but then they slipped again in October to 987,000.
Facebook launched "live audio rooms" in June, and it now pushes the feature in users' main feed, as well as in Messenger text chats. It's also offering to pay musicians and creators up to $50,000 to open these rooms a few times and use them for 30 minutes, The Information reported.
A Clubhouse spokesperson said the app is a place where "millions gather daily," and that overall growth has far exceeded the startup's expectations. "We expect to see a regular fluctuation as we grow," he added. The spokesperson also said there were now 700,000 Clubhouse rooms created each day, and that the average time spent on the app was 70 minutes. Asked about growth targets, he said those were kept private "for competitive reasons."
Still, Clubhouse's founders, Paul Davison and Rohan Seth, are on the defensive, a rare spectacle in a VC market bursting with money and exuberance. In recent public appearances, Davison said the app grew "too fast." Today, the goal isn't "hype" or a "roller coaster of downloads," he said during an October conference held by The Information, but "steady, consistent growth."
Rohan Seth (left) and Paul Davison, Clubhouse's cofounders.
That's not what the app or several of its once passionate creators are seeing.
Open the app on a given evening, and you'll get about 60 rooms to listen to — from meditation and TV recaps to vaccine fearmongering and praise for Kyle Rittenhouse. Driven by controversy, "drama rooms," as they're known, are common now and often automatically recommended by the app.
"This sounds like some kind of Nazism," a Clubhouse user said recently in a discussion on vaccine mandates. Another user lamented the suspension of a doctor in Texas who recommended the parasite medicine ivermectin as a treatment for COVID-19. This room often gets a couple hundred people sharing vaccine misinformation and QAnon conspiracies.
A recent room asked in its title, "Is there a drama storm brewing on CH?" It drew an audience of more than 600. One by one, speakers proceeded to condemn such rooms as places of "bullying" that hurt the "sense of community" on Clubhouse, as one woman put it. Others praised them as entertainment. "Let's be real, reality shows stay on because it's entertaining," another woman said. "Half of you on here stay because of the arguments!"
On a recent night in November, the app suggested at least four rooms branded "drama." Each had more than 500 people in its audience. Many rooms aren't branded like this, but they still seem designed to stoke controversial discussions at best, and to spew hate and misogyny at worst.
In one Clubhouse room, a few dozen people argued about whether women "like" to be abused. In another room, on the same night, a participant suggested that all Pakistanis hate Israel, and a shouting match ensued. And in a third room, speakers discussed the Rittenhouse trial, with some rationalizing "putting a gun in someone's face" during times of civil unrest.
Asked how the platform moderates harmful content, the Clubhouse spokesperson pointed to the startup's community guidelines. "We've invested significantly in trust and safety with a cross-functional team," he said. "Live-audio moderation brings a unique set of challenges."
A stumble at a crucial moment
A recent group of Clubhouse users made no secret of the app's problems in a room partly titled "Our engagement sucks." About 30 people, some with a few thousand followers, discussed theories and rumors that could explain why they were no longer able to start Clubhouse rooms that gained audiences of any real size. One theory: The overall content quality on the app had deteriorated, which caused people to leave.
"I started using the app in December, and my first room I started completely by accident, but I ended up with 500 people," one user said. "Times have really changed." Others complained that they now struggled to get more than a few dozen people in a room, if that.
Beyond shrinking audiences and divisive content, Rodriguez, the comedian and TV writer, thought Clubhouse stumbled at a crucial moment. In late 2020, the startup developed an official creator program to increase quality content. While TikTok and other platforms bent over backward to accommodate creator needs, Clubhouse made the process onerous. Anyone who wanted to take part, even those who had already been successful on the app for months, had to complete an "exhausting" application, Rodriguez said.
"5,000 people got rejected, and everything changed after that," she added. "At that point, all of the interesting creation effectively stopped."
Social-media platforms thrive when there's a steady stream of compelling connections, information, and entertainment to lure users. Once services become popular, that attracts more creators and users, and the flywheel spins — as Facebook, Snap, TikTok, and Twitter have proved. Clubhouse is so far from this industry holy grail that even some early-stage investors, knowledgeable about startup challenges, are lukewarm about using the app.
One startup investor said they've stepped back from using the service in recent months because it takes too long to make content that isn't easily shareable on other social-media platforms. The investor also said it had become difficult to filter for content they wanted to hear.
"There's something missing in the product that would incentivize creators and club managers to come back," said the person, who asked not to be identified discussing a sensitive topic.
Advertisers are lukewarm
One thing missing is a clear path to monetization, for the app itself and creators. As of now, a creator can make money by asking for tips — through the available "payments" feature or, most often, through Venmo or PayPal links in their bios — getting a sponsored room, or striking a deal outside Clubhouse. The latter two have happened, but they're rare. When it comes to sponsorships, there's little interest from brands or advertisers.
"There are some sponsorships happening, but we haven't seen a lot of demand or any crazy buzz," said Eric Dahan, the CEO of Open Influence, a social-focused marketing company. This is in large part because Clubhouse doesn't share analytics on its users, creators, or rooms, he said.
"The first question a brand will have is, 'Who am I reaching, and what's the CPM I'm paying," Dahan said, referring to the price advertisers pay per 1,000 impressions. He said Clubhouse executives had assured the industry that it was working on making analytics available. Until then, Clubhouse is unlikely to be of any interest to advertisers, which reduces the financial opportunity for creators.
'A different set of skills'
Earlier this year, Clubhouse tried to alleviate the lack of pay for creators by paying the few who managed to become "official" a stipend of $5,000 for three months. It helped a little, said three such creators, who spoke on condition of anonymity. Ultimately, the creators felt the creator program underdelivered.
"It hasn't been as life-changing as we initially thought, and they sold a life-changing moment," one creator said. "We were told we'd have access to celebrities and all these metrics, and it didn't play out that way."
Hyla, another creator who's also a TV producer and has previously worked in radio, said those who were dissatisfied with the app may have underestimated the work required to make compelling audio experiences. And spectacular early growth probably set unrealistic expectations, he added.
"It's a new platform and a new space, and it takes a different set of skills," he said. "It's less about what Clubhouse does today than the road map for the next two years."
Still, Hyla, who had more than 87,000 followers on Clubhouse at publication, said he gets fewer people in his rooms lately. "Discoverability" is an issue, he said, although Clubhouse has recently released updates to try to address this, such as expanded search capabilities. It's also released new features, such as "clips" and "replays," in an effort to have content that creators can share elsewhere, which could help to build followings.
"I have less of an expectation for serendipity than I did last year, but when I put together the right voices of people, the conversation is great," Hyla said.
'Down round' risk
Clubhouse likely has enough money to see it through years of product updates and experimentation. "We're well capitalized and committed to lead innovation in the social-audio space," the company's spokesperson said. $110 million, from marquee VC firms such as Andreessen Horowitz, Tiger Global, and DST Global, is a lot of cash for any startup. But especially a social-audio business, one venture capitalist said, speaking on the condition of anonymity.
"Instagram barely raised money before getting acquired by Facebook. Snap was super capital efficient," the VC said. "It doesn't seem like the type of business where you need" a lot of cash.
Another VC estimated that Clubhouse has enough money to carry it into the next decade — a good thing because the prospect of raising more has dimmed alongside falling usage.
"My sense is that they would struggle to raise not in a down round," said the VC who mentioned capital efficiency, referring to a round of funding in which investors assign a company valuation that's lower than the previous round.
Are you a Clubhouse, Facebook, Twitter, or Snap employee with insight to share? Got a tip? Contact Kali Hays at firstname.lastname@example.org or through secure messaging app Signal at 949-280-0267. Reach out using a non-work device. Twitter DM at @hayskali. Check out Insider's source guide for other suggestions on how to share information securely.
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