Transcript

Hi, I’m Viram from Vested, and today we will discuss the rise and fall of Clubhouse.

It all started in 2020, amidst the COVID-19 pandemic, where everybody was home, worried about the global scenario. During this time there was one company slowly going viral across social media. It was a new social networking platform called ‘Clubhouse’.

For almost a year after its launch, there was no significant traction on Clubhouse as the app was invite-only and worked only on iOS for Apple users. Clubhouse’s invite-only model though, led to a lot of FOMO among Gen Z and millennials, which in turn drove discussions on various social media platforms. 

Clubhouse noticed this momentum that it was getting, and decided to take advantage of it. The company invited some prominent personalities like Elon Musk and Oprah Winfrey to be a part of discussions on the platform. The effect of doing so was exactly as intended – a lot of FOMO was created!

So, the strategy clearly worked for Clubhouse, the number of active users on the platform picked up significantly within a year! Users went from a few thousands in September 2020 to 10 million in February 2021.

Between September 2020 and this entire February 2021 period The number of users on the platform increased by 300,000%, crazy, right? No platform before Clubhouse had focused on audio as a medium, and this novelty was exciting.

While people spend all their time across the world locked up at home.

People started hosting events and discussions via rooms on the platform. But why would clubhouse be a novelty when we already have podcasts and radio right basically audio formats. Well, the answer is social interaction. 

The app was an intersection between audio and social media, something that Spotify had been trying to do in different ways for years. Remember how you could connect Spotify with Facebook? and then all your friends could actually see what you’re listening to? That’s a version of audio plus social media.

Clubhouse made audio interactions, social life, and allowed brands and creators to engage with their audience in an entirely new way. So it’s amazing, right? But then what went wrong? Well, in March 2021, clubhouse users dropped to 3 million, and by April 2021 number had dropped under 1 million.

Within two months, the app saw both the highest number of users and also the highest ever decline. This was something that Clubhouse had not anticipated at all. As a remedial action, The company decided to launch on Android, and that certainly helped the numbers.

Android users who had felt the FOMO of not being on Clubhouse hopped onto the platform now as iOS users began to lose interest. Active users jumped again approximately to 10 million in June 2021, but this spike did not lost in the subsequent months.

Now what went wrong? Well, let’s look at the two primary reasons that clubhouse did not succeed despite widespread adoption during the pandemic. First, it is challenging for anyone to find the subject of a discussion on a clubhouse chat. Since the discussions happen in an audio format, even if the topic is interesting, you would have to spend a couple of minutes to even understand whether the discussion is relevant or interesting to you.

In a written format, you can make that decision much faster so you can join a lot of different discussions quickly. The second is that we can attribute the success of Clubhouse initially to the pandemic and people’s attraction to novelty.

People were at home and wanted something new to distract them from a global pandemic. As normalcy resumed, people simply moved on. Take a look at the Google Trends graph from 2021 to 2022 for Clubhouse. All of this still doesn’t mean that Clubhouse will shut down. 

Today, the platform caters to a specific set of people who want to discuss niche topics. Interestingly, Clubhouse is still the eighth best app on the App Store under the news category.

What do you think is the reason that the platform still continues to do decently well? Let us know in the comments below.

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Our team members at Vested may own investments in some of the aforementioned companies/assets. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for an investor’s portfolio. Note that past performance is not indicative of future returns. Investing in the stock market carries risk; the value of your investment can go up, or down, returning less than your original investment. Tax laws are subject to change and may vary depending on your circumstances.

This article is meant to be informative and not to be taken as an investment advice, and may contain certain “forward-looking statements,” which may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, without limitation, estimates with respect to financial condition, market developments, and the success or lack of success of particular investments (and may include such words as “crash” or “collapse”). All are subject to various factors, including, without limitation, general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors that could cause actual results to differ materially from projected results.

This video is meant to be informative and not to be taken as an investment advice and may contain certain “forward-looking statements” which may be identified by the use of such words as “believe”, “expect”, “anticipate”, “should”, “planned”, “estimated”, “potential” and other similar terms. Examples of forward-looking statements include, without limitation, estimates with respect to financial condition, market developments, and the success of or lack of success of particular investments (and may include such words as “crash” or “collapse”.) All are subject to various factors, including, without limitation, general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors that could cause actual results to differ materially from projected results.