Clubhouse Faces Steep Challenges In Spite Of New Features And Expanded Access

Morrison & Foerster LLP - Social Media
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Morrison & Foerster LLP - Social Media

Clubhouse, the former invitation-only social media darling that captured the attention of investors, social media early adopters, and competitors since its introduction in April 2020, now faces significant challenges as it strives to remain relevant and attract new and engaged users.

Since our previous report on Clubhouse in March 2021, the social media app has released some significant changes and upgrades on its platform.

Based on trends from other social media apps and platforms, both changes would seem to predict a significant uptick in downloads, new users, and activity.

While Clubhouse added more than 1 million Android users within weeks of its launch in May 2021, more recent numbers indicate that the app’s popularity may be declining. Wired, citing a report from analytics group SensorTower, reported that Clubhouse had only 484,000 new installs globally during the five-day period between July 21-25 2021, compared to the 10 million iOS downloads it received in February 2021. (To date, Clubhouse has 30.2 million installations, with 18.7 million of those on the iOS platform, also according to SensorTower as reported by TechCrunch.)

Yet, this slowdown in installs and usage may simply be an indication of the rapid maturation and leveling off of an app that is competing for attention against a plethora of other offerings that provide similar experiences, such as Spotify. ScreenRant, the online review publication, speculated that the significant decrease in downloads could be attributed to “the early novelty of the app wearing off, competitors offering their own takes on the curated audio rooms concept, and maybe even people leaving their homes a little more as COVID-19 restrictions are lifted.

Even with those concerns, Clubhouse continues to capture the interest of investors and users. It enjoys some key advantages over larger competitors: early mover status, a smaller size, and a more nimble model that will enable it to introduce additional features and functions, such as its recent introduction of payments (for iOS users) and Backchannel, its direct messaging feature.

These upgrades will remain crucial to its continued growth and success. Even with pressure from tech giant competitors that are considering functionality similar to Clubhouse’s, many predict that Clubhouse will remain a strong competitor.

Some analysts, such as Bloomberg’s Alex Webb, raised a critical question about Clubhouse and its content monetization strategy.

Webb described one model akin to the subscription based SiriusXM digital radio channel, where users would pay for content either on a broad-based plan or individual channels. Clubhouse recently rolled out its payment platform directly to other club members (primarily conversation and room hosts in the form of tips), but only for iOS users. With this feature, Clubhouse will not receive any percentage of those payments, raising additional questions on its future monetization strategies. This move does, however, provide incentives for popular and influential content hosts to join Clubhouse and contribute to the app’s rising popularity.

In addition, brands are also catching on quickly to the potential for marketing products on the app. The targeted focus that Clubhouse provides (with its moderated rooms) could help Clubhouse capitalize on brands’ desire to reach early adopter influencers.

Noted author and technology analyst Nir Eyal unpacked Clubhouse’s appeal and how it follows his hook model, described as “a way of describing a user’s interactions with a product as they pass through four phases: a trigger to begin using the product, an action to satisfy the trigger, a variable reward for the action, and some type of investment that, ultimately, makes the product more valuable to the user. As [they go] through these phases, [they build] habits in the process.” Eyal explains how Clubhouse follows this four-step cycle, citing key aspects of the model that Clubhouse has clearly mastered in its early days, including internal triggers, variable rewards, scarcity, and rewards of the tribe.

Clubhouse will continue to be a social media phenomenon, and one to watch as it moves to its next level of adoption, innovation, and investment. We’ll keep a close eye on the app’s evolution, how it continues to push boundaries, and where it may be headed in light of its competitors’ developments.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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