by Mic Wright
We live in a world where it’s possible for an app to be “worth” $4 billion when most people have no earthly idea what it is or why they’d want to use it. The latest multi-billion dollar big deal is Clubhouse, which allows people to set up and join audio chat rooms that mimic the stage/audience set up of an in-person conference. That $4 billion figure comes from tech press reports that Twitter (founded in 2006) tried to buy its infant rival (Clubhouse launched in April 2020) for that price. Discussions came to naught, but whispers from the realm of hyperventilating hustlers suggest Clubhouse’s founders are raising a new round of investment at that $4 billion valuation.
That’s $4 billion for an app that’s still invite-only and restricted to people with iOS devices. A $4-billion app that could quickly be acquired by one of the bigger social platforms, or simply copied and crushed by them — Twitter, Facebook, Slack, Spotify and others have developed or are developing their own audio chat room features. There are also many other audio chat startups jostling for space.
So what makes a deliberately exclusive app with a niche audience — at least for now — “worth” more than £333 million pounds for every month of its existence? The short answer is that the right people think it’s worth that much; the carnival barkers of venture capital have convinced themselves and others that Clubhouse is the future or, at least, some version of the future that they can sell.
That Andreesen Horowitz, the venture capital firm that was an early backer of Facebook, Twitter, Airbnb, GitHub and Stripe is Clubhouse’s lead investor is one reason the startup world is betting big on the app. But while it has a history of picking winners, A16z — as the firm is commonly known because of the sixteen characters between the first and last letters of its name — has also stuck money into stinkers like Clinkle, a legendarily misconceived payments app that received $25 million in funding and produced nothing.
A16z’s patronage and promotional power combined with appearances by tech names including Elon Musk and Mark Zuckerberg in Clubhouse rooms has boosted its press profile. Circumstances also play a big role in the hype; audio-only chat suddenly seemed more appealing during the pandemic when the chances of meeting people in person were vastly reduced at the same time as heavy reliance on Zoom and Microsoft Teams made video conferencing maddening.
With all that said, if you haven’t heard of the (theoretically) $4 billion boys at Clubhouse, I’m not surprised. Twitter, for example, has been around since 2006 and is talked about incessantly in newspapers because journalists love it. While Facebook has over 50 million users in the UK, Twitter has just over 15 million. But, because it has a lot of well-known users and is such catnip to hacks, what happens on Twitter jumps into mainstream news, vastly over-inflating both its reach and importance.
Clubhouse may well break out into mainstream success. With over $110 million in investment so far and a tiny team keeping it up and running, it’s got plenty of time to work out how to make all that talk pay. It’s already had its first big data leak — in April 2021, 1.3 million users had their real names, social media usernames and other account details revealed beyond the virtual walls of Clubhouse — and Facebook’s version, Hotline, has already launched in a limited beta. It lets speakers turn on video and listeners ask questions in text form, both features Clubhouse has yet to explore.
Clubhouse needs to break out of its iPhone-only, tech obsessive niche soon. While invite codes have been trading hands on eBay for as much as $400 and the app climbed to ten million active users in February, it needs to grow faster while also avoiding a company killer level conspiracy. The last part will be especially difficult as moderating voice chat is a hard and expensive problem.
There have been a significant number of examples of Clubhouse users hosting rooms pushing conspiracy theories, Covid misinformation, and even Holocaust denial. In March, Michaela Hirsch, an investor with the New York firm Insight Partners, tweeted a screenshot of a Clubhouse room called, “Were 6 million Jews really killed?”
Clubhouse said on Twitter that antisemitic content “has no place on Clubhouse. Actions have been taken. We unequivocally condemn anti-semitism and other forms of racism and hate speech.” But without action the company’s “condemnation” rings hollow. Clubhouse has been recruiting for a Trust & Safety team over the past few months, but how that team will deal with conversations had in hundreds of different rooms remains a mystery.
Having a policy that “racism, hate speech and abuse are prohibited on Clubhouse” is meaningless unless the company can enforce it. Twitter, which largely has to deal with text, does a poor job of moderating those issues on its platform and Facebook, with its thousands of moderators and vast riches, is only moderately better. Spotting misinformation, racism, and other forms of hate in audio is far harder.
If Clubhouse does manage to break out into the mainstream expect to hear about the very same problems that have bedevilled Facebook and Twitter before it. When you do, you can think back to this column and say with confidence: “Oh yes, I’ve been talking about these problems for ages. This is old news!”
Mic Wright is a freelance writer and journalist based in London. He writes about technology, culture and politics