What the Rise of Clubhouse Means for Marketers

Clubhouse had a big moment, but its path to monetization and brand opportunities remains uncertain

Richard Yao
Feb 4 · 9 min read
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Photo by William Krause on Unsplash

Clubhouse is having a moment. Although the social audio app is not yet a year old, it has become a buzzy platform among the Silicon Valley crowd. Built around the idea of live audio-only interaction, Clubhouse enables users to broadcast their live conversations and invite live audience feedback. Instead of a central content feed, users are presented with different “rooms” to join for live discussions on various topics where they can choose to simply listen or to participate.

After raising a series B round at a staggering $1 billion valuation last month, Clubhouse scored an Elon Musk appearance on Sunday night that caused a “virtual stampede” and further pushed the app into the mainstream consciousness. It now boasts over 2 million weekly active users, despite the fact that it’s still in an invite-only rollout stage. VC firm Andreessen Horowitz, a key investor in Clubhouse, laid out their long-term vision for their company last week in a blog post, announcing that it would create “a new media property” aspiring to be “the go-to place for understanding and building the future, for anyone who is building, making, or curious about tech.” Clubhouse would undoubtedly play a big part in building towards that vision.

As with any breakout social platform or emerging media format, we here at the Lab are always on the lookout for the potential brand opportunities that they may unlock. In the case of Clubhouse, it not only signals the exciting rise of a new social platform, but also a new tweak in the digital audio format. A closer look, however, reveals some uncertainties as to how Clubhouse can effectively monetize the attention it garners, as well as what the rise of social audio means for audio advertising.

Clubhouse Thrives On Lower Barriers, Live Spontaneity, and Exclusivity

The sudden rise of Clubhouse can be attributed primarily to its main format — live audio, an underutilized format on social platforms. The main appeal of this format comes down to two main factors: one, it lowers the barrier for content production and consumption, and two, it recaptures the kind of spontaneity that often happens in offline conversations.

Lowering the entry barrier for content creation is a great way to get more people on board, especially those who are too busy to commit to a regular content schedule. In a way, Clubhouse has been described as “Medium for podcasts,” for it allows users to pipe up whenever they want without the pressure of future expectations or — since it’s recorded live — professional production quality. This broadens the type of content creators you would find on the app, with many high-profile tech industry executives and Hollywood celebrities joining in in recent months. The confluence of “important people” makes for a higher chance of a spontaneous conversation between interesting people that may not have been possible offline.

Lowering the barrier for consumption is another reason why Clubhouse has been gaining traction with new users, as its audio-only format allows it to serve as an option suitable for ambient consumption, like the kind of comfort TV that some people would put on as background noise while they multitask. Of course, this flexible level of engagement is true for nearly all audio formats, but Clubhouse stands out from the likes of podcasts and radio thanks to the live spontaneity and interactivity it offers.

More importantly, the namesake of Clubhouse offers an obvious clue to its biggest appeal — the exclusivity that comes with being in the company of an elite community. In addition, the live format also grants listeners a rare chance to directly interact with top brass decision-makers in their respective communities and receive live feedback — as entrepreneurs casually pitch their startup ideas to VC investors, which served as the initial audience base for the app, or aspiring hip-hop artists playing their demos for producers and record label scouts that happen to be tuning in. Following Elon Musk’s appearance, it is also now attracting attention from professional communities such as real estate agents, PR specialists, and educators. As mentioned, the app has been rolling out invite-only basis, which has only added to its exclusive allure so far.

Ultimately, the rise of Clubhouse can be seen as the latest manifestation of the reinvention of social context, a key trend that we recently explored in our Outlook 2021 report. As we lose the ability to spontaneously converse in a shared social space, people are starting to recreate various social environments online to facilitate different conversations, be it on messaging apps or social media. Capitalizing on this emerging trend, Clubhouse highlights the user-friendly audio format and leverages it to carve out a new context for communities to come together and socialize online.

What’s Next for Clubhouse & Social Audio: Scaling Up and Better Discovery

Still, exclusivity only works for social platforms in the early stages, as limited scale usually hinders growth potential and limits the kind of sustainable business model it may pursue. Clubhouse may be the hottest social upstart that we’ve seen in a while, creating a new format that could be the biggest addition since nearly every social platform copied the Story format from Snapchat. However, Clubhouse will need to address several issues innate to the live audio format if it were to truly bring social audio to mainstream consumers.

First of all, every conversation happening on Clubhouse is live streamed, with no recording feature to create content for on-demand listening. People can record a conversation on their own device and post it elsewhere later, but it is not a natively supported feature. While the live-ness does add urgency to the user experience and encourages users not to miss out when the people they follow go live, it also severely limits the content inventory it could’ve amassed otherwise. One would assume that a “record for time-shifted listening” feature is in the works.

Then there is a pesky issue with content moderation, which has been a rather thorny issue for all social platforms that monetize user-generated content. While major platforms like Facebook and Twitter have been making progress on that front — partly due to increasing regulatory scrutiny, but primarily because their ad-supported business model depends on creating a brand-safe environment — the social live audio format creates a bigger challenge for content moderation, especially if it scales up in volume and opens up to a wider audience. For example, on Clubhouse, while the owners of each room can control which audience members get to join the discussion, there is no guarantee of avoiding pranksters and antagonists in disguise. And while AI-powered tools are getting better at helping moderators to flag questionable text and image-based content, moderating audio content in real time poses a bigger challenge, especially when the context and tone of the conversations will have to be taken into consideration.

Another issue facing the social audio format lies in its content discovery. Clubhouse surfaces different rooms in its main tab, but it has yet to develop a simple search function for users to find conversations on topics they are interested in, let alone an “Explore tab” a la Instagram or an algorithmic feed like TikTok where users can find data-driven recommendations on conversations that align with their interests. Currently, Clubhouse users would still rely on following the people those options they value as the primary discovery mechanism outside the main feed, but as the success of TikTok has proven, the next-gen social media will eliminate that pain point in the user experience with fine-tuned algorithmic recommendations. In addition to on-platform content discovery and recommendations, enabling external embedding is also a must for Clubhouse to expand the reach of its content.

Interestingly, a potential solution to the scale and content discovery issue of social audio might be on the horizon, as Twitter is reportedly working on an “audio-based social networking project” called Twitter Spaces, after acquiring social broadcasting app Breaker. Details are scarce as to how Twitter will approach this format and integrate it into its existing platform, and the company’s track record with developing new features does not exactly inspire much confidence.

Still, if one were to be optimistic here, Twitter’s platform has a big user base consisting of various interest groups and communities, and its algorithmic main feed with a strong focus on “the now” could lend itself way to the social audio format if it’s implemented correctly. After all, the largest Clubhouse user going live notifies a few hundred thousand users, whereas the largest Twitter user would notify hundreds of millions.

Besides Twitter, LinkedIn is another potential platform to adopt social audio for its ability in facilitating conversations and professional networking, but the Microsoft subsidiary has been historically rather slow to embrace new content formats. One would wonder if Microsoft Teams would benefit from adding a social audio component, but that would essentially limit its use cases to private chats between co-workers, which is a much harder environment to monetize.

An Uncertain Path to Monetization & Brand Opportunities

As a breakout audio format, social audio will no doubt compete against other audio formats such as podcasts and radio, and perhaps even video live streaming, for attention. This raises the question of how Clubhouse and other social platforms interested in exploring the format will choose to monetize it, as well as how brands can leverage it to build intimate connections with their audiences.

Starting with the ad-supported model that podcasts and most social platforms depend on, social audio doesn’t lend itself well to commercial breaks and programmatic ad units because of its live factor. According to eMarketer, in 2020, 16.5% of digital radio ads was transacted programmatically, and that figure will reach 21% by 2022. The lack of on-demand content at the moment means that it would be difficult for advertisers to plan ahead and easily buy media.

Making past sessions available to listen on-demand will help increase inventory and alleviate its content moderation issue, but how are those content different than a live podcast? A potential blending between these audio formats demands further exploration, as Clubhouse has announced it would turn one of the live talk show series on its platform into a podcast and distribute it elsewhere.

Instead, leaning into the fact that it is live and exploring a tipping-based model close to the monetization tools that live-streaming platforms like Twitch use may prove to be a better fit for social audio. Clubhouse has announced a plan to explore subscriptions and tipping, which makes sense for power users leveraging the platform for networking access but would be a harder sell for regular users who tune in occasionally for some live conversations.

Specifically for Clubhouse, and social audio by extension, its path to monetization is hindered by a paradoxical conflict between scale and content moderation: in order to develop a sustainable business model, Clubhouse needs to expand its communities to scale up; yet, opening up to a wider audience inevitably puts more pressure on content moderation, which could lead to potential brand safety concerns. Although the company has promised to address these issues, it still has a long way to go to solve this central conflict before it can become a brand-friendly environment.

For now, brands interested in testing out the social audio format and getting on Clubhouse should lean into branded content, be it organic or sponsored. For example, the UK production team behind hit musical Hamilton recently hosted a live competition on Clubhouse where people get to show off their singing and rapping skills in the presence of the Hamilton cast for the prize of two tickets and an exclusive backstage pass to the show in London. The team also publicized the event via other social media to drum up interest, offering a great example of how brands may leverage the buzz around Clubhouse in tandem with other social platforms to directly engage with fans and foster connected communities.

For brands without a strong IP hook or an established digital persona, starting a room on Clubhouse to create live audio content may not be the most effective way to garner attention. Still, there’s an opportunity for all brands to become sponsors or curators that facilitate conversations between interesting people on Clubhouse and other social platforms that may embrace social audio. Meanwhile, keep an eye out for Twitter Spaces, as it would significantly broaden the scale of reach for social audio content and unlock viable brand opportunities.

IPG Media Lab

The media futures agency of IPG Mediabrands

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