The dazzling rise of Clubhouse: Is there a business potential?

The exclusive, invite only, Silicon Valley obsession “Clubhouse” has become the elitist trending social media application worldwide. Whether you are using it for business or pleasure, being on Clubhouse has become a source of status and privilege. The fact that it is an only invite application results in a limited access to the app, and thus a growing waiting list for users who want to join this Clubhouse community.

Interestingly enough, this elitist approach was not intended by its founders, who adopted a “build quietly” mentality- motivated by technical reasons- for starting the app. With the growing number of its raving fans, and the rising demand on getting into the app, Clubhouse CEO Paul Davidson made promises that the application will be open to everyone. However, the application developers are expanding it slowly to ensure efficacy and to avoid any possible breakdowns.

Launched in March 2020, Clubhouse has quickly built a reputation as the new chic social media space for people to meet and exchange ideas. It is also a place for celebrities like Oprah Winfrey, Mark Zuckerberg, and Elon Musk who also hosted conversations on the app. The appearance of Elon Musk alone has almost created a black market for the app subscriptions. Clubhouse is valued for over $1 billion before its first anniversary. If you haven’t heard yet of Clubhouse or just don’t understand why it has become a big deal lately here is why.

What is Clubhouse and how does it work?

Clubhouse is a free, invite-only, audio-based social media application where people chat and listen to live conversations in predetermined topics or just speak their minds within chat rooms. Videos, text or photos-other than profile ones- are not allowed. Being in a Clubhouse chat room is more like being in a public Zoom meeting or a conference call with all the cameras turned off. You can only see the profile pictures of the other users in the room.

When it comes to the number and type of rooms, the sky is the limit. Any Clubhouse user can start a room in any topic of their interest and invite others to join the room. The room creator is the moderator of the discussion who decides who speaks when. You can think of Clubhouse chatrooms like interactive podcasts or TED talks where you have one speaker talking to an audience who may or may not speak. However, it can get a bit chaotic with some speakers talking simultaneously or when one speaker rambles too much.

On the merits of Clubhouse, Dr. Mona Mowafi, co-founder and president of Realizing Innovation through Social Entrepreneurship in Egypt (RISE Egypt), a ‘Think and Do Tank’ that supports entrepreneurship for development in Egypt, believes that in a post-pandemic world the former allure of video in social media will be diminished by spaces like Clubhouse where folks can build community using audio-only technology while still leveraging the power of social networks. “Zoom fatigue is real, and people have become over-stimulated by screen time. Clubhouse enables the opportunity to have spontaneous conversations that are relevant both for community building and for business, without the production effort nor the required face-time-fatigue of video,” she explains.

Similarly, Sherif Makhlouf, adjunct professor of Digital Strategy at the American University in Cairo (AUC) School of Business and a digital marketing expert, speaks to Business Forward about the added value of Clubhouse to both businesses and individuals. He points out how Clubhouse provides a space for emotional connection among people as well as creating forums and discussions in different topics. It connects people from all parts of the globe, and it also provides a lighter version of webinars and a better interactive form of podcasts.

Another advantage of Clubhouse is allowing users to move freely from one room to another listening live to interesting people or even connect with celebrities, a privilege unavailable on other social media apps. Users can keep jumping from one room to another listening to a mixture of serious and fun conversations based on their preferences and moods with no participation requirement in any of the rooms. Currently, the app is an invite-only and is only available for iPhone users.

Potential growth options for Clubhouse

Regarding the potential growth of Clubhouse Makhlouf highlights the scarcity approach adopted by its founders. “I think it goes without saying that this is just a growth strategy for Clubhouse. The idea that it is only for iPhones, only exclusive, creates the sense of scarcity, [that] it’s for an exclusive community [in which] you have to get invited in a way,” he says. He explains that this is not the first time this strategy is adopted by high tech and social media market leaders. Google plus, Gmail and Facebook used the same tactics of scarcity at the advent of their operations when those apps were only exclusive for a certain number of individuals before being open to the entire population. “I don’t see that as something sustainable,” Makhlouf explains. “After a while they will have to definitely open up, and it is the networking effect, the more people you have on the platform the more value you will be able to create within the platform itself.”

Clubhouse: Does it matter for businesses?

According to CNBC Network, Clubhouse has reached more than 10 million weekly active users in February 2021 up from 2 million weekly active users in January 2021. The popularity of Clubhouse has increased multiple folds in the past four months, which represents a huge opportunity for corporations, start-up businesses and marketers. Business owners can use the application to brand themselves, connect to customers and even get advice from business gurus. The structure of Clubhouse makes it possible to connect to anyone from any part of the world. What more can business owners ask for to execute their marketing campaigns?

“In terms of corporate positioning, Clubhouse might prove to be an engaging way for companies to showcase their passions and values especially if key stakeholders within the company are used to tell the right stories,” says Amy Mowafi, co-Founder and CEO of MO4 Network, one of the leading creative and media network agencies in Egypt. “As a media company myself I see tremendous potential in using this platform to tell powerful stories and curate a community that reflect the stories we focus on telling,” she explains.

Both Makhlouf and Mowafi believe that on the surface an audio-only format does not seem like a very lucrative platform for product marketing. Yet, that is still to be seen if businesses will manage to find ingenious ways of marketing their product on an audio only platform. “Despite enabling a lot of experts, businesses and individuals to position themselves, at this point the Clubhouse weakness manifests in being more on the personal branding side. It is all individuals, it is not necessarily business driven. You don’t see IBM or a big car manufacturer on these forums yet. What you see is a lot of entrepreneurs, politicians, artists, musicians, thought leaders and those are the ones who are driving conversations now,” Makhlouf comments.

He adds that there will be two main challenges for businesses; first, how businesses will manage to find space to be a part of these conversations while adding value and avoiding overselling; second, how they will be able to extract money out of it. Makhlouf advises Clubhouse founders to think strategically about how they are going to monetize content creation on the platform and how they will reward content creators as this is always the driver of growth for social networks.
In terms of the app’s growth and sustainable proliferation, Mowafi is a bit skeptical regarding the efficacy of the audio only format of Clubhouse. “I think it’s yet to be seen if this boom in audio will take off for the foreseeable future, or if it’s a matter of product-market fit in this particular moment due to the pandemic.”

“In the world of social entrepreneurship, sustainable development, and impact investing, we are seeing a lot of exciting discussions emerge in spaces like Clubhouse that enable spontaneous conversations to happen around global causes with a wide range of people one may not usually get to see or interact with on a regular basis. I think there’s immense potential in new and innovative ideas coming out of such spaces, where ideas can build on each other easily and fresh ideas and diverse people can find one another,” concludes co-founder and president of RISE Egypt Dr. Mowafi.

Between growth opportunities and limitations and challenges, the sudden booming popularity of Clubhouse must still prove its sustainability. We have seen a lot of rise and fall of social media apps for many reasons. For Clubhouse it is still early days!

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