Clubhouse has become the talk of the town, with high-profile individuals such as Elon Musk, Bill Gates, Mark Zuckerberg and Oprah Winfrey having paid a visit to the latest social networking platform.
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Clubhouse is a mobile app entirely focused on conversation. No text, no video, no scrolling — just a bunch of virtual rooms that people can drop into randomly. In the rooms, people might be chatting about cryptocurrency or geopolitics, fashion, music, sports, philosophy and much more.
The social network has about 10 million users and was recently valued at $1 billion. Moreover, the idea of building platforms where audio is the emphasis is accelerating.
Twitter (TWTR) has developed an audio platform called Spaces. And this past week Spotify Technology (SPOT) announced its move into the live audio space with the acquisition of Betty Labs, the creators of Locker Room, a live audio app that's focused on sports. Spotify did not disclose the acquisition price.
"This acquisition builds on our work to create the 'future formats of audio' and will accelerate Spotify's entry into the live audio space," Spotify said in the announcement. "Through this new live experience, Spotify will offer a range of sports, music, and cultural programming."
Facebook (FB) and Microsoft (MSFT) are also planning to jump into the space, reports say.
Clubhouse App: Moving From Room To Room
When users launch the Clubhouse app, they see virtual rooms with the names and photos of people who are in them. There might be two people in one room and 50 in another. People can move fluidly from room to room. For now, the Clubhouse app is only available at the Apple (AAPL) App Store, but Android is coming. Also, in order to join, users need to receive an invitation from a current Clubhouse user.
Clubhouse was founded by entrepreneurs Paul Davison and Seth Rohan, who worked on several projects at Google. It was launched one year ago in a limited format.
"Our goal was to build a social experience that felt more human, where instead of posting, you could gather with other people and talk," Davison and Rohan said in a blog post in late January. They declined an interview request.
"Clubhouse has accelerated quickly over the past 10 months, from a small handful of beta testers into a diverse and growing network of communities," they wrote.
$1 Billion Valuation
In January, Clubhouse raised about $100 million in funding. It was led by existing investor Andreessen Horowitz, giving the company about a $1 billion valuation after that funding round.
"Clubhouse is about a real-time exchange of ideas, not just consuming highly edited, static content," Andrew Chen, a partner at Andreessen Horowitz, wrote in a recent blog post explaining the firm's investment. "It's a fresh experience that brings humanity and context to online social engagement."
Twitter (TWTR) has been developing an audio platform called Twitter Spaces, which works in a similar way as Clubhouse. The app has been in a beta-test phase but Twitter plans to make it available to everyone sometime in April, on both Apple and Android devices.
Twitter Chief Executive Jack Dorsey talked about Spaces at the company's fourth-quarter earnings call in February.
"We really love what we're seeing early with our beta testers in terms of the audio conversations," Dorsey said. "It will present a new model for how we think about instantaneous and potentially ephemeral communities in public conversation."
Twitter has been exploring several methods of communication through its microblogging platform. In addition to Spaces, Twitter launched Fleets in November. Fleets are tweets that disappear from view after a day. Twitter is also developing a new service for anyone to start and publish newsletters.
"There are multiple ways to have public conversations and we want to make sure that we have the best offering," Dorsey said. "Spaces is a really compelling area."
Facebook, Microsoft Up Next?
Facebook is working on a competitor to Clubhouse, according to the New York Times. The company looks to add live audio features to its existing products, such as Messenger, and is testing a stand-alone audio app.
Microsoft also is eying the space, according to news reports. Microsoft is in talks to acquire Discord, a video-game chat community, for more than $10 billion, Bloomberg reported.
Discord allows gamers to communicate via voice, video or text. It now counts more than 140 million active monthly users. During the pandemic, Discord began to pivot from an audio platform for gamers to an audio platform for all.
Discord raised $100 million, giving it a $7 billion valuation last year, according to Pitchbook. The company has raised $480 million total. Multiple parties have reportedly expressed interest in acquiring the company.
Challenges Facing Clubhouse App
Wayne Kurtzman, a research analyst at IDC, said the success of audio apps will come when they open the gates to a wider audience
"Voice is humanizing, so the challenge is to maintain the intimacy and effectiveness as they reach large scale," Kurtzman said. "It's also about keeping out trolls and monitoring conversations and monetization."
Clubhouse hasn't detailed a monetization plan yet. But with its latest funding round from Andreesen Horowitz, Clubhouse plans to help creators on the platform generate revenue. That could include subscriptions, tipping and ticket sales.
The two Clubhouse founders touted their service in a recent blog post.
"We've been blown away by the brilliance and creativity of the Clubhouse community," they said. "Each night in Clubhouse, there are now thousands of rooms filled with people hosting game shows, recapping NBA games, singing opera, discussing philosophy, meeting other musicians, sharing travel tips, running support groups, and meditating together."
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
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