Discover why Clubhouse fell out of favor and what it means for your business’s social media strategy.

27 Jun 2022 | Business & Strategy

About the author

Hooshang Bakht

Brego Business was started with a mission to make entrepreneurship easy. Our goal is to help business owners grow and scale without having to deal with the day-to-day stress of running a business. We specialize in providing services that help business owners grow their businesses, including search engine marketing (SEM), social media marketing (SMM), LinkedIn marketing, video production, accounts receivable (AR), accounts payable (AP), internal audit, VCFO, and recruitment. We have helped more than 500 brands grow their businesses. We work closely with the clients to understand their unique needs and develop customized strategies that deliver measurable results.

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Clubhouse app

Not a single person can forget about the trauma Covid-19 caused worldwide. where people were forced to maintain social distance to halt the impact of coronavirus on others. Everything was done virtually; from jobs to schooling, shopping and even socializing. To make things easier on the personal interaction front, a virtual platform or app was launched to enable communication through different ‘rooms’. Do you know which platform we’re talking about? Yes, it’s Clubhouse! For a short period, the Clubhouse app became the preferred medium for a live discussion right from the comfort of your home. Everyone was talking about it at first, and the excitement was strong. But then, all of a sudden, no one was interested. What went wrong?

Going forwards, we will discuss the story of the quick rise and quicker decline of the Clubhouse App. 

What is a Clubhouse?

In layman’s terms, Clubhouse is a social networking platform that was launched back in 2020 by Paul Davison and Rohan Seth of Alpha Exploration Co., headquartered in San Francisco, California. Initially, the app was introduced on iOS only, and is now available for Android users as well. As a social media startup, it was designed for podcasts under the name Talk Show but was later branded as Clubhouse. Anyway, this platform was eventually fitted out to be a place where users can have healthy discussions. As a user, you can listen to live interviews, as well as partake in discussions. 

Let’s now discuss the Clubhouse Business Model to obtain some unique insights. 


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Clubhouse business model: an overview 

What exactly is the clubhouse business model? In the beginning, clubhouse was seen as a social media platform to connect with people for live discussions. But today, it is seen as a platform providing people with unique business ideas for their ventures. Whether you’re an iPhone user or an Android phone user, you can use this app as long as you’ve been invited to join. Then, you can invite friends to join as well. There is no doubt that the Clubhouse has been working hard to support a larger audience. 

Clubhouse is a purely audio-based app that resembles the modern form of radio, strongly emphasizing social interaction only. As an individual, you can create digital audio rooms where you can discuss any topic of interest. You can either participate in the discussion or just listen to discussions that are ongoing. 

Initially, the company faced a lot of complications that contributed to Clubhouse decline because of its guidelines. The guidelines prohibited conversations from being recorded, reproduced, shared without permission, or transcribed. Such prohibitions have resulted in bullying, harassment, and racism on the app, which further led to Clubhouse decline in popularity. In fact, countries like China, Oman, and Jordan have banned the app completely due to these issues.

However, to control the number of active users on the platform and address some of these problems, an invite-only version of the app was introduced, which became a crucial step in addressing Clubhouse decline. It means anyone can download the app, but they can’t register and access it unless they get an invitation from a friend who is a user. This invite-only model helped big brands control the crowd, fake accounts, and irrelevant trolling, which ultimately helped in reducing Clubhouse decline. By addressing these issues and implementing necessary measures, Clubhouse can hope to recover from its decline and regain its position in the live audio industry.

The rise of Clubhouse

Clubhouse debuted in April 2020 and has rapidly become one of the most popular apps on the market.

In less than a year since launching, they’ve raised hundreds of millions of dollars and amassed more than 10 million active members. However, it gained actual popularity in 2020 when everyone was confined to their homes due to the Covid-19 pandemic. Worldwide Google searches for “clubhouse app” began to rise in December 2020, around the time of the launch, and peaked in February 2021, when the hype machine was fully operational. In fact, businesses found it to be a great way to connect with their audience in a more personal way. 

Another reason for the popularity of the app was that it helped people connect with their favourite celebrities in real-time. Elon Musk, Mark Zuckerberg, Justin Bieber, Kevin Hart, Drake, etc. are some renowned celebrities who connected with people on the app in real-time. 

The decline

Clubhouse decline was swift and steady, starting in May 2021 and continuing through January 2022, when the app’s market value plummeted from $100 million to just $1 million. One of the primary reasons for Clubhouse decline was its lack of a revenue-generating business model, which ultimately proved unsustainable. Additionally, the platform failed to address several significant issues, such as app overloads, fake gurus, and spammers, that made it unappealing to anyone other than high-volume creators. These factors led to a significant drop in the app’s popularity, as evidenced by its decline from the #5 most downloaded app on iOS in January 2021 to #18 in January 2022.

Moreover, Clubhouse decline was further compounded by the emergence of Twitter Spaces, a major competitor with vast resources and a more interest-oriented approach. Twitter Spaces offers several features that Clubhouse lacks, such as emoji reactions, auto-captions, and personalized recommendations based on users’ interests and geographic location. By leveraging its size and existing Explore function, Twitter can easily promote Spaces to its vast user base and compete effectively in the live audio industry, posing a significant challenge to Clubhouse’s already dwindling user base. Overall, Clubhouse’s decline underscores the importance of a sustainable business model and the need to address users’ concerns to maintain a vibrant online community.

How does Clubhouse make money? 

Despite facing a decline in popularity, Clubhouse’s focus is still on growth and increasing its user base, as it’s only been two years since the app’s launch. The Clubhouse decline, however, has been notable, with a drop in user engagement and downloads. To aid in this effort, in April 2021, the platform introduced a payment option that allows creators on the app to monetize their audience and accept donations. This revenue strategy is similar to that of crowdfunding site Patreon, which enables independent creators to receive funding directly from their audience, but it’s unclear how much Clubhouse charges its users for transactions.

Two crucial revenue streams that Clubhouse uses to generate revenue are ad revenue and monetization tools for creators. There are plenty of apps available for hosts to control engagement, improve member experience, and advertise their events, allowing the app to earn ad revenue. Additionally, the app has monetization tools that enable creators to make money for their innovative and creative work on the platform. Clubhouse also offers other revenue opportunities, such as display advertising, ticket sales for events, and charging subscription fees to give premium access.

Despite its decline in popularity, Clubhouse’s revenue streams and monetization tools show that it’s still actively seeking ways to grow its business and appeal to its users. However, to truly revive its platform from the Clubhouse decline, Clubhouse must continue to innovate and address the problems that contributed to its decline, such as user interface issues and competition from other social media platforms. By doing so, the app can better position itself for success in the live audio industry and increase its revenue streams over time.

Unleashing the potential of commercial marketing on clubhouse

One thing is clear: Clubhouse isn’t the only audio-based interaction app, but is definitely one that made its mark. Several social media platforms also came up with audio features in their platform and became its competitors. For example, Twitter introduced Twitter Spaces, Instagram launched a feature where you can go live without turning on video, and Facebook introduced live audio rooms. 

Above all, Twitter Spaces is the major contemporary of the Clubhouse business model. Moreover, it’s harder to spend time on Clubhouse than it is on Twitter and other social media platforms. This was the major reason why Clubhouse failed. Though Clubhouse has now fallen from grace, it has still managed to retain some of its loyal customers. If the app wants to rise to the top once again, it’ll have to innovate and transform itself to a platform that is revenue generating and accessible to its users. 

Do you want to grow your business or establish an online presence in the market? If yes, Brego Business is a company containing experts who help clients increase their online presence and scale up their businesses. Connect with us right away. 

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Frequently asked questions

1.What is Clubhouse, and why was it so popular?

Clubhouse was a social networking app that allowed users to participate in audio chat rooms with other users on a variety of topics. It was popular because it provided a unique platform for engaging conversations and networking with other professionals.

2.Why did Clubhouse experience a decline in popularity?

Clubhouse experienced a decline in popularity due to the emergence of other audio-based social networking apps, such as Twitter Spaces and Facebook Live Audio Rooms. Additionally, Clubhouse's invitation-only model made it difficult for new users to join the platform, limiting its growth potential.

3.What are some of the reasons why Clubhouse failed?

Some of the reasons why Clubhouse failed include its exclusive invitation-only model, lack of content moderation, and limited accessibility for users with disabilities.

4.Did Clubhouse fail because it was a one-trick pony?

Yes, to some extent, Clubhouse's limited functionality may have contributed to its decline in popularity. The app lacked features that other social networking apps had, such as video and text-based chat.

5.Did Clubhouse have any privacy concerns?

Yes, Clubhouse had some privacy concerns, such as the app's access to users' contact lists and the potential for sensitive conversations to be recorded and shared without users' consent.

6.Did Clubhouse fail to capitalize on its early success?

Yes, Clubhouse failed to capitalize on its early success by not introducing new features to keep users engaged and by not expanding its user base beyond the tech community.

7.What lessons can be learned from Clubhouse's rise and fall?

The rise and fall of Clubhouse demonstrate the importance of continually innovating and evolving to stay relevant in a crowded social networking market.

8.What are some of the criticisms of Clubhouse?

Some of the criticisms of Clubhouse include its lack of diversity and inclusivity, the potential for harassment and abuse in chat rooms, and the app's focus on promoting celebrity and influencer culture.

9.Could Clubhouse make a comeback?

It's possible, but Clubhouse would need to address the issues that led to its decline and differentiate itself from other audio-based social networking apps.

10.What are some alternatives to Clubhouse?

Some alternatives to Clubhouse include Twitter Spaces, Facebook Live Audio Rooms, and Discord's Stage Channels. These apps offer similar audio chat room functionality but may have different features and user bases.

In addition to exploring how businesses are using NFTs to create communities with their target audience, it is also interesting to look at the rise and fall of social audio platform Clubhouse. In early 2021, Clubhouse was the talk of the tech industry, with celebrities, entrepreneurs, and even politicians joining the app to participate in live audio chats. However, in the months that followed, the app's popularity declined, leaving many wondering why Clubhouse failed to sustain its initial success.

One reason for Clubhouse's decline is that it failed to keep up with the competition. Similar platforms like Twitter Spaces and Spotify's Greenroom emerged, offering users similar features and functionality. Additionally, Clubhouse's invite-only system, which was initially a source of exclusivity and hype, eventually became a barrier for new users who were unable to join without an invite.

Another factor in Clubhouse's decline was its lack of content moderation. As the app grew in popularity, so did concerns over the spread of misinformation and hate speech. This led to several high-profile incidents of harassment and abuse on the platform, which ultimately damaged Clubhouse's reputation and led many users to abandon the app.

Despite its challenges, Clubhouse remains a fascinating case study in the world of social media. Its rapid rise and fall offer valuable lessons for businesses and marketers looking to leverage emerging technologies and trends.

Brego Business Digital Marketing services are helping their clients navigate the constantly evolving landscape of social media and digital marketing. By staying on top of emerging trends and technologies, they are able to help businesses create engaging and effective marketing campaigns that reach their target audience. From NFT marketing campaigns to social media strategy, Brego Business Digital Marketing services are committed to helping their clients succeed in the digital age.

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