Explainer Clubhouse

The author says there are an estimated 6 million registered users of Clubhouse — it’s an audio-only chat app — and that the number continues to grow by leaps and bounds.

The latest entrant into the social media orbit is an audio-only chat app called Clubhouse. The internet company had a $1 billion valuation before it had a business plan. That is even more surprising, since membership is by invitation only.

On Jan. 24, the company announced its latest $100 million fundraising effort, and for the first time presented a rough sketch of how it plans to start generating sales. Its Silicon Valley founders, Paul Davison and Rohan Seth, are hoping to offer paid subscriptions, ticketed events and other schemes to turn the site profitable.

You need to know an existing member in order to get an invite to join Clubhouse. Once you become a member, you can join the conversation on a variety of topics. Everything from cryptocurrencies to the latest sports games, to any other topic you can imagine. You can wander what is called “the hallway” and listen in on various live conversations in process as you pass different rooms.

So, who, you might ask, would want to pay just to listen in on or have a conversation with someone? Well, it might depend on who was doing the talking. What if Elon Musk, or Mark Zuckerberg, Oprah, or Drake were the guest speakers?

The site’s virtual rooms are organized into a host, moderators and audience members. The host and moderators determine the conversational flow, who can speak, and when, as well as any question-and-answer segment, if applicable. It is quite similar to a virtual panel discussion you might attend through Zoom or GoToMeeting. However, this is an audio-only event, with no videos.

Each event or topic may be different. And if, for example, the subject matter is performance-related, as in acting, or presenting a comedic routine, or the topic is designed for listen-only, then the panel member may not allow audience feedback or a Q&A.

The founders are betting that you will not only be attracted to Clubhouse’s exclusivity, but will also be willing to pay for a seminar by a famous influencer on topics like the future of coronavirus, or watch the Clubhouse production of “The Lion King.”

To date, there are about 180 investors — including several large venture capital firms and a group of smaller, independent investors — that have funded the effort. There are an estimated 6 million registered Clubhouse users, which continues to grow by leaps and bounds.

Clearly, the formula for success is providing the membership a growing list of relevant topics and “influencers,” who are loyal to the site. Tesla CEO Elon Musk made his first (and only) appearance on the site on Jan. 31. He is credited with singlehandedly driving membership from 3 million to more than 5 million users worldwide in a matter of days. New members sprouted up in Taiwan, China, Hong Kong and Japan.

Much of the credit for the app’s early success lies with a group of talented, Black artists, who transformed what was a geeky tech hangout into something more that would appeal to a much wider audience. But, success does not come without a price.

Clubhouse, in its earlier days, had its fair share of hate speech, nasty conversations, and verbal harassment of speakers, moderators and audience members. Since then, the company has developed its own set of community guidelines, as well as “block,” “ mute,” and “report” buttons.

In addition, some of Clubhouse’s funds are now used to hire more professional moderators, as well as for training of those members who host and/or moderate rooms. Given the varied and heated opinions of these divided states, I suspect it will become even more difficult to maintain civility in these rooms, depending upon the topics presented.

The Clubhouse success has also spawned competitors. Twitter recently launched a live audio feature called “Spaces,” Facebook is reported to be developing something similar, and the Chinese are putting together their own version of the app.

As for me, I am still waiting for someone who is a Clubhouse member to send me an invite. I would greatly appreciate it. My email is billiams1948@gmail.com.

Bill Schmick is registered as an investment adviser representative of Onota Partners Inc. in the Berkshires. He can be reached at 413-347-2401, or email him at billiams1948@gmail.com.