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March 8, 2021

Business Model Canvas – Clubhouse

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Clubhouse is the talk of the town these days; not since the early days of social media has there been this much buzz about an app like this. That’s because Clubhouse is invite-only and a completely new experience, not to mention celebrities and certain CEOs use it themselves. With a business model still in development, we roll out the Business Model Canvas to dig into the future possibilities.

You could call it a ‘social radio’ of sorts, driven by the ability to pick a Room (there are many), join that Room as a listener only, and ask to speak by raising your hand. The difference is that you can engage with the Room itself or the people in the Room (by connecting with them), but you can only talk to them via audio. There are no DMs or posting comments etc.

The app launched last Spring, and as of late February had more than 10 Million Users.

“Clubhouse has been out for less than a year, and we’re already seeing what it took five to six years for Twitter to go through.”

Wired

Users can create Rooms or Clubs (with permission from Clubhouse), and basically market the Room inside out and outside the app in order to get other members to join. There are many different ways to use Clubhouse, whether via Clubs, Rooms, or personal connections. That’s why it is a breeding ground for innovation, no just in the app but in the ecosystem surrounding it as well.

How does Clubhouse make money?

Right now they are in hyper-growth mode – as with most social networks in this stage the priority is to keep growing the user base rather than to try and monetize on ads.

That being said, Clubhouse has a completely unique engagement model compared to almost any other social network in history; unlike other products in the past where the networking is 1-to-1, this type of engagement is 1-to-many and driven by Moderators in the Room(s). 1-to-1 is still possible in private chats, but most of the activity in Clubhouse is in the Rooms (hence the name).

The Moderators themselves define the topic in any room, Speakers can join in to augment/steer the conversation, and any member in the audience can ‘put up their hand’ to speak if they are accepted by Moderator(s). Therefore, there are two major revenue streams emerging in the early-stages that can lead the company in different directions with their business model: an app ‘ecosystem’ and monetization tools for creators.

1) An Ecosystem of Apps for Moderators (or Hosts) to measure engagement, improve the experience, and better market their events.

>Host Notes > application for Room Hosts to allow them to better manage their the sessions with links, notes, etc. ( most Hosts have recurring weekly sessions)

>YoYo Club > Index of the upcoming events on the platform (outside of notifications) like EventBrite (free right now)

>Direcon > Analytics subscription service ($50 per month) for individual rooms

“Clubhouse now has to make an executive decision: Do we want to allow other people to build apps?”

Wired

Right now Clubhouse allows this to occur, although there is no API and so app builders are using workarounds at the moment; an API will come in the future although no timetable has been set.

There are times where we can’t support those things but like philosophically what we would love to have is a public API, where people could build all sorts of things on top of clubhouse.

Clubhouse CEO – Otter

2) Monetization Tools (Ticketing, Subscription, Tipping) to help Creators ‘earn a living’ for their creative work

This is the going to be the ‘foundation’ of the business model according to their CEO on a recent Clubhouse townhall:

And there’s so many amazing funny smart thoughtful people who are great at hosting conversations and bringing people together, and we want them to be able to get paid directly for the amazing experiences that they’re creating that we want that to be the foundation for our business model.

Clubhouse CEO – Otter

The problem here is the how for most Creators – as we discussed in a recent post – and that is probably where Clubhouse will start to get creative in the future.

… it just means you host conversations right and we want to make sure that that you’ve got a way to do that and make a living doing that

Clubhouse CEO – OTTER

Enabling ticket sales, subscriptions, building in-app tipping capabilities – these are some of the mechanisms that Clubhouse is building into the app in the short-term.

Over the next few months, we plan to launch our first tests to allow creators to get paid directly—through features like tipping, tickets or subscriptions.

Clubhouse Blog

Payments – and the ability for the audience to send ‘tips’ to Creators – is now officially the first layer of the Clubhouse business model. Initially, Clubhouse will not take any commission, and only a small ‘processing fee’ will go to payment processor Stripe.

All users will be able to send payments today, and we’ll be rolling out the ability to receive payments in waves, starting with a small test group today.

Clubhouse blog – Payments

Community-Centric or Commercial Partner Strategy?

At the moment, Clubhouse is completely built around the community.

Because it is an invite-only platform – and the member that invited you is attached to your account – there is a high-degree of social capital that already exists on Clubhouse, even with only 10 Million members.

The company plans to create an Android app and localization features in the short-term:

One is welcoming more people to the app through things like Android and localization and, and even like creative monetization because that gives great creators reason to come on and bring their audience.

Clubhouse CEO – Otter

If this vision of having ‘creators bring their audience‘ to the platform is fulfilled, then the community-driven strategy will be cemented in.

Some have noted that ‘Sponsored Clubs‘ are the low-hanging fruit for Clubhouse, but this will mean they will need to start building a suite of tools for corporate sponsors effectively. While it makes sense on paper, if big brands and corporates start to dictate the tone of the platform then they themselves can become more important than the community like we have seen on almost every major social network to date.

But if creators are at the centre of the strategy, and the top ones can use Clubhouse as a tool to make a living, then this would be a unique strategy for a social media company.

Fundraising and Valuation

Part blessing and part curse, the Clubhouse hype feeds into the lofty valuation they have achieved, which may create pressure to monetize – time will tell.

In January of 2021, they raised investment from Silicon Valley VCs at a $1 Billion valuation.

We will also be using a portion of the new funding round to roll out a Creator Grant Program to support emerging Clubhouse creators.

Clubhouse Blog

A portion of that money will flow towards the creators, so some of that money ends up going back into the ecosystem, while the majority helps the company scale-up their tech infrastructure and support teams.

Clubhouse Business Model Canvas

A business model is defined as:

“the rationale of how an organization creates, delivers and captures value.”

Alex Osterwalder et al invented the Business Model Canvas to help individuals and organizations conceptualize how to analyze, create, and develop business models.

Explained - components of the canvas
Business Model Canvas - Index

Value Proposition

Social radio – allows users to drop into Rooms, explore new topics, socialize, and speak if they wish.  

Connections – a new, more engaging way to make connections online

Creator Platform – for Creators, the platform promises new tools to aid in monetization, helping them earn money for their work

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