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Clubhouse and the Dawn of the Audio-First Revolution

Just like easy access to the internet triggered a wave of internet startups in the 1990s, and rich media on the internet triggered a wave of social media apps in the 2000s, the audio-first revolution may create a wave of new consumer apps that would have been impossible to build just a few years ago.

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Clubhouse and the Dawn of the Audio-First Revolution

Clubhouse is in unprecedented territory right now. 

With a16z’s recent $12 million investment, Clubhouse has gone from idea to $100 million company before the team has even launched their website. There is no public app available on the App Store either, just the promise of an audio-first social app.

Before we get into the importance of a16z’s investment, it’s helpful to understand what makes Clubhouse unique. It’s a voice first platform that resembles radio, except anyone can become a Clubhouse host. Spectators can join in and listen, and the hosts can invite audience members to join the discussion too.

Why is this an interesting angle? Think of Clubhouse as a podcast that never ends. It’s being called the first passive social media platform, because spectators can just keep absorbing new information from interesting hosts without lifting a finger.

A16z’s Clubhouse Investment

Make no mistake, a16z’s investment into Clubhouse is a monumental achievement for the quickly-growing niche of audio applications. A16z has validated the entire movement, as they’ve dropped the largest sum of money ever offered to a company without a public product. 

The VC fund business model depends on 10x, 100x, and 1,000x investments to offset the risky nature of startup investing. So a $100 million valuation means a16z is betting on Clubhouse becoming Silicon Valley’s next great tech unicorn. 

Even more impressive, Clubhouse landed their a16z investment during the middle of a global pandemic, at a time when other early stage tech deals were falling apart. 

How does Clubhouse’s valuation stack up against other social media apps?

To really understand the potential size of Clubhouse, consider this.

Facebook was offered $75 million, 13 months after it went live.

Instagram was offered $525 million, 18 months after it went live.

Snapchat was offered $3 billion, 2 years after it went live.

Clubhouse has already joined the ranks of elite Silicon Valley tech companies, and there is still no exact date when the app will go live. 

With only about 1,500 private beta users, most of whom were hand-picked to be part of the network, Clubhouse adoption is still highly speculative. At a $100 million valuation, each user today represents a value of over $66,000.

How does Clubhouse’s user base stack up against other social networks?

Facebook is worth $670 billion today, with a daily active user base of 1.73 billion people. Therefore, Facebook is valued at $387 per DAU.

Snap is valued at $25.5 billion, and has a daily active user base of 229 million people. At that rate, Snap is worth $111 per DAU.

Twitter is also valued just north of $25 billion, with 126 million daily active users. This means Twitter is being valued by the market at $203 per DAU. 

Instagram is estimated to be worth about $200 billion, with about 500m daily active users. That puts Instagram at around $400/user.

Cloubhouse's User Base Value vs Snapchat, Facebook, and Instagram
Clubhouse's User Base Value vs Snapchat, Facebook, and Instagram


Clearly Clubhouse has been offered a massive premium on its user base, one that reflects its potential, and has got a lot of people on Twitter talking about it.

Clubhouse’s recent buzz is in line with the viral success of Zoom and Houseparty during the COVID pandemic. And while COVID may have accelerated the interest in audio and video apps, COVID isn’t the only reason they’ve been gaining traction.

What else is contributing to the success of Clubhouse, Zoom, and Houseparty? Apple’s worldwide domination of their wireless Airpods has opened the adjacent possible for an entirely new set of audio applications to emerge. 

Airpods are enabling the audio-first revolution

It wasn’t long ago that messy cords, outlets, and clunky hardware were required to stream audio from a phone. Even worse, until wireless earphones came along, phones had to stay within an arm's length while streaming audio.

But with a set of wireless earphones that automatically pair to a phone and can be used anytime a phone is in the room, Airpods have made the experience of listening easier than ever.

And today’s audio-first and video-first apps are leveraging that improved experience. These apps get seamless access into the brains of their users, without them lifting a finger. As a result, adoption is skyrocketing.

Just like easy access to the internet triggered a wave of internet startups in the 1990s, and rich media on the internet triggered a wave of social media apps in the 2000s, the audio-first revolution may create a wave of new consumer apps that would have been impossible to build just a few years ago.