Clubhouse Business Model | How Does Clubhouse Make Money?

The Clubhouse app is the talk of the town right now; not since the early days of social media has one app generated so much interest.

The reason is that Clubhouse offers a unique, exclusive experience. Not to mention celebrities and CEOs frequent it. 

We learn Clubhouse Business Model to delve into the future potential of a business model still in development.

The clubhouse is an “audio-first social app” that offers audio-only digital events.

It features a form of discovery feed where you may discover events at any time, organize them as a host, participate in them as an active participant, or simply listen to them as a listener. 

The clubhouse is a non-profit organization supported by venture capital firms. The clubhouse is a social media application that is entirely audio-based. 

There are no texts, no video, and no images; only audio. It’s similar to a podcast in that numerous individuals can discuss a topic or host hangouts without the need to transmit images, videos, or texts – all interaction is audio-based.

Simultaneously, the content format appears to be more akin to a story, with the content being live and not available (as of yet) in a recorded version.

Thus, Clubhouse resembles a modern form of radio, with a strong emphasis on social interaction.

Individuals can freely create digital audio rooms in which they can discuss anything. These virtual audio rooms are moderated by a few moderators who act as hosts; some participants can engage in the session by speaking up, while others can simply listen in.

According to the designers, “Clubhouse is a new form of social product based on the voice that enables individuals worldwide to communicate, share experiences, develop ideas, strengthen friendships, and meet interesting new people.”

What is Clubhouse?

The clubhouse is a social networking site where you can listen to people have intriguing talks. Users can listen to online interviews and debates.

Clubhouse does not earn any revenue as of August 2021. It is now working on growing its user base before monetizing.

Clubhouse was founded in 2020 and has swiftly grown to become a global sensation. Since then, the program has been downloaded more than ten million times.

Company NameAlpha Exploration Co.
Company TypePrivate
FoundersPaul Davison and Rohan Seth
OwnerRohan Seth and Paul Davison
Founded DateApril 2020
HeadquarterNew York, US
Location ServedWorldwide

How Does Clubhouse Work?

Clubhouse is an audio-chat-based social network. Users can listen to interesting conversations, interviews, and debates amongst individuals.

Discussions cover a wide range of subjects, including entrepreneurship, marketing, philosophy, and politics, to name a few.

After launching the Clubhouse app, which is compatible with iOS and Android smartphones, users are presented with a list of available virtual rooms.

Each room features live speakers. The other users merely converse informally or monitor what is happening in the room with live people. Additionally, users can communicate via text during the audio event.

A member may host a room if preferable. People are simply informed of the topic of the discussion and waited for others to participate.

Previously, Clubhouse was an invite-only application. On July 21st, 2021, the app’s founders announced that it would no longer require an invitation from existing users.

Clubhouse Business Model

Currently, the Clubhouse does not earn any revenue. As was the case with Facebook in its early years, it is initially focused on user growth and will worry about money later.

The platform launched a payments option in April 2021, enabling creators on the network to receive donations and monetize their fans.

Clubhouse, however, has opted not to take a cut like Patreon, which charges a percentage off each gift.

Satisfying its platform’s creators enables them to continue producing high-quality material, which draws new users. Additionally, with over $110 million in the capital, the company has considerable time until it must begin monetizing.

Apart from donations and tips, Clubhouse has additional revenue-generating alternatives. 

This could include displaying advertisements, selling tickets to (offline) events hosted by the corporation, or charging a membership fee to access premium content.

How Does Clubhouse Make Money?

On January 24th, the company announced its current fundraising round, as well as a touching sketch of the revenue-generating methods it hopes to implement in the coming months.

Influencers are critical because, without them, most websites would struggle to grow their audience or generate revenue through subscriptions, advertising, and various other methods. 

The Clubhouse has lately begun targeting influencers by compensating producers who upload popular material for their new TikTok-inspired Spotlight feature.

The app’s revenue strategy is comparable to that of the crowd-funding site Patreon. Patreon enables independent authors to accept funding directly from their audience. 

Clubhouse Business Model

Patreon charges a modest fee for these transactions, and it is unknown how much or whether the Clubhouse app will charge a percentage of the membership.

The app gained notoriety recently when Tesla CEO Elon Musk joined the platform to debate various topics. 

Following this, co-founders Rohan Seth and Bruce Davison discussed their recently finished $100 million series B funding round headed by Andreessen Horowitz in a blog post on January 24. They placed a value on the business of up to $1.4 billion.

“As makers of the Clubhouse app, we want to ensure that each of the incredible people who live in this world and host talks for others receive proper acknowledgment for their contribution,” the co-founders stated. 

Additionally, they noted, “Within the next few months, we as creators intend to publish the first app tests that will enable creators to earn and be compensated directly.” 

This can be accomplished through intriguing features such as tipping, performance tickets, or simple subscriptions. 

Additionally, we will allocate a portion of the new financing program round to a Creator Grant Program. The program’s objective would be to assist emerging Clubhouse creators.”

During a CNN SquawkBox interview, Davidson stated, “There are some wonderful folks out there that are clever, humorous, and have exceptional topic experience.”  They excel at collaborating with others via a centralized platform. 

And we, as artists, want to enable them to earn a living directly from the Clubhouse app through memberships, scheduled ticketed events, and tips from eager listeners who would gladly pay them directly for the incredible listening experience they create for them.”

At the moment, consumers cannot purchase content straight within the app. The platform is completely free and does not include advertisements or paid plans for users. According to the founder, the app will introduce a model “sooner rather than later.”

What is the Funding and Valuation of Clubhouse?

Crunchbase reports that Clubhouse has raised $110 million in venture capital funding over five stages.

Tiger Global Management, Andreessen Horowitz, and DST Global are among the notable investors in Clubhouse.

Clubhouse currently has a market capitalization of $4 billion. Its valuation occurred in April 2021, just over a year after its establishment.

What is the Revenue of Clubhouse?

Clubhouse is a privately held company and doesn’t have to share its revenue figures with the public. The funding announcement may occur in the future.

Success Story of Clubhouse

Clubhouse was founded in March 2020 by Paul Davison and Rohan Seth in San Francisco, California.

While the app may appear to be an overnight success, it was created due to both founders’ decade-long failures and learnings.

Allow a small amount of tape to be rolled back here. Davison joined Bain in 2002 after graduating from Stanford College of Engineering with an Industrial Engineering degree.

He then earned an MBA from Stanford’s Graduate School of Business, after which he opted to enter the startup industry.

As VP of Product, he joined Metaweb, a database business based in San Francisco. Three years later, Google purchased Metaweb. 

Rather than remaining at the search engine behemoth, Davison felt it was time to strike out on his own.

He became acquainted with Benchmark investors during his tenure at Metaweb, as Benchmark had previously invested in his prior business. 

He participated in Benchmark’s entrepreneur in residence program, which allowed him to experiment with new concepts.

One of those concepts evolved into Highlight, a social media application that enabled users to post their location, which he co-founded with Ben Garrett in late 2011. 

One would sign up using their Facebook credentials and then allow Highlight to operate in the background. When a friend or stranger with similar interests approached, the app continued to notify you.

They were able to raise $5.5 million in venture capital funding in a short period of time. The app caught off like wildfire in 2012 at South by Southwest, a biennial technology convention held in Austin, Texas.

Clubhouse Business Model

However, the event’s buzz gradually dwindled following the event. For the first time, Highlight’s location tracking depleted the user’s phone battery. 

Second, most individuals believed it was unsettling to constantly track and have people in your vicinity know your name and preferences.

Davison and Garrett, on the other hand, continued to iterate and created two further apps. One of them was called Roll, allowing users to share their camera roll with their pals. The second, dubbed Shorts, flashed photographs to random passersby.

Regrettably, none of them took flight. Pinterest acquired Davison, his co-founder, and the remainder of the company’s workers in 2016. 

Following two more years at Pinterest, Davison became CEO of cryptocurrency exchange CoinList.

Davison was called in 2019 by Rohan Seth, another fellow entrepreneur he met in 2011 through a mutual friend who required assistance raising money for his newborn daughter. However, let us first rewind the tape slightly.

Seth arrived in the United States in 2002 to study Computer Science at Stanford University, the same year Davison graduated. 

After graduating in 2008, he joined Google, where he assisted in developing Android and Google Maps.

As was the case with Davison, Seth finally became an entrepreneur. The former Microsoft employee founded Memry Labs, an incubator for all kinds of social applications, in early 2014.

Over the next three years, the team developed six different social apps, including Dayfie, which encouraged users to share one selfie with friends each day, and Phone-A-Friend, which allowed users to call pals whenever they were available for discussion.

Regrettably, none of these concepts gained traction. Seth spent the following two years developing numerous products for the real estate market. As a result, he shared Davison’s fate. He and his staff were acquired by Opendoor in April 2017.

Then, in 2019, fate intervened. Lydia, his newborn daughter, was born with a highly unusual genetic abnormality that results in significant mental and physical problems. 

For example, she began suffering regular seizures, which could significantly impact her life in the future.

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After poring over dozens of study papers, they learned two things: for the first time in her daughter’s life, her daughter’s problems, albeit rare, were treatable (despite doctors claiming the contrary). 

Second, millions of additional children were born with genetic abnormalities that resulted in severe impairment.

Seth and his wife decided to establish a nonprofit to fund the technologies that could lead to a cure. 

He was, however, inexperienced with fundraising. He approached Davison for assistance with the fundraising. The Lydian Accelerator, a nonprofit organization, eventually raised $1.5 million.

Meanwhile, the two gentlemen discovered that they got along quite well. Due to their shared technological background, they ultimately decided to give the social app idea another shot.

They launched an app called Talkshow in the fall of 2019 that allowed users to arrange and host radio-style live shows. 

The hosts would be able to stream their shows live on Twitter while fielding live questions from listeners.

While Talkshow never took off, it was instrumental in sparking the future birth of Clubhouse. The app’s beta testers particularly loved a feature that allowed users to spontaneously join a show and chat alongside the host.

They renamed the app and ultimately relaunched it as Clubhouse in March 2020, immediately before Covid lockdowns. 

Initially, Clubhouse was exclusively available on iOS devices and could be accessed only with an invitation from another existing member.

The invite-only restriction is a frequent strategy social media firms use to a) generate interest through scarcity and b) keep complexity reasonable while also establishing safeguards for proper moderating.

Clubhouse gained particular traction in the venture capital community. The app attracted attention from world-renowned investors such as Marc Andreessen of Andreessen Horowitz.

As a result, it was unsurprising when Andreessen Horowitz led Clubhouse’s inaugural round of fundraising. The clubhouse was valued at a stunning $100 million in May 2020 after the venture capital firm led a $10 million Series A transaction. 

Meanwhile, Clubhouse remained limited to approximately 1,500 people due to its invite-only nature.

Despite its modest user base, Clubhouse was already experiencing the same issues that its larger social media competitors had been experiencing for years. 

Sriram Krishnan, a Silicon Valley entrepreneur, joked about changing his identity to Tim Cook (Apple’s CEO), drawing hundreds of users to his room.

Clubhouse continued to cautiously increase its user base over the next few months while iterating on the product. 

By the end of 2020, its iOS app would have been downloaded millions of times, and it would have been featured alongside other pandemic-fueled technology firms such as Tik Tok or Zoom.

It has gained popularity due to celebrities such as rapper MC Hammer, comedian Kevin Hart, and actor Jared Leto participating in various rooms. 

Nonetheless, lesser-known individuals could amass sizable audiences, with some amassing hundreds of thousands of followers on the platform.

To avoid a destiny similar to Vine, which saw its most renowned producers abandon the network owing to a lack of financial opportunities, Clubhouse introduced its Creator Pilot Program in December 2020.

Clubhouse raised a second round of funding for $100 million in January 2021 due to its exponential development. 

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The fundraising round valued the company at $1 billion, elevating it to the status of a unicorn less than a year after its debut.

The app maintained its momentum. Elon Musk, for example, joined Clubhouse in February for a range of discussions, prompting Russian President Vladimir Putin to dispute him on the app.

Regrettably, not everyone was pleased with the startup’s meteoric rise. Like other tech giants such as Google, China will prohibit access to the site in February 2021.

This, however, did not affect Clubhouse’s global appeal. As a result, other technology titans began copying the software and integrating it into their platforms. 

For example, Twitter developed a product called Spaces, while Facebook, Spotify, and Reddit all followed suit with their alternatives.

However, Twitter did not stop there. In March 2021, the social media network purportedly made a $4 billion proposal to purchase Clubhouse. 

Rather than sell the business, its founders raised another round in April at the same valuation.

Clubhouse eventually launched its first Android app in May 2021, which can significantly expand its reach. 

The introduction coincided with reports that interest in the audio platform had begun to wane due to the company’s lockdown features being relaxed.

Then, a year after its initial introduction, Clubhouse lifted its invite-only rule. On July 21st, 2021, Clubhouse officially ended its beta period and opened to the general public.

How can you make money on Clubhouse?

The following ways may allow you to make money through digital events, just as with social networking, podcasting, or radio:

  • Sponsorships for your events.
  • Generation of leads.
  • Brand awareness/brand development
  • Community development.
  • Placements of products.

Key Takeaways from Clubhouse Business Model

Clubhouse swiftly gained traction as an audio-only social app, first operating on an invite-only basis in its beta edition. 

How Does Opendoor Make Money?

Currently, it does not monetize its content. However, it may explore other revenue models outside of advertising rather than advertising that have a greater appeal to content creators, such as subscriptions, membership, and more.

We call it the “Clubhouse,” an app that combines a social media platform, podcasting app, business networking app, and entertainment app, where users can communicate about any subject they choose.