In December 2020, Clubhouse had 600,000 users. As of April 2021, it has 10 million. But just as it’s beginning to achieve critical mass, its core “Social Audio” experience is being replicated by a slew of well-capitalized incumbents like Facebook, Twitter, Spotify, and Slack, as well as ambitious upstarts like Stereo and Fireside. We explain why via the duality of “Lean-Back” and “Lean-In”, how Social Audio drives time on platform, and the paralells with livestream video.
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EPISODE TRANSCRIPT:
Chris Erwin:
So Andrew, there's been a lot of news about live and social audio as of late, hasn't there?
Andrew Cohen:
Crazy. It seems like we went from November, something we've never heard of, to March, we're hearing a new announcement every day.
Chris Erwin:
It's crazy. Let's go through a few of those, and then we'll talk about why this is happening. So over the weekend, Clubhouse just announced a Series C at a four billion valuation. There's also been the launch of Fireside backed by Mark Cuban, and then also Stereo as well. And then incumbent platforms have been either announcing new product builds or rolled out features. Facebook just had a big announcement this past Monday, Twitter has spaces, then there's Slack, Discord, LinkedIn Telegram, and even Reddit. And there's also been some M and A in the space, Spotify acquired Locker Room, focused on sports live audio, and then Twitter acquired Breaker. Am I missing anything there? I know it's a pretty long list.
Andrew Cohen:
I think you just covered it all. And it's crazy that even after all of those launches, all those builds, all those acquisitions in the space, Clubhouse is still able to raise at a $4 billion acquisition.
Chris Erwin:
It's wild. Again, led by Andreessen. There were supposedly demand that that valuation could have been higher from other investors. And I think that Apple is making an audio announcement potentially right now, but unsure what that's going to be. So anyway, though, Andrew, why do you think all this live and social audio is happening? We've been writing and thinking about this for our newsletter and also for our clients. And I think there's a few key trends that you've identified. What are you thinking?
Andrew Cohen:
It definitely seems to be a uniquely kind of engaging and accessible media. And I think all these platforms are trying to get in on that action, because they see it as an opportunity to kind of expand the time that both users and creators are spending on their platforms, and to deepen the engagement, both peer-to-peer engagement and trader to fanning. So we're kind of like what Spotify has been doing with the introduction of podcasts, or how Instagram and Facebook and even LinkedIn introduced stories, or what Instagram is doing now with Reels. I think all of these platforms where you're seeing social audio is another really engaging form of communication that they can integrate into their whole suite of communication tools to keep people in their ecosystem for longer and keep them leaning in even harder and deeper.
Chris Erwin:
I think that's interesting, to even think about the Facebook announcement this Monday, is I think from Zuckerberg's point of view, it's all right, there's a lot of people listening to audio and we don't want to miss the boat on that. Like you said, we just, we win and we make money by keeping our audience on our platform and engaged. And so even though I think Facebook and Ben Thompson did a good job covering this, that Facebook is a visual first medium, or first focused on text and editorial, then introduced videos. Bringing an audio into the mix, is that going to be kind of like wonky for the user experience? Potentially, but we'll see how they do it. They're going to bring in audio, I think, into live virtual rooms, which could be really complimentary to the Facebook communities and Facebook groups.
Chris Erwin:
And I think they're also going to bring in sound bites into the newsfeed, but I think Zuckerberg looks at stats like over 57% of U.S. adults are aware and have listened to a podcast. And then I think over the past month, at least 41% of U.S. adults have listened to a podcast. And so he's like, Hey, we should build towards that audience behavior.
Andrew Cohen:
Oh, for sure. And I think Facebook, like all of the other incumbent platforms that you just mentioned, the key to them is going to be how to integrate this feature organically into the existing user experience on their platform, so it doesn't kind of feel like this out of place, wacky third party pack on, but something that, again, just like stories did it, when it was added to Instagram, just feels like such a natural extensions they're already doing on that platform. And so that's why I think it would be interesting to see how each platform approaches these features in their own unique way, which begs the question what's the future of Clubhouse? Is Clubhouse going to lose its appeal once its core experience has just become another feature on all of these other apps, or like we've seen with Snap and with TikTok, is it still going to remain a vibrant destination in and of itself with its own identity in fan relationship? What do you think?
Chris Erwin:
Well, I think you just highlighted one of the main challenges for Clubhouse is that they were kind of first to this live and social audio craze. You could go in, log into the app and there was all these rooms about a variety of different topics. And you're like, you could see how this could expand to topics around sports, topics around investing, coaching, cooking, baking, all the things. But it feels like all of those niche communities are now starting to be stripped away from the platform as like, okay, Facebook is your friends and family, and LinkedIn is your professional network, and maybe Slack is your colleagues, right? And Reddit is other vertical communities.
Chris Erwin:
So then that means, what does Clubhouse stand for? What is its vertical? And then from there, how's it going to build unique features into that? I think that's the second part of the equation, is you can have the interest graph focus, but you need to uniquely build features and user experience for that community to win. I think there are certain must have features like there should be, you should enable recording from live so that you can then publish at a later date to an RSS feed, but you got to uniquely cater to your community to win and create stickiness, and uniquely recruit both creators and listeners.
Andrew Cohen:
It seems to me like Clubhouse is going for the professional trader angle, with their suite of monetization tools that they rolled out. Maybe that they see that as their big differentiator. But as we've seen with the creator economy overall, it's only a matter of time before these incumbents can roll out the same forms of creator monetization, live tipping, ticketed events, and all of that stuff. And as we're seeing right now with livestream shopping, creators are very hesitant to move their audiences to a third party platform to provide an experience that they can just as easily provide on the platforms where they're already engaging with their audiences, like in Instagram or Facebook, or from usual artists like a Spotify, and for professionals like a LinkedIn. So again, I only think that those creator tools are going to take you so far if there's no sense of identity and purpose associated with that.
Chris Erwin:
I really liked that point, rallying around a unique identity is key. Look, broadly, we're big at RockWater. We're big evangelizers and ambassadors of podcasting and audio overall. So at the least, I think that we look at the introduction of live and social audio features as part of all of these social creator platforms as a good thing. Facebook, with this rollout, which is it's probably the largest social platform on the planet, over 2 billion users, it's going to introduce a lot more creators and users to audio and podcasting. And that's a total win. It's going to bring in more listenership, more audience, which then attracts more advertiser dollars and more ways for creators to make money. When you look at it from this top down perspective, I think us as a team, we're like, yeah, this is totally fantastic.
Andrew Cohen:
Absolutely. I think Mark Zuckerberg pointed out that a reason he really likes the medium is because "you can walk around a lot more easily, you can consume it without having to look at the screen, and do that in the background while doing something else." So for Facebook, which is you pointed out earlier, is a really visual medium. That's obviously a good thing in terms of really driving that engagement, but it also creates all of these other more ambient moments where users don't even have the attention to be engaging with Facebook. And that's where we've seen podcasts and audio really take off. 79% of monthly podcasts listeners say that the top reason that they listen is because "you can do other things while also listening to the spoken word audio."
Andrew Cohen:
So in these opportunities where listeners are too busy to really focus on their screens and look at Facebook or look at LinkedIn, they're turning the audio. And I think these more visual platforms like a Facebook, like a LinkedIn, like a Reddit, are seeing that opportunity to broaden that time on platform, broaden that opportunity for engagement, and really create that more holistic experience where they can be touching their users at all times.
Chris Erwin:
Another angle I think I'm excited about here is everyone talks about figuring out audio discovery, that it's a really friction full process, and trying to find new podcasts on Apple podcasts or Spotify is really difficult. I really liked the idea, and I'm blanking on the name of the startup, but they essentially have this AI where they create a curated audio feed based on your interests and existing podcasts that you listened to. For example, if there are certain shows that are 30 to 60 minutes long, they have unique AI that can say, "Here's the top one to three minutes segment," then bring that into the feed as well as a lot of other curated segments. And then as a listener, you're listening through that and be also scrolling on your phone. And if one of those really peaks your interest, you can then click into it and listen to the full episode. I think that's a fantastic idea.
Chris Erwin:
Now, Facebook seems like they might be trying to introduce, they're going to be introducing audio right AKA sound bites into the Facebook overall feed, which is editorial and video and then soon to be audio. I wonder if they soon realize, Hey, let's just create a dedicated audio feed. And not only could there be curated snippets of programs that you may like, but even maybe commentary and recommendations from your friends and likes around there. That could be really exciting for new audio discovery. What do you think?
Andrew Cohen:
Absolutely. I think that opt-in on demand nature of podcasts have always been a double-edged sword. On one hand, it's one of the things that creates that intimacy between the listener and the creator. But on the other hand, it is a barrier to entry. I think it keeps a lot of people on the sidelines when it comes to audio consumption. And that's one thing that we've seen Clubhouse kind of crack with this drop in linear programming live nature of it that really creates this frictionless access point to introduce fans to audio, which I think can ultimately function as a really great top of funnel for audio creators who want to find new fans and fans who are curious about audio and would want to find the shows and creators that are good for them without having to sift through an endless sea of options and make that one decision to commit their time to.
Andrew Cohen:
So yeah, discovery sharing in general are going to be huge points that need to be innovative to continue to unlock the potential of the medium. But I think that's one thing that Clubhouse has definitely hit on that I think is going to be around the sec.
Chris Erwin:
Andrew, we're getting to the end of our time here. So I think some closing thoughts. I think one for me is that I think a lot of people are asking, is this the call it for Clubhouse, the equivalent of the Snap, Instagram moment, where Facebook and Instagram replicates stories, and then Snap for a couple of years need to figure out what it's core value prop and identity was. But clearly, Snap has really bounced back and they've been a very fast moving innovative product for organization that really understands the uniqueness of their user base. I think Clubhouse can do that. It's going to be contingent on finding their vertical identity being really innovative on the product front and having really great leadership from the top down and also from their investors. But they have a hard road ahead, but where there is competition, there's also incredible opportunity. Any final takeaways that you want to highlight?
Andrew Cohen:
Well said. I think Clubhouse needs to figure out who they are to their fan. I'm not saying they can't do it. I think everything you've said is spot on in terms of what needs to be done and how they could accomplish that. Personally, if you're asking my opinion, if they were offered four billion for an acquisition, I would take it. But hey, I said the same thing about Snapchat selling for one billion in 2010, so don't take my advice.
Chris Erwin:
Noted. All right. Well, more to come.
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