Clubhouse appeared out of nowhere in early 2021.
They went from an unknown brand to the hottest topic in the marketing business world.
And then, they disappeared almost as quickly.
I mean, just look at their downloads through the year.
There was a point where it seemed like every time I logged onto other platforms people are either talking about Clubhouse or inviting people to their clubhouse “rooms”.
And now, I never hear about them.
What’s incredible though is how, within a few months, Clubhouse grew to ~2,000,000 users despite being less than a year old.
With such meteoric growth, we thought Clubhouse’s growth strategy and business was worth a quick analysis.
Here’s what we’ve dug up.
Clubhouse in 30 seconds
- Who are we analysing today?: Clubhouse
- What does Clubhouse do?: It’s a live-audio social media app
- Why should you care?: It’s the hottest new social platform and growing at lightspeed.
- How are they doing it?: Invite-only memberships + strategic PR/content buzz.
- When was Clubhouse founded? - In March 2020
Clubhouse user base
According to the Clubhouse blog, in a single week during January 2021 they managed to get 2,000,000 users.
Up from December 2020’s total of 600,000, which is crazy growth.
According to that same article, those users were made up of…
- Stock traders
- Non-profit leaders
- Real-estate agents
- Sports fans
- And more
Which doesn’t really help us in analysing their ideal customer base.
In my experience, I’ve seen a huge number of marketers, VCs, and SaaS founders on the platform.
The main interesting point is how they grew their user base so quickly.
That 600,000 number for 2020 was taken in December, and the 2,000,000 number was in January 2021.
Which means they grew their user base by more than 50% in a 1-2 month time period.
It also puts them at a higher user base than other social media platforms when they were in their first year.
We’ll cover how we think they did this shortly.
This is where things get interesting with Clubhouse.
There was a lot of buzz in May 2020 when they closed their first round of funding of $10,000,000.
This initial funding round led to them being valued at a whopping $100,000,000. Not bad for 2 months of operation.
However, in 2021, they closed a Series B of $100,000,000 which has pushed their valuation to $1,000,000,000 ($1B).
According to Clubhouse, that Series B is funding from 180 different investors. Which is a crazy huge number and must make their cap table a nightmare to manage.
Clubhouse’s revenue model
Right now, Clubhouse doesn’t actually have any revenue model.
They don’t charge for usage nor do they run ads on the platform.
Without a public revenue model, it’s hard to say how that $1B valuation is justified.
We’re sure they’ve got plans on monetisation strategies, but they’re not yet public knowledge. We have a few ideas of what they might explore, but it’s all just conjecture right now so we won’t spend a lot of time on this.
Here are a few options we think they might explore.
- Sponsorships for people who can generate large audiences (maybe even build out a sponsor <> influencer management dashboard)
- A membership/patron system like Patreon/Only Fans (influencers have premium fans who get exclusive access)
- Built-in checkout and payments (so speakers can generate sales of their books/courses directly from Clubhouse)
- Tip-system like Twitch / YouTube live streaming (users tip a few bucks if they like the content)
All is hypothetical and pure conjecture at this point.
It’ll be interesting to see how this side of the product develops.
Clubhouse’s growth strategy
Clubhouse is using what’s known as the “Velvet Rope” strategy. They’re creating exclusivity with a combination of invite-only memberships and strategic hype.
If you’ve never heard of the Velvet Rope strategy, think of the VIP area of a club.
It’s often separated by a velvet rope, which separates the “VIPs” from the rest of the crowd.
If you want in, you either need to be special or be invited in by someone special.
Once you’re in, you are now one of the “special people”.
Anything behind that velvet rope is seen as more desirable because it’s hard to acquire. It’s exclusive.
Clubhouse’s invitation-only approach makes their app exclusive, thus, making more people want it.
Why is Clubhouse’s Velvet Rope Strategy working so well?
There are some simple, but highly effective psychological principles at play with this strategy.
Let’s unpack them.
Reason #1) Exclusivity builds FOMO.
The more insiders are talking about Clubhouse, the more outsiders will want in.
And if you spend any time on social, you’ll know a lot of people are talking about Clubhouse.
This creates a lot of demand for relatively little supply.
The result is people begging their friends for an invite, and people with invites treating them with a lot of care and consideration.
Reason #2) Invites from friends build trust in the app.
It’s not just about getting invited to the app -- it’s about getting invited by a friend.
If you were to just receive an invite from a random internet stranger….it’d be weird, right?
And if the brand you’d never heard of sent it, would you check it out? Probably not.
But Clubhouse invites come from your friends.
And that means you’re getting “in” to something that’s already been vetted by someone you know and trust.
You trust them, they trust Clubhouse, ergo, you trust Clubhouse.
Reason #3) Invites from friends are more likely to convert.
This doesn’t need any explanation.
The combination of FOMO and the trust friendly invites create means you’re way more likely to take the action.
Reason #4) Invites from friends make it cheap to scale
You might think gating your tool or service behind this kind of invite-only joining process would hamper your chances.
But it actually does the opposite.
As we’ve already mentioned, those invites obliterate any trust issues because a friend has already vetted the service.
So the actual sign up is an action happily taken.
It also doesn’t require any financial cost beyond finding the initial users.
As for scale, it also works insanely well.
Most brands can only dream of having each customer refer two of their friends.
If you make the process easy (as Clubhouse has) the potential scale is incredible.
The best illustration of this is to imagine you have a single penny.
Each day that penny’s value doubles.
So on day one you’d have 1p, day two that would double to 2p. Day three would see you collect 4p and so on.
Within 30 days you’d end up with over $5,300,000 dollars.
Once you hit a critical mass of users the scale from a double invite pays huge rewards.
Clubhouse’s invite approach offers the same kind of benefits.
Sure, it might be a low start, but as each person refers 2 others, you end up with an exponential growth machine.
How can you recreate Clubhouse’s strategy in your business?
It’s easy to look at something that’s already been done and say “that’s genius”.
Knowing how to apply it to your business is another matter. And this is the difference between the brands that grow and those that don’t.
You could easily replicate a basic version of their invite-only strategy through simple blog posts.
All you do is use a simple tool like GoViral.
Hide a valuable resource behind a simple share action. Make sure people are aware of what they can get and how the cost of admission is a referral of 2 friends.
This should, in theory, drive more targeted traffic to your post and help you “convert” more people.
Here’s how we’d view the experiment.
- Hypothesis - If each interested person invites 2 of their friends to read this, we’ll 10X traffic for free because invites from friends carry intrinsic trust
- Action for reader to take - Click on the share buttons and mention a specific friend who would like this in the share (@friend)
- What they'll get for helping - We’re offering a couple of rewards for helping us with this including...
- Reward 1
- Reward 2
- Reward 3
Below, I’ve listed a couple of actions that we would take were we trying to fully replicate Clubhousse’s invite system.
#1) Pick the right influencers and get them on board.
The Velvet Rope Strategy depends heavily on you seeding the “behind the rope” section with some genuine heavy hitters.
Influencers other people want to hear from, listen to, or be associated with.
If you can get a handful of these people in your gated area, you’re gonna see the demand and perceived value of your offer massively increase.
This is nothing new.
Businesses have been using influencers and celebrities to raise the perceived value of their offers for centuries.
Here’s the process we’ve taken when launching our own paid newsletter, and one I’ve used in the past with other brands to build a foundational set of influencers.
I’ll build a list of people who…
- Have a substantial following comprised of a relevant audience
- Would enjoy and benefit from the offer themselves
- Could potentially be gatekeepers for other sectors/influencers I’d like to work with
I add them into a simple spreadsheet that breaks down a few key pieces of information.
- Their name
- Social handle and emails
- Audience segment
- Audience size (email list if known, social followings if not)
Then I get to ranking these influencers.
What we’re looking for here is the easiest potential win.
And often, that’s not simply going to the person with the biggest audience. Those folk are busy, get inundated with pitches, and you’ve got to have some form of relationship with them so they know you’re not gonna ruin their reputation.
I break the ranking down into 3 sections. Each is given my best guess score out of 10.
- The ease of me reaching out to them. For this I consider…
- Whether they’re likely to open my email/message
- Can I contact them directly, or will I have to go through an EA/VA/PA?
- Do I have their number/Messenger id to contact them
- The likelihood of a collaboration. For this I consider…
- Their likelihood of saying yes
- Do they promote other similar things to their audience (thus they’ll find my offer valuable as well)
- Do we have an existing relationship or do they know I create quality stuff?
- Can I offer something they value in return for their help?
- The total potential impact of the collaboration. Here I’ll consider…
- Their audience size
- The engagement rate of their audience (large unengaged audiences are useless)
- Whether I could then leverage this new relationship and their name to open other doors
Finally, I’ll add up my rankings and get a total score for each influencer.
Then it’s simply a case of organising by the people with the highest overall score to start my outreach.
I do the whole thing in a simple Google Sheet that ends up looking something like this.
You can get a free copy of that sheet if you join our newsletter at the bottom of this post.
Here’s the thing to remember here.
This isn’t going to ensure automatic success for you.
All this will do is help you prioritise influencer and partnership potentials that are most likely to work out well for you.
These outreach lists are living things and yours will change as you close more partnerships and promos.
#2) Create word-of-mouth buzz
Word-of-mouth is really powerful once it gets going. But, it’s not that easy to create.
You can tackle it two ways.
The expensive way is to make a massive PR push and get major media coverage. When you start showing up on the news, on niche websites, on ads, etc, you’ll start to become a topic that people naturally bring up in conversation and tell their friends about.
Clubhouse definitely made several PR pushes throughout 2020. They didn’t publish much content on their site, but they managed to get coverage by just about every major tech, startup, and business website in the last year.
They were super smart with their PR as well.
They weren’t simply a rundown of “check out this new app”. They made sure the authors included real value signifiers like who’s using the app (mentions of initial influencers), people’s reactions, and predictions on their incredible growth.
- This piece in TechCrunch (a leader in its own right) mentions Clubhouse blowing up VC Twitter
- This CNBC piece mentions how early users of Clubhouse could get access to talks with celebrities like MC Hammer, Kevin Hart, Jared Leto. Investors like Matt Brezina and successful founders like Nate Bosshard.
You can create your own PR push by using tools like HARO or simply reaching out to the sites you’d like to be featured on.
One of the easiest ways to get real results from this is to systemise the approach.
Keep an internal document that keeps a track of key information that grows your brand’s perceived value.
We’re talking things like…
- Big names using or prompting the app (with links to their mentions if possible)
- Growth stats you’re comfortable sharing (Revenue, funding, user numbers etc)
- A collection of (positive) expert analysis of the brand
Create one version of these kinds of stats for your staff. Then, when someone reaches out for a comment or quote you can simply copy and paste from the sheet.
You could also create a simple cheat sheet of stats and relevant links to send to authors when they reach out.
By giving them the information they need to write a relevant piece, you’re helping them out.
But you’re also controlling the image of the brand by ensuring the stats you’re sending out are the kind of things that build a positive image and create real-world buzz.
The cheaper way to build word-of-mouth marketing is to ask your users to share directly with their friends. That’s exactly what Clubhouse did with their invite system.
They combined this with their influencer outreach.
Basically seeding influential people as the initial users, then getting them to add their influential friends.
If you’re not already doing this for your business, I suggest trying it out. There are several free/cheap tools you can use to build your own little system.
#3) Encourage user-generated content.
Some of the best marketing tools are simple screenshots of what’s happening “on the inside” or real-world snippets of what real customers are saying about you.
User-generated content like this literally shows the action happening behind the “Velvet Rope”.
Clubhouse’s Twitter account just retweets user tweets. It’s simple, easy, and celebrates the user (not the brand).
It’s trustworthy because it comes from real users (not the brand) and it often feels “real”, rather than manufactured.
Thing is, it can be difficult to generate this kind of user-generated content.
After working with a few UGC brands and running one or two campaigns myself, here are 3 approaches that could work for any budget.
UGC strategy 1 (completely free) - A simple ask
Let’s start with the completely free version.
The easiest way to generate UGC is to simply ask your users.
A simple email that might look something like the below…
Granted, the email ain’t perfect.
But sometimes simply asking your users ot take an action is all you need to generate some great UGC.
UGC strategy 2 (minimal cost) - Viral giveaway
Viral giveaways are a super simple way for you to incentivise users to share something about your brand on social.
Each share, like Clubhouse’s invites, exposes your brand to multiple new potential customers.
This is a relatively cheap way of generating UGC as it’s a one time cost for you.
You’ve only gotta fork out for the prize.
I’ve run a few viral giveaways and this is the basic process I’d take.
- Identify a relevant offer
- Create a viral giveaway
- Launch and continually promote for the duration of the giveaway
Let’s break it down in real terms. We’ll continue with the imaginary turntable brand from above.
Step 1 - Relevant offer
The relevancy of the offer is key. If you run something with an Amazon gift voucher as the prize you’re gonna get everyone and their mum joining.
You want it to be relevant so that you only attract the right kind of people who might one day become customers.
The relevant offer for the turntable brand needs to be something else audiophiles would like.
Could be something like…
- A high end pair of headphones
- A collection of vinyl the winner can choose
- Speaker set
At most, this would cost the brand around $500.
Step 2 - Viral giveaway
There are a bunch of tools out there that allow you to set up viral giveaways.
If you operate on WordPress, I’d recommend RafflePress.
RafflePress integrates with WordPress and makes the setup process simple.
If you’re not on WordPress, check out Vyper.io.
Both are great tools and make setting up a viral giveaway easy.
If you want to find another tool, just make sure it does the below…
- Integrates with multiple social media platforms
- Collects user email addresses
- Helps you randomly select a winner
- Automates most of the processes
Collecting email addresses is a key feature. I like to offer all the losers a 10% discount to get them to buy something once the giveaway is finished.
The giveaway should have users share something that’s related to your brand. This way, you’re generating user-generated content that could be used beyond the life of the competition.
Step 3 - Launch
Use the approach above to rank potential influencers to kick things off.
Also launch to your existing email and social subscribers.
Run the giveaway for a week or two and be sure to continue promotion throughout that process.
UGC Strategy 3 (mid-cost) - Incentivise sharing
This is a process I used a few years back to help a SaaS brand scale to 6-figure MRR within 18 months.
All we did was incentivise smart sharing.
We offered users a 7 day free trial as standard. They could extend this trial by doing one fo a few things…
- Leaving a review on the most relevant review site (be careful with this as it’s now against many review site’s ToS)
- Sharing something in one of a handful of Facebook groups we selected
- Inviting a friend to try out the tool
If they took all 3, they could increase their free trial to 28 days total.
We effectively encouraged each new user to refer at least 2 others to us, and it was a huge driver of growth.
Incentivising referrals like this can work wonders, but you’re going to have to take a revenue hit on each and every action a user takes.
You could incentivise users in a few ways…
- Extension of a free trial
- % discount for each successful referral
- % commission for each successfully referred sale
And there you have it.
Three simple strategies to implement a similar referral strategy to Clubhouse to drive new users.
We’re gonna quickly cover the red flags of these kinds of invite-only and referral systems before showing you the results of the “share referral” gate experiment we actioned above.
Red Flags for Clubhouse!
#1) Invite-only social apps have flamed out in the past.
Clubhouse isn’t actually doing anything new with their invite-only memberships. Many social media sites launched with similar tactics and managed to get some early traction.
The most famous examples are probably ASMALLWORLD (est. 2004) and Ello (est. 2014). They launched with members-only invitations and created some wild buzz in their first few months (and years, in the case of ASW).
But, once they opened the gates to everyone…..they both seemed to fall apart.
They’re both still around, but they’ve had to pivot several times and never really lived up to the hype once they removed the members-only invitations.
Hype is easy to create, sustainability isn’t.
You’ve got to make sure that the Velvet Rope strategy isn’t just pretty marketing. That means encouraging your top users to stick around, keep the content standards high, and give users long term value that’ll have them coming back over and over.
#2) How are you going to manage “quality”?
As Clubhouse grows its user base and content, it’s inevitable that some people are going to start creating content that’s either low-quality or “bad” (like hate speech).
Is Clubhouse going to censor the conversations happening on their platform? Where will they draw the line as to what’s allowed vs not? How about the inevitable outrage once something bad is published? (Clubhouse is already facing this problem)
This is a problem across most social media platforms. Smaller businesses can usually avoid the quality-control problem by setting clear terms around their content. If you run a membership site, though, you’ll need to commit to your terms and be willing to enforce them.
#3) How are you going to monetize?
Building your user acquisition around hype and viral sharing is effective for the short term - but it’s not a complete business model.
In Clubhouse’s case, it’s not really clear how they’re going to actually make money out of all this action. Are popular moderators going to get paid for their content? Are users going to have to pay for membership? Are brands going to be able to advertise to their audiences?
A platform’s monetization model may not seem like an important thing to users. But, unstable monetization can lead to the brand scrambling, bouncing between business models as they try to figure out how to make money.
That constant change is what typically drives users away. It’s what happened with ASMALLWORLD and Ello. The more new identities they tried, the more people they turned off.
Clubhouse is already on the decline and I highly doubt it will be sticking around unless they make some radical changes.
While their growth strategy of the Velvet Rope was expertly implemented, the problem they faced was they had no real moat.
They were going head to head with huge brands like Twitter and Facebook, and unfortunately, they had nothing these brands couldn't easily copy.
Which is exactly what happened.
Twitter in particular rolled out a direct competitor to their product in record time.
And, thanks to their established user base it pulled people away from the new platform in favour of the one people were already using.
Clubhouse is a great study on how to create buzz.
It's also a great study on the problems of not building a moat into your product or offer.
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