Clubhouse and the Pure Play Audio Opportunity

Clubhouse has gained quite a bit of attention lately. Before I share how I’m viewing the audio platform that is Clubhouse, I think it is helpful to give a little context around the audio opportunity.

For a while, I have known that something was going to happen around a pure-play audio platform for 3 years or so now. The reason I knew was because of my work with the VC community. Several years ago, I did the rounds with most of the top-tier VC firms, and they ran me through their central investment thesis for the next several years. The audio was the most consistent thesis I saw that showed up in nearly all VCs investment thesis.

Essentially the thesis for audio was this. The visual opportunity is gone. YouTube, Snapchat, Instagram, Facebook, Netflix, etc., has sucked up all the available time to view something visually with our eyes. Basically, the battle for the eyes is gone, but the battle for the ears is a different story. We commute, we exercise, we walk, and in general, we do things where we can’t always stare at screens. This is where the opportunity for the ears comes into play. Pure play audio is an area most investors believed there was room to compete for consumers’ time. And thus, something in audio was going to come out of this.

Many investors believed Podcasts were the audio opportunity evidence but knew Podcasting platforms were mostly settled and would not be an investment opportunity. Then came Clubhouse, and now we have a highly evolved take on many previous audio platforms.

If you aren’t familiar with Clubhouse, it is basically an app where anyone can host a room, start talking, and people can show up to listen. Hosts of the room can invite listeners up to the stage to participate or call on listeners to ask a question to those on the “stage.” You can liken it to talk radio with listener participation, a panel at a conference where people with subject expertise have a moderated discussion, or even as one of my followers on Twitter pointed out like the days of Ham radio where people could connect and talk to each other even if they didn’t know each other.

The clubhouse is the evolution of many former audio meetings but not a 1:1 comparison to any of them. It is like many things but not exactly like any of them. This perplexed a lot of investors, but given their thesis, it was only a matter of time before Clubhouse raised funds.

What I find curious is the black and white nature of Clubhouse. The public commentary I’ve seen, at least, in general, paints it as the next big thing or a total failure waiting to happen, which will get crushed by other players. Its future is not so black and white, but when something new shows up, we don’t totally understand. This dynamic seems to be common, and quite curious.

The reality is Clubhouse could be big, or it could fail. Both possibilities exist. I agree with the investment thesis I explained, and pure-play audio is certainly an area of opportunity.

That being said, what I find interesting about audio, is how different it is from video. Video allows people to be more passive or let their brain shut off. Audio is a different story. Listening requires much more attention by the listener. Listening was at risk of becoming a lost art. This is why I think the pure-play audio opportunity is so interesting. One’s audience is potentially much more captive than any visual platform. And captive audiences are lucrative.

Lucrative niches have always been my personal thesis of how the digital world breaks up. I’ve always believed Facebook would struggle because it is too general-purpose as a platform. It was successful at first because it was general-purpose in nature and ultimately why it may fade into irrelevance someday. If your business is advertising, subscription media, or direct-to-consumer content or products, then a focus on a niche is your only way forward. Platforms that empower focused niches, like Substack for niche newsletters, or Shopify enabling as a platform for niche businesses, or in this case Clubhouse for niche audio, all become enablers of lucrative niches with little to no upfront cost.

While it is unclear Clubhouse’s fate, what it is enabling as a platform is the most interesting part of analyzing from my perspective. I caution being too optimistic or too pessimistic at this point. It’s easy to write things off we don’t fully understand yet but, as the thesis I laid out, there is something here.