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The Retired Investor: Clubhouse Comes of Age
By Bill Schmick, iBerkshires columnist
04:09PM / Thursday, February 18, 2021

The latest entrant into the social media orbit is an audio-only chat app called Clubhouse. The internet company had a $1 billion valuation before it had a business plan. That is even more surprising since membership is by invitation-only.
 
On Jan. 24, 2021, the company announced its latest $100 million fundraising effort, and for the first time presented a rough sketch of how it plans to start generating sales. Its Silicon Valley founders, Paul Davidson and Rohan Seth, are hoping to offer paid subscriptions, ticketed events, and other schemes to turn the site profitable.
 
You need to know an existing member in order to get an invite to join Clubhouse. Once you become a member, you can join the conversation on a variety of topics. Everything from cryptocurrencies to the latest sports games, to any other topic you can imagine. You can wander what is called "the hallway" and listen in on various live conversations in process as you pass different rooms.
 
So, who, you might ask, would want to pay just to listen in or have a conversation with someone? Well, it might depend on who was doing the talking. What if Elon Musk, or Mark Zuckerberg, Oprah, or Drake were the guest speakers?  
 
The site's virtual rooms are organized into a host, moderators, and audience members. The host and moderators determine the conversational flow, who can speak, and when, as well as any question-and-answer segment if applicable. It is quite similar to a virtual panel discussion you might attend through Zoom or GoToMeeting. However, this is an audio-only event with no videos.
 
Each event or topic may be different. And if, for example, the subject matter is performance-related, as in acting, or presenting a comedic routine, or the topic is designed for listen-only, then the panel member may not allow audience feedback or a Q&A.
 
The founders are betting that you will not only be attracted to Clubhouse's exclusivity, but will also be willing to pay for a seminar by a famous influencer on topics like the future of coronavirus, or watch the Clubhouse production of "The Lion King."
 
To date, there are about 180 investors, including several large venture capital firms, and a group of smaller, independent investors that have funded the effort. There are an estimated 6 million registered Clubhouse users, which continues to grow by leaps and bounds.  
 
Clearly, the formula for success is providing the membership a growing list of relevant topics and "influencers" who are loyal to the site. Tesla CEO Elon Musk made his first (and only) appearance on the site on Jan. 31. He is credited with single-handedly driving membership from 3 million to more than 5 million users worldwide in a matter of days. New members sprouted up in Taiwan, China, Hong Kong, and Japan.
 
Much of the credit for the APP's early success lies with a group of talented Black artists who transformed what was a geeky tech hangout into something more that would appeal to a much wider audience. But success does not come without a price.
 
Clubhouse in its earlier days had its fair share of hate speech, nasty conversations, and verbal harassment of speakers, moderators, and audience members. Since then, the company has developed its own set of community guidelines as well as "block," "mute" and "report" buttons. In addition, some of Clubhouse funds are now used to hire more professional moderators as well as for training of those members who host and/or moderate rooms. Given the varied and heated opinions of these divided states, I suspect it will become even more difficult to maintain civility in these rooms depending upon the topics presented.
 
The Clubhouse success has also spawned competitors. Twitter recently launched a live audio feature called "Spaces," Facebook is reported to be developing something similar, and the Chinese are putting together their own version of the app.
 
As for me, I am still waiting for someone who is a Clubhouse member to send me an invite. I would greatly appreciate it. My email is billiams1948@gmail.com.
 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.

 

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