From $4 Billion to Forgotten: The Rise and Fall of Clubhouse
Many of us excitedly followed the rise of ClubHouse when it launched. But very few know the current state and the reasons for its downfall. Here is what I know and what PMs can learn from this story!
Hello hello,
Hope you’re staying warm, sipping on something cozy, and maybe planning which holiday snacks you’re going to devour (No judgement. I am doing the same).
Today’s edition is a little different.
Before I dive into it, let me share some context.
I absolutely love exploring and learning from the stories of products—whether they’re the global products we all use every day or the niche underdogs quietly making waves. Each product’s journey is filled with decisions: some brilliant, others not so much.
And every single decision holds valuable lessons.
So, here’s what’s different:
Going forward, I’ll be sharing insights and learnings from other products.
The goal?
To analyse what other product managers and leaders have done well—or where they’ve stumbled—and use those lessons to become better product thinkers ourselves.
While I’ll continue sharing the detailed guides, you can now look forward to a mix: actionable guides plus these fascinating product stories.
Today, we’re diving into Clubhouse—remember that? The app that skyrocketed to fame and then… kind of ghosted us? Let’s see what we can learn from its rise and fall.
And I’d love to hear your thoughts on this new format. Should I keep these coming? Or should I stick to my usual guides? Reply to this email and let me know what you think!
Alright, let’s get to it!
The Rise and Fall of Clubhouse
Clubhouse was once the hottest platform in tech, promising to revolutionize social interaction through live, audio-only conversations.
With meteoric growth, jaw-dropping valuations, and backing from top investors like Andreessen Horowitz (a16z), they seemed unstoppable.
Clubhouse went from ZERO to 100 million users in less than 1 year and was valued at $4 billion.
Sounds like a success story, right?
But just as quickly as it rose, it started to fade into the background.
So, what went wrong?
Let's dig in!
What Is Clubhouse?
Clubhouse is a social media app focused on live audio conversations. Unlike Instagram or Facebook, where people share photos, videos, or text posts, Clubhouse allows users to talk and listen in real-time.
Here’s how it works:
Join conversations: Users can join virtual rooms where people discuss specific topics.
Create rooms: Anyone can start a new room to host discussions or share ideas.
Listen or speak: In these rooms, you can either listen quietly or raise your hand to speak.
No recordings: Most conversations are live and unsaved, which led to a drop-in experience where users could not revisit missed chats.
(Watch this YouTube video, if you want to see how Clubhouse works.)
What Made Clubhouse Stand Out?
#1 Live Audio
Clubhouse stood out because it introduced a new way for people to connect through live audio conversations.
At a time when social media platforms were full of images, videos, and endless scrolling feeds, Clubhouse’s audio-only format was a refreshing change.
It allowed users to focus on conversations and ideas rather than visual content or polished presentations, which made interactions more authentic and less intimidating.
#2 Exclusivity
Another key factor was its exclusivity.
When Clubhouse launched, it was invite-only, meaning you could not simply download the app and join Clubhouse. You needed an invitation from an existing user.
That created a sense of curiosity and urgency.
Most normal humans want to do things that are not easily accessible. (Yes, FOMO is real!) So, this exclusivity gave it a club-like vibe, created a sense of community, and made it extremely popular among users at the time.
#3 Unique mode of interaction
Unlike traditional social media, where communication often feels one-sided (e.g., posting and waiting for likes or comments), Clubhouse rooms were live and interactive.
Users could listen to experts, ask questions, or join the conversation in real-time.
This promoted a feeling of being heard and valued.
#4 Timing
Finally, its timing could not have been better. Clubhouse launched during the COVID-19 pandemic, when people craved human connection but could not meet in person.
With the world in lockdown, the app provided a space to socialize, network, and learn without leaving home. This combination of novelty, exclusivity, and community-driven engagement made Clubhouse feel revolutionary at the time.
The Rise: Clubhouse’s Meteoric Rise
Paul Davison and Rohan Seth launched Clubhouse in April 2020. By January 2021, it had already attracted 2 million users.
And then within just one month, the app’s popularity exploded to 10 million users in Feb 2021.
This was an extraordinary achievement for any new platform, and it became one of the fastest-growing apps in history.
Clubhouse's journey from a small launch to a global sensation happened in less than a year, and several factors contributed to its success.
#1 Valuation and investments
Given it’s viral popularity and growth, the app quickly caught the attention of Silicon Valley investors. In a very short period, by April 2021 (4 months after launch), Clubhouse was valued at $4 billion.
That's a valuation almost unheard of in the industry. Upon seeing the app's potential to revolutionize social media, well-known venture capital firms like Andreessen Horowitz (a16z) invested more in Clubhouse.
#2 Celebrity influence
Clubhouse gained massive traction by attracting big-name celebrities early on.
Influencers, tech leaders, and stars like Elon Musk, Oprah Winfrey, and Mark Zuckerberg joined the platform. Their participation created a buzz as millions wanted to join conversations hosted by these famous personalities.
For instance, listen to Oprah and Adele’s full interview on Clubhouse here. The Verge reported that 10 million people tuned in when this was airing.
#3 Pandemic timing
The team launched the app during the COVID-19 pandemic when people were stuck at home and missed human interaction. Clubhouse allowed people to connect, learn, and network without in-person meetings.
Its live audio format felt personal as it filled the gap left by in-person events.
#4 Exclusivity
Initially, Clubhouse was available only on iOS and required an invite to join, which made it feel exclusive and elite. People raced to get invitations, which drove more curiosity and demand. This invite-only strategy worked perfectly to build excitement.
#5 Media attention
Media positioned Clubhouse as a disruptive innovation in social media. They even called it the next big thing, which created further momentum. Many started thinking that it might even challenge giants like Facebook and Twitter.
#6 Global Expansion
The app expanded internationally, with influencers and communities from Asia, Europe, and Africa joining in large numbers. By mid-2021, Clubhouse had become a global platform for discussions on several topics, from business to entertainment.
So, Clubhouse went from being an unknown app to a global phenomenon in just one year. It became the face of social audio, a new category in the social media world.
But soon, Clubhouse was to see the unknown.
The Fall: Why Did Clubhouse Fail?
Clubhouse's rise was fast, but its decline was even quicker.
Here are the main reasons why the app failed to sustain its success:
#1 Fierce competition
Clubhouse was the first audio-only social media platform, but it did not stay unique for long. Tech giants like Twitter and Facebook quickly launched their social audio features. These competitor features were more interactive than Clubhouse.
For example, Twitter Spaces (now X) looked like this.
And Facebook Live Audio looked like this:
These platforms already had massive user bases, making it easy for them to get inital traction and grow in this new space.
Here’s how Clubhouse, Twitter Spaces, and Facebook Live Audio competed:
#2 Monetization problems
Clubhouse struggled to make money. It introduced features like tipping and ticketed events, but these did not make enough revenue.
Without a strong business model, Clubhouse could not attract and retain creators who needed financial incentives to stay active on the platform.
For example, here’s how tipping in Clubhouse worked
#3 Content moderation issues
As Clubhouse grew, it faced harassment, hate speech, and misinformation problems.
There were many reports of users creating rooms that spread conspiracy theories, such as anti-vaccine misinformation, or engaged in harmful discussions promoting hate speech.
One notable incident occurred in 2021 when discussions in some rooms were flagged for amplifying COVID-19 misinformation without any moderation.
#4 Loss of exclusivity
In its early days, Clubhouse was invite-only, which created a sense of exclusivity. But when it opened to everyone, the app lost this unique attraction. The influx of new users diluted the experience, and many early adopters lost interest.
#5 Limited accessibility
Clubhouse launched on iOS first and only introduced an Android version in mid-2021. By then, much of the hype had died down. Additionally, it was audio-only, which excluded users with hearing impairments and limited its reach further.
#6 Pandemic-driven success
Clubhouse gained popularity primarily due to the COVID-19 pandemic. During lockdowns, people craved social interaction and used the app to connect with people.
But as the world reopened and people returned to in-person events, the need for live audio platforms gradually decreased.
#7 Retention problems
Despite rapid user growth, Clubhouse could not keep users engaged.
Many downloaded the app out of curiosity but did not stick around. This happened because the novelty wore off quickly, and users found the conversations uninteresting.
Also, as other platforms like Twitter Spaces and Facebook Live added similar features, people lost interest in Clubhouse.
#8 Global expansion challenges
Clubhouse struggled to scale internationally.
Payments were initially only supported in North America, which made it hard for creators in Asia, Africa, and other regions to earn money.
Additionally, language barriers and cultural differences made global adoption difficult.
#9 No clear long-term vision
Clubhouse saw rapid growth early but did not seem to have a long-term strategy.
Instead of focusing on sustainable development and innovation, it relied too much on hype and celebrity endorsements.
#10 Technical limitations
Clubhouse’s platform could not handle its rapid growth—frequent glitches, server issues, and limited features frustrated users.
Competing platforms like Twitter and Facebook had better infrastructure and integrated features, which made them more attractive.
By late 2022, Clubhouse’s user base had dropped drastically.
Once valued at $4 billion, it struggled to remain relevant. Many creators and users moved to other platforms with better monetization, accessibility, and features.
Present State of Clubhouse
Clubhouse is no longer the sensation it once was. While it still exists, the app has become a niche platform addressing small specific communities and focusing on private, intimate discussions.
The app has undergone some changes, including a revamp in 2023, but these efforts have not regained the earlier excitement. Clubhouse also had layoffs and is still struggling to find a solid revenue model.
Clubhouse's global reach is limited, and its competitors like Twitter Spaces and Spotify Live, with similar features and better integration, overshadow it.
Once valued at $4 billion, Clubhouse's worth has dropped significantly as its user base shrunk.
Lessons for PMs from Clubhouse
Keep listening to users: Clubhouse grew quickly because of a new idea, but it did not keep up with what users wanted as their needs (and circumstances) changed. It is important to keep listening to your users, understanding how the market is changing, and adapting your product to stay relevant.
Have a clear monetization strategy: Clubhouse did not build a strong way to make money, which hurt them in the long run. Therefore, start thinking about how to make money from your product early on to ensure it lasts.
Keep users engaged: Clubhouse gained millions of users but struggled to keep them. They did well in acquiring users, but not so well in retaining them. When you’re thinking about the value that your product provides to the users, make sure the value is large enough to keep users coming back.
Don't rely on exclusivity forever: Clubhouse started with an invite-only system, which made it exciting. But once it was open to everyone, the excitement faded. Exclusivity can help, but you need a solid plan to keep things interesting as your product grows.
Stay ahead of your competition: Clubhouse could not keep up with competitors like Twitter and Facebook. You must keep improving your product and stay ahead of competitors, or you risk losing your edge.
That is it for this edition.
Please reply to this email and let me know if you enjoyed this read, and if you’d like to get more in-depth product stories like this one.
Until then,
Sid
Loved the layout of this! Great post.