Thoughts on Clubhouse. Innovative Disruption in the Caribbean
I got on Clubhouse so you don't have to
I recently got an invitation to Clubhouse from a friend. Thanks, you know who you are 🙏 I have some ...er, thoughts. Read on for those.
I have some good news and some bad news. The bad news first as is customary. There’s no podcast version of this essay yet. It’s actually a very time-consuming process, and I’ve had a lot on my plate recently. Furthermore, the stats show that it isn’t as popular as some had led me to believe. I’m thinking of changing up the format and doing a more “traditional” podcast that complements these essays, but I haven’t quite finished thinking that through. I’d love a regular partner to podcast with. Let me know if you’re interested.
Now on to the good news … well, for me anyway. I got my first COVID-19 vaccine today and looking forward to the next dose. It’s the least one can do to protect the vulnerable around me. I hope you get yours soon too.
On to this week’s essay.
Thoughts on Clubhouse
I got on to Clubhouse, so you don’t have to. It is actually a fascinating idea but one I can’t quite adhere to fully for numerous reasons, some of which I’ll dive into here.
But first, whenever I jump into a room on Clubhouse, there is literally nothing that couldn’t be better served in podcast format. The ability to stop/start when you like, the offline capability and the accompanying show notes that often point you to supporting materials, are all clearly missing from Clubhouse. This has been confirmed by the fact that many presenters are actually recording and publishing their “talks” through podcasts and YouTube post-room.
In fact, that’s the primary reason I got on the platform, to try to understand its relation to podcasts and to see if it would disrupt them as so many have been predicting. I’m happy to say that no, Clubhouse will not put a nail in the coffin of podcasts any time soon. If anything it is more like to become the model on which conference panel discussions get digitalised (and subsequently marginalised in value). There’s scope for the democratisation and digitalisation of many of the panels that are hosted around the world. COVID-19 has accelerated the acceptance of that reality. As a panel host/guest speaker invested in that market, i.e., if it’s your main job, I’d be worried about where well-paid work will come from in the next couple of years.
In fact, I’d go as far to say that if the platform becomes very popular, it could decouple live panel discussions from conferences and even kill off local discussion in-person forums. And like any platform on the internet at internet scale, the problem quickly becomes discovery. How do you find out about those interesting and informative conversations? How do you stop from getting placed in a social bubble (remember you’re linked to your contacts)? What part does moderation play in this?
But what is Clubhouse? I think a good way think about it is a cross between a phone-in radio show from a small town, populated by procrastinators, narcissists, and grifters. Its sudden popularity has meant that it is the latest target for dollar store wisdom mongers, snake oil merchants and outright fraudsters. That is not to say that there aren’t any interesting and enlightening discussions taking place on the platform, of course there are, just like we’ve seen on TED. But boy, there’s a lot of absolute crap out there too! If you do join, just beware of the VCBS and the pathetic rich-splaining like ‘Ooh look at me, I’m a millionaire’ or “Get More Clients in 2021”. I think I’ve said enough.
From an analytical point of view, I can see it as an ancillary service in digital conferencing —something that despite trying, we still haven’t cracked meaningfully, particularly the conference-goer interaction space. You’ve all been there, when the filthy mic gets passed around the hall in the Q&A session. You’ve probably all spent time in a Zoom-like conference wanting to get to talk to the panel/presenter and couldn’t because the tools don’t allow for that yet. Using Clubhouse as a digital alternative might possibly be very compelling.
The big question, of course, is how is Clubhouse going to monetise. I’ll put that to bed immediately because there is only one proven solution to qualitative tools on the Internet. Ads. Only businesses pay for quality (ahem) software. Consumers wilfully (or ignorantly) allow spying to be performed on their footsteps in cyberspace for that to be monetised later using some flaky and downright fraudulent claims on accuracy and ROI. And so it will pass. Clubhouse will become Clubhouse + ads. The funding round mostly from A16z practically guarantees this. They have bet big and will want big returns or nothing.
There is also a technical and practical dilemma for Clubhouse too. How it can interject adverts without the speakers announcing “This room is sponsored by …” —something I’m not even sure is possible in the T&Cs. (Note to self: Check the terms for advertising clauses). If it is audio, i.e., the primary reason you get on the platform, then having your favourite show interrupted by an advert about a website builder or better yet, the next “hot” Clubhouse room is so user hostile that I can only imagine adverts inserted as you enter or leave a room. Interstitial adds are super agressive and frictional to the point that many of us might reduce the use of the app. The other option is visual ads either static of video-based. Again, this is a tricky prospect as many people open the app, join a room and turn the screen off listening on headphones, the phone’s speaker or AirPlay-ing it to the voice in the box. I mean, where’s the moat? How is this different from live-feed podcast?
As it stands today, Clubhouse is just a feature waiting to be copied by the big boys in the classroom. Twitter and Facebook have started doing just that. They’re unlikely to stop until they can kill off the disruptor before it gets a foothold or be told to stop by legislation. It’ll most likely be achieved through two strategies; using their already hard-won networks and graphs, and out-featuring the features of the product for nothing more than is little more personal data.
I wrote this passage a few weeks ago as I was taking notes using Clubhouse:
Just as an aside, a note about building the network. Clubhouse requires, yes requires, you to upload your entire contacts list if you want to invite someone to the party. You get two invites when you’re successfully integrated. If you store contact details on any European citizen (regardless of where you like), you are defect breaking GDPR laws unless you’ve got permission from the person being invited. I make no judgement, I inform. Think about that for a minute. I currently have 1346 contact cards on my Mac (some are old or defunct), but Clubhouse wants 1300+ just to send two invites. I suspect around 800 or more of those contacts are EU citizens; therefore I’d be breaking the law over 800 times.
That paragraph is meaningless today, as the app has been updated to allow an invitation to be sent to individual phone numbers thus avoiding the wrath of the EU for now. Who knows if they’ll go after those who have already broken the law. 🤷♂️ For them, Clubhouse has provided means by which you can delete the contacts you uploaded. Looks a bit like shredding the papers before the inspectors to me. As far as I’m aware, French authorities have opened an investigation to determine if there was indeed a breach of law by Clubhouse.
I doubt much will come of it, though. But it is a sign of the very different times in which startups in the tech industry are trying to get off the ground, of which they will be no doubt acutely aware.
Podcast: Innovative disruption discussion on ICT-Pulse
You may well recall that I have been a guest on the ICT-Pulse podcast a couple of times in the past; well, a while back, Michele Marius released an episode we recorded together with Tunde Mottley, where we talked about the state of innovation in the Caribbean, and what we perceived as confusion between Smart and Digital. I’ll write about the second topic in the future, but I thought the first topic would be good to expand upon here. The format of the podcast is to propose a question and then discuss it unscripted. My proposed question was:
Does our size, complexity, lack of investment and poor data preclude the Caribbean from truly innovative disruption in business?
This is a multi-layer question and one that can’t be answered in one paragraph, and to be honest, depending on how many words I end up writing past this point, I might break it up in the smaller essays. 😰
What got me thinking about this in the first place is the evidence of a complete lack of popular services we take for granted in parts of the US and Europe. The Uber’s, the JustEat’s and Deliveroo’s of the world are all absent here. Even the well-implanted franchises like McDonald’s and KFC don’t offer the same services as their counterparts in other regions. Why is that?
When you take the Caribbean basin in total, some 44 million people, it could be equated to around ⅔ of the population of the UK or France. Those are big markets and provide plenty of scope for business development. A market of 44 million people should be comparable in terms of GDP, but according to my research, that is far from the case.
Of several structural issues, the Caribbean is a disparate, separated geography that makes it counterproductive to large-scale development. The 44 million people are spread over 31 countries separated by sea, language, currency and political persuasions that break the Caribbean down into small chunks that on their own cannot command the scale of funding, development and potential sales to attract investors.
Our banks and our investors have no appetite for the types of funding required to produce the kinds of startups —that once built could be exported across the globe— because they refuse to bet money the way the likes of Andreessen Horowitz does. They want an immediate return on their cash and guarantees that are inexistent in the startup world. That is not how much of the new world of business that understands internet assumptions are built.
Benedict Evans revealed in 2016 some startling figures that enlightened us on how returns on VC were broken down. Around half of the investments returned less than the initial investment, i.e., made a loss. Perhaps even more surprisingly, approximately 6% of investments returned 10x, which made up 60% of all returns.
Without attempting to oversimplify, and to be fair it is more complicated than these aggregate figures suggest, it would appear that investors would need to accept significant losses but keep going to find those breakout projects that return well above expectations, paying for all the other bets. We have no organisations/investors that have the stomach for that here.
When we look at companies that are flying high, take DoorDash —not to be confused with Deliveroo that is having a bad time on the FTSE—, it’s the leading to-the-door food delivery service in the US, but in its recent IPO prospectus, DoorDash notes that it made 149 million US$ from revenue of 1.9 billion US$. And that is after losing hundreds of millions of dollars over the last few years. Clearly, there’s potential in a market that can afford these kinds of losses over multiple years until the internet-sized scale tips things in their favour. With a population of 300 million and essentially, one jurisdiction, the incentives are clear and easy to spot.
Where do our innovators and entrepreneurs stand in the local markets? Multi-jurisdictions, multi-currencies, multiple languages and cultural differences would not seem propitious for development in the digital economy.
The 44 million in the Caribbean living in a digital divide that is still marked, together with a just-getting-going digital economy, can we build lasting value-added services? The internet is only part of the solution. Until the other pieces are in place, there will be slow growth and no breakthrough innovation. I wish I had a few billion to spend! I know we don’t lack ideas or the technical chops to wow the world, my research has shown me that over the last few years. And, the Caribbean has done it before1. It can do it again.
1 Search for “History of Reggae Music”