Even though Twitter (NYSE: TWTR) just created its own audio feature, Spaces, reports have emerged that the company was in acquisition talks in recent months to buy Clubhouse for a staggering $4 billion. Conversations between the two companies have now stalled but it is not clear why. Another question puzzling the tech world is which company approached whom about the deal, as this would signal how the other feels about the competition in the social audio space.
Just a few days ago, it emerged that Clubhouse is seeking to raise the $4 billion in financing.
What is Clubhouse?
Clubhouse is an invite-only social networking app based on audio-chat. To gain access to the discussions taking place on the app, you need to be invited and Clubhouse users get two invites when they join. Once in, you can tune into interviews and conversations — like listening to a podcast but live. The drop-in app is currently only available on iOS. Oprah, Drake, and Elon Musk are just some of the celebrities that have held discussions on the app.
Does Clubhouse have competition?
Twitter’s feature to rival Clubhouse is called Spaces, which launched in late 2020. The addition is still in testing mode and not all users can create or host talks yet. Twitter CEO Jack Dorsey is very bullish on Spaces though and believes it to be a great way for people to interact on the platform. During a press conference on Wednesday, Twitter stated that the company is exploring ways to monetize Spaces.
Facebook, Discord, LinkedIn, and Slack have also started to build their own audio apps. These social platforms, like Twitter, have the added advantage of already having millions of users plus functioning web, iOS, and Android apps ready to go, which will allow more users to access their apps on more devices.
Clubhouse is aware of the competition though and has already started to build an Android app and has just launched tipping as a way for users to make money from their discussions. This addition was not a way for Clubhouse to make money as they will not be taking a cut, with100% of the proceeds going to the creator.
Twitter shareholders might be wondering why the company would want to buy Clubhouse in the first place seeing as it’s making good progress with Spaces — the answer most likely being the popularity of Clubhouse. The start-up has a whopping 10 million users, up from 2 million in January and just 1,500 in May 2020. However, the fact that its business model is being copied by almost every big social and chat messaging company is a worry for the new company.
If Twitter was the one to end the discussions, they might have made a good decision as the idea is starting to become more like an addition for social companies to add to their existing platforms instead of a standalone product. Even though Clubhouse is very popular with celebrities, CEOs, and politicians, big tech companies have a huge bonus in that they already have the technology to roll out features faster to their massive legions of followers on their platforms. Once all of these audio apps are on the market, it will be interesting to see if Clubhouse can compete against them. Alternatively, the start-up might have built up enough of a loyal fanbase to ensure it remains the leader for all things voice in the social media space.
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Financial Writer at MyWallSt
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