Consumer/Media/Opinion/

Why can’t Europe build a Clubhouse?

Clubhouse is taking Europe by storm, and nobody loves it more than the tech community. So why can't we build our own social media giant?

Nicolas Colin

By Nicolas Colin

“Clubhouse was inevitable,” Stratechery’s Ben Thompson wrote to his subscribers on Monday. Social media has replaced just about every other form of traditional media  — except for audio! And so it was only a matter of time, or circumstances.

In this case, as it turned out, Covid-19 was the tipping point: people were stuck at home with plenty of free time on their hands and a thirst for social interactions.

Enter Clubhouse, which benefited from much more than just a favourable context. Its rise has followed a well-honed playbook for growing Silicon Valley-based ventures at a global scale.

The Silicon Valley playbook

First, work on what VC investor Bill Gurley calls “liquidity quality” — getting early users super excited about your product. Clubhouse did exactly that by initially focusing on the small, exclusive world of tech personalities and VCs in Silicon Valley, who then acted as influencers to attract a broader base of engaged users.

Then raise a lot of money to accelerate growth on a solid basis, which is what Clubhouse’s $10m Series A, led by Andreessen Horowitz in May 2020, was all about.

And finally, as you raise a Series B, tackle the challenge of international expansion by adapting the value proposition to foreign markets. Sure enough, Clubhouse accelerated its deployment in Europe just as the new round of investment was announced. In this case, crossing the border meant targeting local influencers and managing diversity when it comes to the languages spoken in the various rooms on the platform.

Yet if the playbook is so clear and it’s only a matter of market timing and good execution, then why hasn’t any European startup managed to emulate Silicon Valley and grow a social media platform at a large scale? Only a few exceptions come to mind: UK-based OnlyFans, which has long been focused on adult content (but now has the potential to go mainstream), and France-based Zenly, which although it remains independent as a product, was acquired by Snap relatively early, back in 2017.

“Now TikTok is here to say that you can indeed conquer a global market with a social product built outside the US.”

Now, though, Europeans don’t have any excuse. For a long time, it appeared as if the US was the only market from which you could pull off such a trick, but now TikTok is here to say that you can indeed conquer a global market with a social product built outside the US. 

The real reasons Europe can’t build social giants

So what’s up? Three issues come to mind.

First, it’s difficult to deliver Gurley’s “liquidity quality” followed by exponential growth in a market that’s as fragmented as Europe. One option is to focus on a given geography, but the local specificities when it comes to language and culture make it difficult to quickly expand into neighbouring markets. Or you can address a cross-border community of early adopters (say, for instance, tech people across Europe), but even then there’s still a high probability that these individuals won’t really feel they’re part of the same world given their different cultural and linguistic backgrounds.

Another issue is Europe’s investment community. Building and scaling social products is a game Silicon Valley has been playing for years, and investors there are now seasoned enough and have enough capital under management to be able to make long-term bets on social companies such as Clubhouse (which will likely take years before it monetises, let alone turns a profit).

Investors in Europe, on the other hand, don’t have as much experience in this field: not only do they not have access to as much capital (although it’s getting better), they also don’t have the local precedents that would make them serene when tackling a challenge like backing a social media platform aimed at the global market.

“Maybe Europe is simply too snobbish for social media entrepreneurs to be able to succeed here.”

The third issue is more subtle: maybe the European tech establishment doesn’t take social media seriously enough to consider having our own champions in that space a worthwhile goal. We can read articles all day long about Europe lagging behind in things such as cloud computing, quantum computing, self-driving cars and artificial intelligence, but not so much about more ‘frivolous’ lines of business such as helping people connect with one another to exchange dance videos, filtered pictures, memes or long rambles in a Clubhouse room. Maybe Europe is simply too snobbish for social media entrepreneurs to be able to succeed here.

It’s not what you got, it’s what you do with it

If that’s the case, it’s yet another example of Europe needing to realise that what matters is less the technology than what you actually build with it. The truth is that if European entrepreneurs try to deploy social media platforms by using the Silicon Valley playbook, they will likely fail. What works for Clubhouse does so precisely because Clubhouse is born and bred in Silicon Valley. But for European ventures, the context is different: they have to deal with fragmentation early on and they don’t have access to the same investors at an early stage.

“It’s possible for a non-American platform to expand at the international, even global, level provided you’re able to design and implement a different playbook.”

This, by the way, is exactly the lesson we should draw from TikTok’s phenomenal success: it’s possible for a non-American platform to expand at the international, even global, level provided you’re able to design and implement a different playbook. For TikTok, the trick was to rely on algorithms rather than human intervention to orchestrate virality and maximise engagement. That made it possible for Chinese entrepreneurs who didn’t know much about American consumers to create a rewarding experience for users of the application in the US and to increase engagement as a result.

Can some European founders come up with their own algorithmic approach — one that’s tailored for Europe’s specific context and turns its supposed weaknesses, such as fragmentation and language diversity, into strengths? With the incredible improvements in speech-to-text technology and translating foreign languages, you would think that users of social media applications need not be trapped within their national community. And with the progress made in building a single European market from both a privacy perspective and a copyright perspective, it should be obvious that the barriers to scaling up at the pan-European level are now lower than ever, including for social media applications.

“If Europe shuns social media as a potential playground for building new companies… it will be left out of all the upstream value that comes with them.”

In the end, this is about more than having European equivalents to Clubhouse, TikTok, Snap, or whatever else. It’s about realising that the fast pace of innovation on consumer markets is what drives technological progress upstream (such as the rise of Facebook eventually giving birth to non-relational databases that lend themselves to scaling up faster). And so if Europe, as a continent, shuns social media as a potential playground for building new companies, not only will it miss the opportunity to see social applications emerge that are more in sync with the European context and way of life, it will also be left out of all the upstream value that comes with high technology developing in the US and China.

I admit it’s hard to see what could reverse the trend, but the meteoric rise of Clubhouse over the past year should serve as both a wakeup call for investors and a source of inspiration for European entrepreneurs.

Nicolas Colin works for investor The Family. He writes a regular column for Sifted.

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Maggie Childs
Maggie Childs

Emmm, we built an open-source version in Austria in just a few weeks after clubhouse launched here.
Gad to connect you with the founders if you want to write about it.

https://github.com/jam-systems/jam

Russell Sheffield
Russell Sheffield

Colin is spot on. The European Investment community lags behind. I appreciate this may be seen as a bit of a plug, but let me explain this from our perspective, We at Trackd are the Worlds first 8 Trackd Social Recording Studio in your pocket. Supporting the Artist to Record, Collaborate, Share their work with fans AND get paid, We have been around since 2016 and already have hundred of thousands of artists the world over. We’ve had to bootstrap our way to success so far with very small capital investment, because European Investors aren’t brave enough to back an… Read more »

Pawel Tomczuk
Pawel Tomczuk

I really enjoyed reading the piece – although I think that Peanut is a particularly interesting European social network, that in my view has a shot of being bigger than businesses like Bumble.

A lot of things you’ve touched upon in the article are things our team is thinking about on a daily basis – I definitely agree with a lot of challenges you’ve described.

Thanks for an insightful piece.

Aniemeka Nduka
Aniemeka Nduka

I have a social network startup based in Europe named Lit vibe . I believe that if we get a good investment and backing we can make it to the mainstream.

The difference between European investors and American investors is the ability to bet on a company with no revenue potential for at least 4 years. Europe investors want to cash out asap. Social network business is long term. It’s not always about the revenue it’s about the values.
Social network revenue is in the valuation based on the user base and the value it provides for users.

A non-european's perspective
A non-european's perspective

You just have to look at these comments to see why europe will never make it big in tech – the dismissive, know-it-all, I-don’t-like-it-so-it-has-no-value comments in the face of repeated failure of european tech cos, the lack of any kind of self-examination is precisely why there will be no big tech startups in europe (and before you start with the same tired old list of 5 companies, ask yourself why do you always have to rely on these few companies to defend european tech environment). At this rate, any successes that happen in Europe are despite the terrible startup environment… Read more »

Colm Smyth
Colm Smyth

I think Clubhouse has tremendous potential. Facebook was also exclusive at launch – it’s a great strategy to colonise a niche and build an initial high quality community to get feedback to the developers and to set the tone for users.

As long as Clubhouse users can congregate with like-minded others, the issues of culture, language, subject matter and value differences can all be resolved.

Paul Dowling
Paul Dowling

I am agreeing with Mark Dempsey on this. Why do we need to build a Clubhouse? It is all that is bad about Silicon Valley. When will the liberal elite learn? Building a series of intellectual echo chambers with barriers to entry for normal people can only polarise society. Keep drinking the cool-aid if you want to but please try and use a bit of judgement about what is cool and what isn’t.

Pippa Lamb
Pippa Lamb

I would respectfully push back here. Europe has one of the richest heritages for an adjacent category: gaming. To state that the region is deficient in this type of thinking or product focus is misleading. And more specifically on social: what about Yubo? With over 40M users: at what point do you define a platform as “large scale?” Or Jodel out of Berlin, or Peanut out of the UK? I would agree that there are less funds that focus on social in Europe (we are one of the few at Sweet Capital/ ex King.com ) which may a bigger problem,… Read more »

europe based
europe based

maybe, but the only people i see talking about yubo are those who invested in it…

Mark Dempsey
Mark Dempsey

I disagree with premise of this piece. Clubhouse is terrible – I am on it and will not be using it much. An exclusive space with lots of back-slapping. Social itself has not proved itself particularly helpful towards wider society in recent years so I believe that is your answer right there; if you consider that “snobbish” than that proves my next statement perhaps! I consider that European founders tend to lean towards building things that wider & better societal implications.

Glenn Burgess
Glenn Burgess

Europe definitely struggles w/- fragmentation … unfortunately. More unity far less division is the order of the day. Collaboration VS Competiton. Connection vs Isolation. Ah one day – one day.

Ricky
Ricky

Pipt looks really interesting. Maybe this is the one Europe offers up to the world.