Is audio a feature or a full product?
What does Clubhouse plan to do? Plus some fine reads : Nick Clegg on content moderation, All things crypto (bunch of links, enjoy!), Google v. Oracle, Intuit's "no free tax filing" flywheel
I hope you all are doing well and welcome (if you aren’t new then again) to Dozen Worthy Reads. A newsletter where I talk about the most interesting things about tech that I read the past couple of weeks or write about tech happenings. You can sign up here or just read on …
I was originally planning a regular edition of DWR but then I read about several things related to Clubhouse which got me thinking …
Clubhouse’s last raise of $100M at a $1B valuation was in Jan 2021. A couple of weeks later I wrote my bearish take on Clubhouse several things have happened which I’ll cover below. Take this with a pinch of salt as I am an audio luddite, but the fact of the matter is that I am not bearish on the format, just the whole format as a whole company!
If we consider that audio is not a format that requires “active” engagement then I fail to see how exactly Clubhouse plans to survive? What is the moat that they will create that some other tech powerhouse can’t create? Given that the format is uncurated conversations the depth of the conversation definitely doesn’t lend itself to “active” engagement and probably even less than a podcast app needs.
Who ended the talks? Was it Twitter since they definitely seem to have gotten their product act together? Or was it Clubhouse since they had another Spaces beta. My wager quite honestly is that Twitter didn't want to pay $4B. Remember they released their Spaces beta in Dec 2020 and probably didn’t want to pay ~7% of their market cap for a feature
While the talks occurred over the past several months, they’re no longer taking place, though the reason they ended isn’t known according to the report. It’s also worth noting that just a few days ago, Bloomberg reported that Clubhouse was seeking to raise a new round of funding at a valuation of around $4 billion, but the report detailing the potential acquisition talks indicate that the discussions with Twitter collapsed first, leading to a change in strategy to pursue securing additional capital in exchange for equity investment.
So now what could have been a quick get-rich scheme with a “feature” seems to have ended with Clubhouse looking elsewhere to raise. I don’t know if there is a specific reason why a16z isn’t investing (I don’t understand and maybe there is a reason). I mean they raised a $100M a few months ago and cant be burning capital at that pace with ~50 employees (max)
The other key point is that everyone and their first cousin is adding “drop-in” voice, which is a feature. Ben Evans wrote a great article about this. From his article:
On the other hand, in the 1960s there was a significant court case around Ford bundling a car radio and squashing competing radio suppliers. Is a radio an essential, necessary part of the product that should be integrated, or is it optional? What would that mean?
This is the centre of today’s argument about what Apple and Google include in their smartphone operating systems, and what Google includes in ‘search’, and it was the argument twenty years ago around whether and how Microsoft should include a web browser in Windows. If a company has market dominance, and it adds a feature to its product that is someone else’s entire business, this is inherently unfair, but life is unfair - does it follow that it’s bad, and that we should we do something about it, and if so, what?
A feature can definitely be sold/given for free “standalone” like radios or web browsers and while this is unfair this is the hand that Clubhouse seems to have played .. and lost! Yeah someone can still buy their expensive $4B “feature” but sure as heck its a lot freaking cheaper to build that feature. Remember stories? Facebook blatantly copied it to the extent that the joke that Evan Spiegel was Facebook’s best Product Manager. And growth? We’ll we all knew how that went …
But this is not always successful. Consider Instagram Reels which is the TikTok “feature” inside of Instagram. Imperfect execution aside (and even if that was not an issue) videos are not a feature, they are a product that can co-exist separately even if other products bundle them as a feature. In fact Instagram will limit the reach of TikTok reposts on Reels. OK so also this doesn’t mean that Instagram cant “fix” it. It can but I think that TikTok has earned its place in the Social/Media world. Clubhouse, not just yet. Maybe never.
So who else threw their hat into the ring? OMG where do I start? Irrespective of name - social chat, drop in chat, social audio, whatever here are some of the competitors. This is going to be a format that will be in EVERY product as a complementary feature. Not the purpose of the product.
Spotify (acq Betty Labs)
Fireside (new app, Mark Cuban)
Look at the variety and the cool thing is most of them don’t really “compete” fully. I mean sure Twitter and LinkedIn probably will compete for audio. But Slack’s audio features might not. They can be used for company all hands perhaps, other kinds of larger meetings, all within your work context, with reminders. No other pesky app to install. Discord can be used for “fan” talk or something like. Audio has many use cases. So that works.
So what should Clubhouse’s strategy be?
If you look at the aforementioned apps/companies integrating voice into their product, they are either serving/going to serve a horizontal segment (ALL audio, which is Spotify) or are going vertical with a specific group. Discord for example for its gamers or artists or whomsoever has/uses a discord server. Daniel Ek has fully realized and executed hard on this strategy. As his conversation with Ashley Carman shows he is strongly, keenly keeping his eye on this space
Social audio, specifically Clubhouse, is super buzzy right now. What are your thoughts on it? Is it something Spotify would ever consider building into the app?
I think that there’s a number of different elements of what social audio or Clubhouse even is. So I think on the one end, you’re seeing the interaction between two or more people talking, and obviously if you think about podcasts today, that’s typically the format that’s working pretty well there, too. So I’m not surprised that that’s working.
I’m also not surprised that social features, users to users interacting with each other, are working. So it is an interesting space, and it’s definitely something that we’re keeping an eye on. Long-term, though, I think the broader shift that has been true with the internet has been most of the hours of consumption, we believe, will be moving from linear to on-demand. Meaning consumers should be able to consume whatever content that they want on their terms and not necessarily be beholden to someone else’s schedule. So I think it’s a really interesting format from a creation perspective, but I suspect that from the consumption perspective, most of the time consumed will still be on-demand which is what Spotify is known for today.
Do you worry about Clubhouse taking people away from the time they typically listened to podcasts?
Andy Grove, the [former] CEO of Intel, said 30 years ago, “Only the paranoid survive,” and it’s definitely something that I think he was right in assuming. But I’m paying as much attention to Clubhouse as I am looking at Fortnite, or Minecraft, or Roblox. All forms of media and entertainment is minutes that could have been spent listening to audio instead. So we’re definitely paying attention to it.
Time is a ticking. With the vaccine light at the end of the uh covid tunnel, Clubhouse needs to move fast and in my opinion go deeper into audio (i’m very hesitant to say become a Spotify since that won’t work, they are years behind!). But other than that I’m hard pressed to find a strategy that will work for them - other than an acquisition. But whom? Twitter is out of the race, Facebook will not even try (as tempted as Zuck might be) with all the antitrust concerns. The choice set is the usual suspects : LinkedIn, Netflix, Disney, Spotify, Pandora, Discord, Google, Amazon? Someone else? I’m finding it hard to figure out who will buy them. Either that or build a nice solid war chest at a $4B valuation and out-execute everyone else on strategy. What that strategy is remains to be seen ...
Great Reads over the past week or so
Nick Clegg on Facebook’s Algo and a conversation with Casey Newton on Facebook’s algorithm. Nick Clegg says “I wish it was down to zero. I don’t think we’ll ever get it down to zero. So we have a massive incentive to do that”
Brilliant conversation between Vitalik Buterin (Ethereum), Naval Ravikant (AngelList) on Understanding Ethereum, ETH vs. BTC, ETH2, Scaling Plans and Timelines, NFTs, Future Considerations, Life Extension, and More.
OK, I knew too little about DAO’s (and honestly I could not follow all of this but this read from Packy McCormick is great. Packy’s writing is engaging and I really have to save his reads for my focused time. Quickly becoming one of my fav authors after a year of doing this and doing it in style. I love his honesty on his year of writing as a full time job and it's great to see someone with so much passion succeed. Definitely the kinda guy I’d love to have a beer (or 10) with!
Google wins over Oracle
If you’ve been a little confused by the details of the case, this article : Google v Oracle: The Copyright Case of the Decade broke it down really well I have to say. This is not a code “copy” issue but rather the fact that Android copied the structure of java and not the actual code. The real question is : Is the structure patentable? I mean seriously? Is that the same as the concept of stories? If Facebook can copy stories are we really saying that Google cannot copy the structure and hierarchy of java code? An example below:
From the article:
Stepping back, in simple terms the Java API is a collection of methods which are carefully organised into a logical hierarchy. There are organisational units above methods: classes and packages. The first instance judge described this as “like a library. Each package is like a bookshelf in the library. Each class is like a book on the shelf. Each method is like a how-to-do-it chapter in a book.” As well as the method declarations, Google replicated the functionality and organisational structure of parts of this library in Android. Google argues that to preserve the functionality of Java in Android (thereby helping developers already familiar with Java) the rules of Java required these aspects to be identical: “to work on the Android platform, Google had to replicate the syntax and structure of the Java API declarations exactly”.The copyright issue at the heart of Google v Oracle lies in the tension between Google’s literal copying on the one hand, and the prescriptive rules of Java on the other.
“In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.”
The real question then is, is idea, procedure, process, system, method of operation, concept, principle, or discovery how one would define the method definition (ie the code structure). To me this seems like an idea v/s anything else. The likely candidate from this list is “method of operation”
Intuit’s “no free” tax flywheel. How Intuit avoids providing a free tax product to its users
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