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? \Consumer TL;DR: What’s the deal with Twitter alternative Mastodon and is Elon Musk even bothered? By Kai Nicol-Schwarz 9 December 2022 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? By Nicolas Colin Wednesday 17 February 2021 By Nicolas Colin Wednesday 17 February 2021 “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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