Drew violently slides his chair back as he stands up from the conference room table. Mouth ajar, he's dumbfounded. He's physically unable to speak. Sweat pools on his forehead. A droplet starts streaming down the length of his nose. Lungs burning, he pleads with himself to remain calm. "Breath Drew, breath." Inhale. Exhale.
Composure regained, he slowly leans forward, anchoring his hands on the conference room table. Sweat drips off the end of his nose directly onto the notebook below, creating blue ink polkadots across his meeting notes. He looks up.
With a quiet confidence, Drew looks his adversary square in the eyes and proceeds to utter one of the greatest one-liners in Silicon Valley history:
"You can go fuck yourself, Steve."
The year is 2009, and Steve Jobs has just informed Drew Houston that his company Dropbox would never make it as a standalone product. "You have a nice feature", Jobs said as he attempted to goad Houston into selling Dropbox to Apple. Was Jobs right? Absolutely. And what about Houston? Was he correct to turn down the buyout offer? With the company currently trading at an $11.5B market cap, history would also say yes.
So what gives?
Product or Feature?
The above retelling of the Dropbox saga almost certainly didn't go down as stated, but in my head, that's what happened. Or rather, that's what I want to have happened. Out manned and out matched, Houston goes up against the greatest Product guy of our generation and holds his own. It's a great story.
The Dropbox case study provides a fascenating glimpse into the age-old Product vs Feature debate. The debate is so common in tech circles that it's permeated organizational structure, influences how marketers launch new functionality, and ultimately drives company valuations. This is why it's so important to get right.
But much like the dress that broke the internet, two reasonable people can look at the same set of functionality and reach completely different conclusions. Your environment influences what you see. Perception is reality.
To Steve, cloud storage is undoubtedly a feature. Why? Because Apple users don't typically sign up for an iCloud account independent of the Apple ecosystem. iCloud doesn't stand on its own. You don't become a customer of Apple for the sole purpose of using iCloud.
To Drew, cloud storage is unquestionably a product. His user base needs a cross platform file storage solution. They weren't interested in going all-in with Apple or Microsoft or Google. Dropbox's users wanted a solution that lives independently and is platform and device agnostic.
Same core functionality. Different user. Different value chain. Different classification.
Cool, but what does cloud storage have to do with Clubhouse? Stick with me, it's coming.
Clubhouse -- Product or Feature?
Clubhouse is a voice-based social networking platform that allows users to listen to and participate in live audio chat sessions. It's analogous to attending a live panel discussion at a conference in that:
- You pick a chat room that interests you and enter as an audience member.
- If you want to talk, you "raise your hand", and the speakers can choose to invite you up and speak.
- When you're done, you move back to the audience where you can leave the room quietly.
Panel discussions as a social networking platform. It's brilliant.
There are two distinct users of the Clubhouse platform: Moderators and Listeners. Moderators are the people hosting the discussion. They are the content creators. Listeners are the public audience. They drop in, ask questions, and drop out.
As Clubhouse is a social networking platform, they, like every platform business, must simultaneously address the needs of both types of users in order to be successful. The more interesting and influential the content, the bigger the audience. The bigger the audience, the more content creators will adopt and use the Clubhouse platform. More creators = more listeners = increased platform value. Classic Metcalf's Law.
In this case, the functionality at the core of the product vs feature debate is the platform itself. Currently the Clubhouse platform is centered around live, synchronous audio communications. No recording, no replay. You have to be there to hear it.
To date conventional wisdom edicts that in the world of audio, on-demand is how most listeners want to engage (e.g. a podcast). Clubhouse fundamentally challenges this notion. For Clubhouse listeners, it's the multi-sided conversation and audience interaction that's the draw. The fact that it's live and anything can happen further adds to the appeal. It's like having seen Oasis Live at Earl's Court, there's status in being able to tell your friends you were there and experienced it in real-time.
Creators desire access to large audiences in order to increase their exposure and promote their thoughts, ideas and personal brand. The best way to do that is to find the platform and distribution channel(s) that provide that broadest reach. Clubhouse provides a unique new way for creators to collaborate and distribute their content at scale, so it's no surprise that we've seen high-profile celebrities like Oprah, Elon Musk and Chris Rock check it out. And with two million active users on the Clubhouse platform, listeners have responded in droves.
As it stands today, it's clear there is a market for a Clubhouse-style content platform to exist. Both content creators and listeners are engaging en masse. However, act two is now upon us. What does Clubhouse look like when the incumbant platfroms hit ctrl-C?
Dropbox realized early on that there was value in an independent cloud storage solution delivered over the top of the major computing platforms. Their platform agnostic approach gave them a natural defense from rivals like Google, Apple and Microsoft who copied their functionality in order to incentivize platform lock-in. Drew's insight was that there is tremendous value in providing a seamless experience across all platforms and devices, and they were uniquely positioned to deliver on that proposition.
Content platforms such as Twitter, Facebook, LinkedIn and Spotify will all undoubtedly follow the Google, Apple, and Microsoft playbook as they look to fight for content creator and audience share on their platforms. Andreessen Horowitz, the primary investor in Clubhouse, is acutely aware of this dynamic. This is why they're pushing the company to build a hefty war chest. But I think there's more at play.
Twitter reportedly recently put in a takeout bid for the company. This makes sense as Twitter is perhaps the most threatened by the Clubhouse model. Twitter is where creators publicly collaborate and debate in written form, and audio is an obvious extension of their core value prop. The launch of Twitter Spaces will be interesting to watch. It feels an awful lot like Twitter using the Jobs playbook--relegating live audio to feature status in efforts bring Clubhouse back to the table.
I also find the timing of Clubhouse's direct monetization announcement interesting. Taken in isolation, the feature looks and feels rushed. The creators most likely to benefit from the tipping function are the ones least likely to need it. Why ship this now?
In my opinion the explanation is simple--content monitization is where Twitter is most vulnerable. As it stands today, Twitter's creators must take users off platform to monitize. There is no way to directly extract value from your followers, and this is by design. Clubhouse is playing offense by targeting a structural weekness in the Twitter ecosystem. This is why Clubhouse is raising money, it adds credibility to the threat. It forces Twitter to make the next move.
Get your popcorn ready and watch this space. The content wars are heating up, and it's bound to get interesting in the months ahead!
So, you've made it to the end, what did you think? I genuinely want to know. Love it? Hate it? Follow me on twitter and share your thoughts!