Clubhouse announces major layoffs: Exploring the reasons behind the decision

Clubhouse is a social network dedicated to live audio chat that was launched in 2020. At the time, the platform became so popular that competitors such as Facebook and Twitter quickly announced their own live audio platforms. Three years later, Clubhouse is struggling to stay relevant, and the company is now laying off half of its employees.

How Clubhouse went from a hit to a flop?

Clubhouse founders Paul Davison and Rohan Seth sent an email this week to its employees confirming they’re cutting the company’s team “by over 50%” and are “saying goodbye to many talented, dedicated teammates in the process.” The founders describe the decision as “absolutely necessary” to keep Clubhouse relevant in the post-pandemic world.

Back in 2020, one of the things that contributed to the success of the Clubhouse was the COVID-19 pandemic. With people staying home due to lockdowns, platforms like Clubhouse caught the public’s attention as a place where they could safely chat with others. Even celebrities joined the platform in its early days, which made many people interested in downloading the app.

But Clubhouse had to face the competition. While alternatives like Spotify Live never became a hit, Twitter certainly changed the rules of the game with Spaces – a live audio feature that works the same way as Spotify, but built into the main Twitter app.

Clubhouse is not the only company laying off employees but several other small to big companies have taken this route in the post pandemic world. In the month of April itself, companies like Gap, Amazon, Disney, Zoom, ZestMoney, McDonald and others have announced major layoffs.

A reboot for the app

With the world moving forward after the COVID-19 pandemic, many people are no longer interested in spending time talking to others in live audio chats on the internet. Clubhouse founders acknowledge that “it’s become harder for many people to find their friends on Clubhouse and to fit long conversations into their daily lives.”

According to the company, the layoffs are part of an attempt to reinvent the app with a small team, just as the app began in 2020. The affected employees will be paid for the next four months and will also be able to keep their work laptops.

We have a clear vision for what Clubhouse 2.0 looks like and we believe that with a smaller, leaner team we will be able to iterate faster on the details, build the right product and honor our teammates who helped us get here.

It’s uncertain at this point what exactly Clubhouse aims to change with its new version. Only time will tell if Clubhouse 2.0 will become a success just as the first version did in 2020.

How company is supporting the impacted?

As per Clubhouse, the company is providing severance pay, equity acceleration, healthcare coverage, and laptops to employees who are impacted by the company's changes. The severance package includes full salary until August 31, 2023, and four months of additional severance pay. 

Equity acceleration will be provided to those who helped build the company, and COBRA healthcare coverage will be paid through August 31, 2023. Employees will also be allowed to keep their company-issued laptops to research and apply for new roles. The company is also offering career support and partnering with investors to connect departing employees with other companies. Immigration support will be provided for those on visas.

The beginning of 2023 has been marked by a series of layoffs and job losses, making this year difficult for many individuals. Companies across different industries have been impacted by the ongoing economic and social changes, leading to tough decisions and restructuring. While these developments are undoubtedly challenging, they also present opportunities for growth and innovation. As we navigate this changing landscape, it is crucial to support those who have been impacted by job loss and to continue working towards a more resilient and equitable economy.