What are the Clubhouse server’s costs? Is the Agora partnership so important?

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Prologue

The “Clubhouse” is the invite-Only Audio Chat Application. It was launched in April 2020. 

Clubhouse’s explosive growth happened after Elon Musk’s interview in January 2021 and crossed 10.1 million registered users as of February 13, 2021.

Clubhouse closed a $100M fundraising round in January 2021, which earned it a $1B valuation. The round was led by one of the best start-up investors, Andreessen Horowitz.

 

Technology

Recent code decompilation discovered Clubhouse is using Agora technology for audio streaming. Once that has been identified Agora shares soared to the sky. 

So what are the infrastructure costs? Let’s make some calculations. 

Approximately 2 active million users spend between 2 and 20 hours a week in the Clubhouse.

I will guess the average time spending on the application would be 3 hours per week. So 2 million users x 3 hours per week = 6 million audio hours per week. 

Agora says they charge $0.99 per 1000 audio minutes of stream.

6 million hours x 60 = 360 million minutes 

Then we divide 360 million minutes / 1000 * $0.99 = 360 000 * $0.99 = $356K per week.

Or $356K * 4 weeks = $1.4 mln per month for audio streaming only. Quite a lot, heh?

 

The interesting part

Some analytics go further and predict the inevitable growth of Clubhouse, therefore they predict continuous payments to Agora. They even conclude that Agora will get from Clubhouse up to 400 mln per year. Wow, probably Agora shares will rise even more.

Well, it doesn’t work that way! 🙂

First of all, Clubhouse will bargain, and in the world of video/audio streaming and cloud services, the discount could be huuuge. 

For example, Amazon charges by default $0.12 per Gigabyte of transferred data. And guess what other CDN players charged in the same market when the traffic amount became pretty large? $0.001 per Gigabyte. That is more than a 100 times reduction.

Ok, probably Clubhouse couldn’t get such huge discounts, but I would bet they can get a 10x price decrease on a scale.

Meaning, they will pay $1.4 mln/month divide by 10 = $140K a month with the currently active user’s amount.

 

Even more interesting part

I assume Clubhouse already hired or planned to hire an audio streaming engineer who will create their own audio streaming technology. It could be based on FreeSwitch or Janus server. Those servers have the ability to mix the audio and I would assume a proper engineer will make a new working audio streaming system in 3-6 months.

What would be the running cost of a custom audio streaming solution? Let’s assume one $0.5/hour server will handle 500 users and the system can scale. And we will use cloud OVH.com where you don’t need to pay for the traffic.

6 million user hours / 500 users per server = 12000 server hours per week. Ok, we will need to run more servers to feel safe, so let it be x1.5 = 18K server hours per week. Meaning $9K per week or $36K per month. And again, with this amount of usage Clubhouse can get discounts from the OVH cloud. So maybe they will stop at around $25K per month.

 

Conclusion

Big companies like Zoom or growing companies like Clubhouse don’t like to be dependent on one video/audio streaming vendor. It’s a big risk. Eventually, they diversify risks among different players on the market and in the longer-term create their own technology.

My team Trembit builds custom audio/video streaming solutions, let me know if you need help sz@trembit.com. 

 

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