Houseparty Finally Has a Plan to Make Money

January 17, 2019

By Alex Heath

After two years and $52 million in funding from some of Silicon Valley’s top investors, the video chat app Houseparty is ready to start making money.

On Thursday, the social network announced a partnership with “Heads Up!,” the charades-like game for phones that was created by Ellen DeGeneres and Warner Bros. Entertainment. Houseparty users will be able to play the “Heads Up!” game inside the app while video chatting with friends. Importantly, they’ll be able to unlock additional material for the game through in-app purchases.

The partnership is Houseparty’s first step toward building a business after raising $52 million in funding from top venture capital firm Sequoia and others at the end of 2016. Back then, Houseparty had quickly shot to the top of the App Store charts and was seen as the next big hit among social networking apps.

Fast forward to today, and Houseparty’s user growth has been declining. The app had roughly 2.3 million daily users in December 2016 and about 1.1 million in December 2018, according to data provided to Cheddar by Apptopia, a third-party analytics firm that specializes in tracking app trends.

A Houseparty spokeswoman declined to provide the app’s overall user numbers but said the average user spends 60 minutes per day chatting with an average of 23 people. Billed as a way to digitally hang out with friends, Houseparty allows someone to video chat with up to 8 friends at once on a single screen and swipe between endless combinations of group calls.

Houseparty conducted focus groups to determine how it could improve – and monetize — the “shared experiences” its users were having, the company’s president and cofounder, Sima Sistani, said during a recent interview. “It was clear they wanted us to help facilitate the engagement a little more,” she said.

Unlike a traditional video call, Houseparty notifies someone immediately when one of their contacts opens the app. And when someone goes into the app, they are prompted to join a video call with a friend who also has the app open. Sistani calls the company a “face-to-face social network” that “brings empathy to online communication.”

Houseparty has no intention of adopting an advertising business model, according to Sistani, who added that the app doesn’t collect data about its users. She said that the company had thought about offering in-app purchases for features like custom emojis and video filters, but that the current focus is on introducing more game-like experiences with outside partners.

It’s unclear how much revenue Houseparty, which has 47 employees, plans to make from its partnership strategy. The company declined to disclose the financial details of its integration with the “Heads Up!” game, which has consistently been one of the App Store’s top-grossing games.

Houseparty’s user base is still heavily concentrated in the United States and on Apple devices. The company initially paid a few dozen college students to market the app on campuses across the country — a strategy that has since been abandoned.

Competition around Houseparty’s core feature — group video chat — has never been fiercer. Apple introduced group chatting for FaceTime last year, and Facebook recently started marketing its own group video chat app, called Bonfire, on college campuses.

“That is not new,” said Sistani when asked about competition. “What’s new is that this is a network. At the end of the day, what we have is not group video chat. It’s a face-to-face social network.”