How Does Houseparty Make Money? Houseparty Business Model In A Nutshell

Houseparty is a social networking service incorporating video chat on mobile and desktop apps. The platform is the brainchild of Ben Rubin and Itai Danino, Israeli developers who also created the similar service Meerkat.
Houseparty has an underdeveloped revenue generation model. Currently, the company makes money through the sale of in-app items designed to enhance gameplay.
Houseparty CEO Sima Sistani wants to avoid introducing advertising on the platform for fear of degrading the user experience. Moving forward, the platform may instead focus on monetizing other games or game-like experiences with partners.

Business Model Element	Analysis	Implications	Examples
Value Proposition	Houseparty’s value proposition centers on social connection through real-time, group video chats. For Users, Houseparty offers: – Social Interaction: An easy-to-use platform for connecting with friends and family via video chats. – Fun and Games: In-app games and activities to enhance social experiences. – Spontaneity: Encouraging impromptu social gatherings. – Privacy Control: Users have control over who can join their chats. For Advertisers, Houseparty provides: – Engaged Audience: Access to an engaged and interactive user base for targeted advertising. Houseparty enhances social connections and fosters a sense of togetherness.	Provides users with a platform for easy and fun group video chats with friends and family. Attracts individuals seeking spontaneous and interactive social experiences. Offers privacy controls for user safety. Offers advertisers access to an engaged user base for targeted advertising. Promotes social connection and engagement.	– Social interaction features facilitate video chats with friends and family. – In-app games and activities add fun and entertainment. – Spontaneous gatherings encourage more frequent use. – Privacy controls enhance user safety. – Advertisers benefit from an engaged audience for targeted ads.
Customer Segments	Houseparty serves several customer segments, including: 1. Social Users: Individuals looking for virtual social interaction and fun activities. 2. Friends and Family: Groups of friends and family members seeking to connect. 3. Gamers and Entertainment Enthusiasts: Users interested in in-app games and interactive experiences. Houseparty caters to a broad user base, focusing on fostering social connections and engagement.	Focuses on diverse customer segments, including social users, friends and family, gamers, and entertainment enthusiasts. Customizes the platform to address the unique needs and preferences of each group. Provides a versatile platform for various social interactions and experiences.	– Serving diverse customer segments broadens Houseparty’s user base. – Tailoring the platform enhances customer satisfaction and engagement.
Distribution Strategy	Houseparty’s distribution strategy primarily relies on mobile app stores (iOS and Android). Users can download the Houseparty app from these stores and create accounts to start using the platform. The app is designed for accessibility and ease of use. It has also leveraged word-of-mouth marketing and social sharing to attract users.	Primarily utilizes mobile app distribution through iOS and Android app stores. Offers easy access to the Houseparty app for users. Focuses on accessibility and user-friendliness. Utilizes word-of-mouth marketing and social sharing for user acquisition. Ensures convenient access to the platform.	– Mobile app distribution caters to users’ preference for app-based convenience. – User-friendliness enhances the onboarding experience. – Word-of-mouth marketing and social sharing drive user growth.
Revenue Streams	Houseparty generates revenue through in-app advertising and sponsored activities. It offers branded games and activities within the app that promote engagement and interaction. Advertisers pay to promote their products and services to Houseparty’s user base. The platform may also explore additional revenue streams, such as premium features or subscriptions, in the future.	Relies on revenue streams from: 1. In-app advertising for brand promotions. 2. Sponsored games and activities that encourage user engagement. Diversifies income sources through advertising and sponsored content. Considers potential future revenue streams like premium features or subscriptions.	– In-app advertising provides a source of revenue. – Sponsored activities enhance user engagement and monetization. – Exploring premium features or subscriptions could further diversify income.
Marketing Strategy	Houseparty’s marketing strategy focuses on organic growth through social sharing, word-of-mouth, and user-generated content. The platform encourages users to invite friends to join, fostering viral growth. Houseparty also collaborates with influencers and celebrities to reach wider audiences. It may explore partnerships and collaborations to promote sponsored content.	Prioritizes organic growth through social sharing, word-of-mouth, and user-generated content. Encourages users to invite friends, fostering viral user acquisition. Collaborates with influencers and celebrities for broader reach. Considers partnerships for promoting sponsored content. Relies on users and influencers for brand promotion.	– Organic growth strategies leverage user networks for expansion. – Influencer collaborations increase visibility. – Partnerships for sponsored content can boost revenue.
Organization Structure	Houseparty’s organizational structure includes teams dedicated to technology development, user support, marketing, partnerships, and content creation. Technology development teams focus on app enhancements. User support teams assist users with inquiries and issues. Marketing teams promote Houseparty’s services, while partnerships and content creation teams collaborate with influencers and creators. This structure supports innovation, user satisfaction, and content quality.	Employs specialized teams for technology development, user support, marketing, partnerships, and content creation. Enhances the app through technology development teams. Assists users with inquiries and issues through user support teams. Promotes services through marketing teams. Collaborates with influencers and creators through partnerships and content creation teams. Supports innovation, user satisfaction, and content quality.	– Specialized teams drive innovation and app improvement. – User support builds trust and addresses user needs. – Marketing promotes services effectively. – Partnerships and content creation enhance content quality and engagement.
Competitive Advantage	Houseparty’s competitive advantage stems from its user-friendly interface, focus on real-time interaction, in-app games, privacy controls, and viral growth. The user-friendly interface attracts users seeking easy and accessible video chats. Real-time interaction fosters engagement and spontaneity. In-app games add entertainment value. Privacy controls enhance user safety. Viral growth through social sharing differentiates it in the social networking space.	Derives a competitive advantage from: – A user-friendly and accessible interface. – Real-time interaction for engagement and spontaneity. – In-app games and activities for entertainment. – Privacy controls for user safety. – Viral growth through social sharing for increased adoption. Sets itself apart in the social networking sector by prioritizing real-time interactions, entertainment, and user safety.	– A user-friendly interface simplifies the social networking experience. – Real-time interaction promotes engagement and spontaneity. – In-app games add entertainment value. – Privacy controls build trust and safety. – Viral growth enhances adoption and user engagement.

Table of Contents

Origin Story

Houseparty is a social networking service incorporating video chat on mobile and desktop apps.

The platform was created by Israeli developers Ben Rubin and Itai Danino in 2015.

Three years earlier, Rubin and Danino founded Life On Air to develop several social media platforms. One of these platforms was Meerkat, a live-streaming app created in just eight weeks and connected to Twitter’s social graph.

Meerkat was an instant hit because users could transfer their Twitter friends without starting from scratch. The platform also received several high-profile endorsements from the likes of Gary Vaynerchuk and Ashton Kutcher.

However, Twitter soon cut access to the social graph after it acquired competing service Periscope.

User growth then began to stagnate, so Rubin and Danino attempted to bolster its popularity by partnering with Facebook and the Discovery Channel. By the beginning of 2016, the founders saw the writing on the wall and decided to pivot.

Houseparty was then developed in February that same year, using millions leftover from a previous funding round. The new platform, touted as a live-video social network, reached the number two position in the Apple App Store just three months after launch.

Life On Air headquarters then moved from Israel to San Francisco to better manage the surge in users.

By the end of 2017, some 20 million people had downloaded Houseparty. Less than two years later, Epic Games acquired the platform for around $35 million.

Growth continued virtually unabated during 2020 as millions were forced into pandemic-induced lockdown. The platform was downloaded more than 17 million times in March 2020, no doubt helped by integration with games such as Fortnite, Uno, and Magic 8-Ball.

Houseparty revenue generation

At present, Houseparty has a somewhat underdeveloped revenue generation strategy.

The company earns some money through in-app purchases. For example, the app teamed up with Warner Brothers to create a new version of Heads Up – a game similar to charades popularised by celebrity Ellen DeGeneres.

Here, users can purchase additional card decks to enhance their gaming experience. This allows Houseparty to collect an undisclosed percentage of the tens of millions of dollars the game earns in both app stores every year.

In response to the COVID-19 pandemic, however, owner Epic Games then announced the full Heads Up game would be available for free.

In terms of other revenue models, Houseparty CEO Sima Sistani has expressed reservations about selling advertising on the platform.

Sistani, who had previously spent time at Tumblr, saw how advertisements there disrupted the community.

Many have also speculated that Houseparty may become more integrated with Epic Games products such as Fortnite and the Unreal Engine. Some others believe integration with Spotify and Netflix is more likely.

Key Highlights

Creation and Founders: Houseparty is a social networking service that offers video chat functionality on mobile and desktop apps. It was created by Israeli developers Ben Rubin and Itai Danino in 2015. Prior to Houseparty, they had also developed Meerkat, a live-streaming app connected to Twitter’s social graph.
Meerkat’s Success and Setbacks: Meerkat gained popularity quickly due to its ability to connect with users’ Twitter friends and received endorsements from notable figures like Gary Vaynerchuk and Ashton Kutcher. However, when Twitter acquired Periscope, they cut access to Meerkat’s social graph, leading to stagnating user growth.
Pivot to Houseparty: In 2016, Rubin and Danino pivoted from Meerkat and launched Houseparty. The new platform, described as a live-video social network, achieved rapid success, reaching the number two position on the Apple App Store within three months of its launch.
Epic Games Acquisition: Less than two years after its launch, Houseparty was acquired by Epic Games for around $35 million. This acquisition positioned Houseparty within a larger gaming and entertainment ecosystem.
Growth During the Pandemic: Houseparty experienced significant growth during the COVID-19 pandemic, with over 17 million downloads in March 2020 alone. Integration with popular games like Fortnite, Uno, and Magic 8-Ball contributed to this growth.
Revenue Generation Model: Houseparty’s revenue generation model is primarily based on in-app purchases. For instance, the app partnered with Warner Brothers to offer a new version of the game “Heads Up,” where users could buy additional card decks to enhance gameplay. The platform earns a portion of the game’s revenue from app store sales.
CEO’s Stance on Advertising: Houseparty’s CEO, Sima Sistani, is cautious about introducing advertising to the platform due to concerns about degrading the user experience. Her experience at Tumblr, where ads disrupted the community, likely influences this stance.
Potential Integration: There is speculation about Houseparty’s integration with other products, including Epic Games’ offerings like Fortnite and the Unreal Engine. Some also believe integration with platforms like Spotify and Netflix is possible in the future.
Development and Relocation: As Houseparty gained popularity, its parent company, Life On Air, relocated from Israel to San Francisco to better manage the user surge and continued development of the platform.
Underlying Success: Houseparty’s success can be attributed to its innovative approach to video chat, rapid user adoption, integration with popular games, and its position within the broader entertainment industry through the Epic Games acquisition.