Houseparty Business Model | How Houseparty Makes Money?

Houseparty is a video conferencing platform that is compatible with all operating systems. 

Individuals wishing to access additional features may purchase in-app purchases; the game is offered free of charge.

Houseparty is different from other video-chatting apps because it offers games such as Chips and Guac.

Houseparty business model is based on the sales of its in-app items which is done with collaboration with various games such as Heads Up and others.

You can connect with other users on the site who are also on your contact list and engage in video conversations with them after creating an account. 

When you’re online, you can share your screen, muffle yourself, or disable your camera.

Houseparty was developed by Life on Air, a San Francisco-based (formerly Tel Aviv-based) company that launched the app in February 2016. 

Houseparty was founded by Sima Sistani, the CEO of Houseparty, and Ben Rubin, the CEO of Life on Air.

Houseparty was developed in secrecy and initially distributed via app stores under a pseudonym. 

A well-known service before Houseparty was Life on Air’s live streaming software Meerkat, released in February 2015. 

The app hit SXSW that year, but it was discontinued in October 2016, replaced by Twitter’s Periscope and Facebook’s built-in live streaming features.

What is Houseparty?

Houseparty is a social media application that enables video calls between friends and other users.

Houseparty earns money through in-app purchases. Users can purchase packages while playing games on the app.

Houseparty Business Model

Houseparty was launched in 2016 and has swiftly grown to millions of users. In 2020 alone, the company saw over 50 million downloads.

Company NameLife on Air Inc. (Epic Games)
Company TypePrivate
FoundersBen Rubin
ProductHouseparty
OwnerBen Rubin
Founded Date2012
HeadquarterIrvington, New York, United States
Location ServedWorldwide
Websitehttps://houseparty.com

How Does Houseparty Work?

Houseparty is a social media site that enables video calls between friends and other users.

You can access Houseparty in various ways, including downloading an Android or iOS app, using a Chrome extension, or visiting the platform’s website.

You can invite friends by sharing their contact lists or searching for their usernames after creating an account.

Video chatting with friends is the primary purpose of Houseparty. Conversations like these can take place between two people or among groups of eight or more.

The service also allows users to send what are known as facemails, which are video communications that can be viewed later.

Video chat isn’t the only way to collaborate. Games can also be played together. This corporation has also worked with game creators, including UNO.

The Epic Games acquisition of Fortnite has also enabled users to stream their Fortnite games to friends and other users.

How Does Houseparty Make Money?

Houseparty earns money from the sales of its in-app items. It has collaborated with games like Heads Up, which is based on the Ellen DeGeneres show.

The game offers standardized decks for users. A player can choose to purchase more decks to improve their gaming experience.

Houseparty must pay a commission to Apple and Google whenever it sells a bundle within the app. An average fee is between 10% and 30%.

Houseparty has explicitly chosen not to display advertisements on the app. The goal is to avoid interfering with the user’s experience, as invasive advertisements often do.

Also, there have been rumors that Houseparty is selling users’ data to third parties. Those claims have been refuted repeatedly by the corporation and remain unproven.

What is the Funding and Valuation of Houseparty?

Houseparty raised a total of $70.2 million in venture capital funding over six rounds, according to Crunchbase.

Arena Ventures, Comcast Ventures, Sequoia Capital, NFX, Greylock, Aleph, and Rainfall Ventures are just a few of the notable investors.

Houseparty’s valuation was last announced in connection with its acquisition. Epic Games is rumored to have acquired the Houseparty for $35 million.

Success Story of Houseparty

Houseparty was started in 2015 by Ben Rubin, Itai Danino, and Sima Sistani. It is administered by Life On Air and is headquartered in San Francisco, California.

However, its narrative began far earlier. Rubin, pursuing a degree in architecture at the Israel Institute of Technology, and Danino founded Life On Air in 2012.

The business’s objective was to catalyze the development of various social media platforms.

The trio eventually released its first app in August 2013 after obtaining a tiny seed round. 

The program, dubbed Yevvo, allowed users to follow not only their friends but also nearby events, places, and more. Regrettably, Yevvo never quite took off.

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Rubin chose to relocate to San Francisco to be closer to investors and other inventors. The team was successful in raising an additional $3.7 million to pursue new business prospects.

They continued to experiment with numerous concepts throughout the next few months. 

One of those concepts evolved into Meerkat, an app that CTO Danino constructed entirely on his own in eight weeks.

Meerkat incorporated a Yevvo feature known as the corner, which was immensely popular with its users. They may use the feature to launch a live stream, for example, to broadcast their attending concert.

Danino expanded on that concept with the creation of Meerkat. Because the app was immediately connected to Twitter’s social graph, users did not need to recruit an entire network of friends to join. 

Everyone with whom you are friends on Twitter would have immediate access to the live streams.

Meerkat officially launched on March 1st, 2015, and took off quickly. Ashton Kutcher and Gary Vaynerchuk were among the early users.

Regrettably, things did not proceed as well after that. Within days, Twitter disabled access to its social graph. 

Houseparty Business Model

Additionally, it paid $100 million for a competing firm called Periscope, which was still in testing (similar to Vine, which was acquired a few years prior).

Meerkat became a hot topic at South by Southwest Interactive (SXSW), a technology conference in Austin, Texas, every year despite the deadline. Ironically, Twitter also gained popularity at SXSW in 2007.

The increased visibility enabled the team to attract another round of funding for $14 million from investors, including Greylock, Comcast Ventures, and other Silicon Valley firms.

Meerkat quickly surpassed one million downloads in part because it released an Android app before Twitter/Periscope, but interest quickly waned. 

The Meerkat team hit up Facebook to exploit its social graph to address the decline in interest.

Nonetheless, even subsequent collaborations with GoPro (for video streaming through the gadget) and the Discovery Channel (for content) could not halt its decline. 

Facebook added a live streaming option months after the partnership was announced, known as Facebook Live to compound problems.

By early 2016, the founders recognized that all hope had been lost. Given that they retained more than 70% of the capital raised during the $14 million fundraising effort, Rubin and his team opted to make another shift.

They came up with the first concept of a live-video social network on a company-wide retreat in Israel. This concept would serve as the basis for Houseparty, which was secretly launched in February 2016.

Additionally, they hired Sima Sistani, who oversaw teams at Yahoo and Tumblr, as its third co-founder and chief operating officer.

Although they did not make a public announcement until September 2016, Houseparty quickly surpassed Meerkat’s user numbers within months of its launching. 

In May, just three months after introduction, the app hit the number two spot on Apple’s App Store.

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Over the summer, Houseparty’s user growth slowed due to the app’s inability to accommodate the influx of new users. 

As a result, Life On Air rebuilt its technical team, relocating them from Israel to San Francisco and hiring a new Head of Engineering from Twitter.

With growth resuming the app passed one million downloads in September, the team could excite investors about Houseparty’s prospects. In December 2016, the club raised an additional $52 million.

Facebook and Snapchat launched competing products, but growth remained unchanged. 

The app has been downloaded more than 20 million times since it was launched in July 2017. 

The team proceeded to iterate on the app experience over the following months and years, for example, by introducing the ability to play games.

CEO Rubin said in March 2019 that he would step down as CEO after seven years and pass the keys to COO Sistani. Rubin remained a board member and advisor while launching his business later that year.

Three months later, an even greater announcement was made: Fortnite creator Epic Games announced the acquisition of Houseparty. 

Subsequent reporting suggested that the purchase price was in the neighborhood of $35 million.

Interestingly, Facebook attempted to acquire the company at the end of 2018 but withdrew owing to pending Federal Trade Commission monopolistic investigations (FTC).

Meanwhile, Epic Games’ timing could not have been more perfect. A few months after purchasing Houseparty, the new coronavirus effectively quarantined the whole world’s population.

Along with Zoom, Houseparty became a tool for friends and families to keep connected. In March 2020 alone, the platform attracted over 50 million users.

Regrettably, not everything went according to plan. Thousands of individuals complained in March that their accounts had been compromised, resulting in withdrawals from their credit cards, among other things.

Epic Games refuted all of these claims and even offered a $1 million reward to anyone who could have a hack of Houseparty. 

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Zach Edwards, the creator of analytics startup Victory Medium, provided that proof two months later.

He discovered that a well-known hacker gang was redirecting users to harmful files via dozens of subdomains controlled by Houseparty. 

The downloaded files began penetrating users’ devices and collecting their credit cards and personal information once they were downloaded (without the users’ consent).

However, the growth rate remained unchanged. Houseparty users can now live stream their Fortnite gameplay to Epic Games via EA’s acquisition of Epic Games.

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