Houseparty, the group video chat that has carved out a niche among a segment of young people who use it to hang out virtually, is making its first effort to generate revenue. The company said today that Heads Up, the popular mobile game, will now be available inside Houseparty’s mobile app. Users will be able to play the game, which has one player guessing a word that only the other players can see, for free. But some “packs” of words will cost $0.99 or more, with revenue split between Houseparty and Heads Up.
After a series of scandals involving data privacy, Facebook has regularly faced questions — including some from Congress — about its advertising-based business model. Critics have argued a business model that involves targeting users based on intimate knowledge of their demographics and behavior will inevitably result in overreaching. Houseparty’s push into gaming represents an experiment in building a different kind of social network — one that makes its money by selling services rather than advertisements.
“We’re really starting to think about ways we can make money by bringing value to our users, not extracting value from them,” said Sima Sistani, Houseparty’s co-founder and chief operating officer.
Heads Up is the first of several games Houseparty plans to bring to the app, she said. The company hopes to profit by selling products that enhance the time people spend together in the app.
“Houseparty is basically the third place for Generation Z and young millennials,” Sistani said. “What they’re doing there is hanging out in the way we used to in the backyard, the basement, or in my case — the Waffle House. This is our first attempt at curating something for them to do while they’re together.”
Houseparty already sees people using the app while playing Fortnite, watching Netflix, or even shopping, she said. They also use it to play card games such as Apples to Apples or Cards Against Humanity.
Heads Up, which offers a modern spin on charades, has been a top-grossing app since it was introduced in 2013. In 2016, Forbes reported that it had been purchased more than 25 million times. The app benefits from regular promotion on Ellen DeGeneres’ popular daytime talk show, where she plays the game with her celebrity guests.
As part of the partnership, DeGeneres will promote Heads Up in Houseparty on her show. “We are excited about this partnership and the ability it brings to fans of both apps to have fun with one another no matter your location,” said Michael Riley, general manager of Ellen Digital Network, in a statement.
In a social landscape dominated by giants, Houseparty is a small player. It won’t say how many people use the app or how fast it has grown. Still, it is working to expand outside its base of teenagers and college students. The company introduced a Mac app last year, and introduced a web app today in beta. (Houseparty found that many of its users own Chromebooks rather than Macs, Sistani said.)
And while the app is small by social network standards — a typical user has just 23 friends on the app — its users are unusually engaged. The average Houseparty user has the app open for 60 minutes a day, the company said. That’s a lot of time hanging out — and a lot of time to sell users additional services. If it’s successful, it could challenge the conventional wisdom that social networks are best monetized through advertising — or, at the very least, offer a workable alternative.