Houseparty taps ‘Heads Up’ to make money without ads

Can a social network make money without relying on advertising?

Houseparty, the video chat app so popular with teens Facebook copied it, is about to find out. The app, which bills itself as a “face to face social network,” just took its first step toward actually making money.

The app is teaming up with Warner Brothers to put a version of Heads Up, the charades-like game popularized by Ellen DeGeneres, inside of its app. Beginning today, Houseparty users can access a lightweight version of Heads Up from within their group video chats.

Unlike the standalone app, Houseparty’s Heads Up feature lets users play without plunking down cash up front. There will be three free decks to choose from, and users can purchase additional decks for an in-app purchase. (If you’ve previously purchased decks in the standalone app, they won’t carry over to Houseparty.)

Houseparty will get a cut of all in-app purchases made via its Heads Up feature,. The company declined to share specifics of its agreement with Warner Brothers.

But partnering with Heads Up is a potentially lucrative deal for the three-year-old startup, which has yet to bring in any revenue of its own. The $0.99 game, launched as a standalone app in 2013 as a spinoff of a game DeGeneres played with guests on her show, has been the most popular paid game in Apple’s App Store for four straight years. It’s also incredibly profitable: Heads Up grossed more than $26 million in both app stores over the last five years, and took in $5 million in 2018 alone, according to data from app analytics firm Sensor Tower. 

If Houseparty can claim a piece of that, then it would be a significant win for the company, which made a conscious decision long ago to eschew traditional advertising models, according to cofounder and COO Sima Sistani.

“We have a big user base, they’re highly engaged [and] we can we can distribute content to them. But it’s important to me that they get to choose whether they want to engage. And that if they’re going to pay us for it, it’s because it’s an additive experience.”

Sistani says users can, however, expect more in-app games as well as other “shared experiences” as the company explores other content partnerships. 

For Houseparty, its move toward monetization comes at an important time. The video chat app has drawn the attention of larger competitors, like Facebook and Snapchat, because of its ability to attract younger users. But much of its early growth has now stalled, according to a recent report in Digiday, which cited slowing app installs. 

At the same time, the amount of time its users are spending in the app has increased, with the average user spending 60 minutes a day in Houseparty, according to the company. (By comparison, Snapchat says its users spend “more than 30 minutes per day” in its app, while Facebook claims more than 50 minutes a day across Facebook, Messenger, and Instagram.)

The sheer amount of time users spend in the app makes it all the more striking that Houseparty purposefully forgo advertising as a revenue source. Sistani says she knew very early on she did not want to purse monetization via advertising, a decision in part influenced by her experience at Tumblr, where she was previously head of media.

“Ads disrupted that community,” she said. “From the beginning, I’ve always said that I would like to try to approach monetization [for Houseparty] in a different way.

“I hope that we’re, you know, able to show a different path.”