HouseParty – A Social Distancing Phenomenon or the Next Big Thing?

With over 50 million downloads between March 15 and April 15, about 70 times above the average number of downloads for any app[1], Houseparty has clearly benefited from the ongoing Covid-19 crisis. Over the same period, the digital socialization app also became the number app in 82 countries[2].  The reason for Houseparty’s popularity is clear: people are stuck at home and they need new ways to socialize and have fun.  Houseparty provides an intriguing solution to this by allowing users to hang out in random “rooms” via video chat. Less than a year after being acquired by Epic Games, the social media app has its opportunity in the limelight. Now the question is, will it be a 6 minutes of fame phenomenon? Or will Houseparty establish a long-term stranglehold on digital socialization?

What is Houseparty?

Created in February 2016, Houseparty is a video hangout platform that allows up to 8 users to hang out in digital rooms.  These digital rooms can either be locked or unlocked. When rooms are unlocked, anyone who has a friend in that room can join the party. When the rooms are locked, friends of the participants in the locked room can request to join the room. Participants in the room can also invite friends to join by waving or using the in-app messaging service depending on if friends are online or offline. Users are sent notifications when their friends are “in the house” (i.e. using the app), and they can decide whether or not they would like to add them to a room.

 

 

Is Houseparty’s Success Sustainable?

 In order to answer this question, we need to look at the advantages Houseparty could leverage and the risks it may face:

Advantages:

  • Gaming element. What currently differentiates Houseparty is the gaming portion of the app. Participants can play a variety of games depending on the number of people in the room. Some gaming options include[3]: Heads Up, Quick Draw, and Trivia.

 

  • Partnership with Epic Games. Epic Games have a great reputation for engaging applications, having been the creator of the popular online video game Fortnite. The company knows how to engage users and could leverage this experience to ensure Houseparty stays relevant beyond the crisis.

 

  • Given the sharp increase in the number of active users, Houseparty have an opportunity to gather useful insights on user behaviors on the app. This can be used to offer more exciting features to keep the app relevant beyond the Covid-19 crisis. If employed correctly, Houseparty could benefit from the flywheel effect whereby the platform attracts more and more users as more data is gathered and used to drive better insights and more attractive features.

 

  • Network Effects. Houseparty benefits from the same network effects that a majority of social media applications benefit from. The more users that frequent the app, the more attractive it becomes to other users. Indeed, we see this at work with Houseparty’s explosive growth over the last few weeks.

 

  • Brand Name. Houseparty just recently became popular but they could have developed some substantial brand equity already. There is an edgy feel to the Houseparty that Facebook, Zoom, Twitter, Instagram, Whatsapp, Snapchat, other social media applications don’t have. In fact, Houseparty users seem to go onto the app with knowledge of the privacy risk. This is likely an effect of the current crisis whereby users are more willing to take risks with privacy and try completely new things to socialize. Moreover, the companies that own these apps may be reluctant to completely copy Houseparty’s platform given their previous issues with privacy.

 

  • Convenience. The apps’ convenience and ease of use is also another advantage. Once a user logs in, he or she can see which of their friends are available, who they are hanging out with, and can thus decide if they want to join the room. The app is also available to use via laptops and desktops which make it more convenient.

Risks:

  • Privacy concerns. Currently, there have been no major privacy issues with Houseparty although a few concerns have been raised[4]. However, this may change as the app gains popularity and the risk of data breaches heighten. These issues have affected many other social applications and Houseparty are unlikely to avoid them going forward.

 

  • Aggressive Competition. Competition in the digital social network space is extremely aggressive. It is easy for people to hold video calls and hang out on Zoom and WhatsApp amongst others. Indeed, some of these options may be preferable given the connectivity is more stable and reliable. People could also find creative games to play over video calls and may not necessarily need the gaming options Houseparty offers. There are clear examples of aggressive competition during the Covid-19 crisis. Facebook quickly launched a product to compete with Zoom after seeing the Zoom’s profile skyrocket in the midst of the crisis[5] and also increased the limit on the number of users on video chats on Facebook and WhatsApp to 50 and 8 respectively[6]. Thus, Houseparty need to be able to adapt and innovate quickly in order to stay ahead.

 

  • Covid-19 Crisis Ends. This is probably the biggest risk to Houseparty. When society opens up again, digital socialization will likely drop significantly as people start to indulge in the kind of physical social activities they missed as a result of the crisis. Houseparty could potentially help friends who are separated all around the world to connect and have fun. However, differences in time zones is one barrier users will have to overcome. Currently, a lot of people are unoccupied and at home and thus time zone differences are less of an issue.

 

  • Limited Revenue. The Houseparty app is currently free and operates under a freemium model to unlock some features in the games it offers. Revenues are limited and there are currently no plans to earn revenue via advertisements[7], a model that has proven successful for other social network apps. Without a more sustainable revenue model, it is unlikely Houseparty will be able to adopt the required innovation to capitalize on its growth and stay relevant.

 

I believe it is unlikely Houseparty’s explosive growth will be long term trend. Unless the apps’ offering changes dramatically in the next few months, we are likely to see a significant dip in the number of daily active users on Houseparty once the Covid-19 crisis ends and other social networks expand their offerings. Houseparty certainly does offer a different gaming element and some excitement. However, without a sustainable revenue model and sustainable differentiated offering, Houseparty’s success is likely to be similar to a storm that passes through for a few hours before it disappears into distant memory.

 

[1] https://techcrunch.com/2020/04/15/houseparty-reports-50m-sign-ups-in-past-month-amid-covid-19-lockdowns/

[2] https://techcrunch.com/2020/04/15/houseparty-reports-50m-sign-ups-in-past-month-amid-covid-19-lockdowns/

[3] https://metro.co.uk/2020/04/07/sick-houseparty-zoom-try-alternative-video-apps-feature-games-12523003/

[4] https://cheddar.com/media/houseparty-finally-has-a-plan-to-make-money

[5] https://www.wsj.com/articles/facebook-launches-its-answer-to-zoom-11587752287

[6] https://www.cnbc.com/2020/04/24/facebook-messenger-rooms-offers-video-calls-for-up-to-50-people.html

[7] https://cheddar.com/media/houseparty-finally-has-a-plan-to-make-money

 

 

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4 thoughts on “HouseParty – A Social Distancing Phenomenon or the Next Big Thing?

  1. Great read, especially as a Houseparty user myself. One other competitor that wasn’t mentioned is FaceTime – the nativity to iPhones offers a big competitive edge to Houseparty. I tend to agree that Houseparty will be more a fad than anything. One thing to think about though is how users themselves will change. Will a post-pandemic world be more digital? More location agnostic? Houseparty won’t replace real-world interaction post-COVID, but it may be able to carve a space in augmenting these human connections; I know personally I’ve never talked with my family more (oftentimes via Houseparty) than during COVID and I’m starting to realize that connection across distance is far, far easier and less time-intensive than I remembered. I also wonder how long EA is willing to support Houseparty financially – and will they know when to pull the plug post-pandemic if necessary.

  2. Absolutely agree with you on the monetization and engagement issues the company will face going forward.

    Monetization – Running a video streaming and conferencing service isn’t cheap for the operator. Houseparty has the benefit of living under Fortnight’s P&L to support its explosive growth. Going forward Houseparty will either need to generate its own revenue (ads? more premium content?) or improve conversion and user experience for the parent company. As it stands, Houseparty appears to be a money-pit.

    Engagement – Much of the appeal of Houseparty is the spontaneity of calling others and joining group calls. Conveniently COVID-19 has cleared many people’s schedule, making matches frequent and convenient. It’s questionable to me how well this usage pattern will work once our days are filled with meetings and meals.

  3. Thanks for a great read! I was an avid Houseparty user until the whole security scandal broke out with people reporting getting their social media and bank accounts getting hacked. After that I deleted the app and never used it again (and most of my friends and family members did the same). This proves to me how flimsy Houseparty is in light of the wide range of competitors out there such as Whatsapp, Zoom, or others. I don’t believe the gaming component is a true differentiator given that anyone can replicate that angle, so I’m very bearish on Houseparty once coronavirus subsides and life goes back to normal.

  4. Agree with the article and all comments! It seems to be just a fad. In a market with fierce competition from cash-rich giants, its unlikely that anyone would pay Houseparty to resolve its monetary challenges. The hacking incident definitely sent me and all of my friends away from the app, probably never to return. And there is growing competition from other gaming apps creating social experiences as well. Psych is one gaming platform that my family moved to after the houseparty scare. This family connection is possible during lockdowns when people have more free-time with lesser work, no school, extra members to help with housework. Once life goes back to normal, its hard to continue finding time to spend together. People will default to the originals – Whatsapp, Facetime, Facebook.

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