What Does Rounds’ Acquisition Tell Us About Houseparty

Canadian messaging company Kik has just added some strong tech capabilities with the acquisition of Rounds this morning, another group video chat app from Israel. The media reported on a deal within the range of $60-$80 million, most of it in Kik’s share, which is still a private company. Holding Kik’s shares is not such a bad idea, considering it is a unicorn that was priced at $1 billion by Tencent back in 2015. However, Zirra, a company that uses AI and machine learning to effectively analyze private companies, estimates Kik’s valuation at $350-$400 million only.

The Rounds deal is an acquihire: Rounds’ 35 employees will work for Kik now, and the company will turn into a product and engineering center, Kik’s first one outside Canada. Rounds app is closing down this February, Zirra has learned, and the users will not be transferred to Kik. That is a sign that Rounds wasn’t that successful in creating an engaged mass of users, although in the past it claimed 40 million of them.

This is a good deal for Kik, and maybe for Rounds’ employees and the founders too. But how good is it to Sequoia, the VC that had put $12 million in Rounds expecting it to be its next Whatsapp? Also, what does this deal tells us about Housparty, Sequoia’s next group-video-chat bonanza? Only a few months ago Sequoia injected $50 million into the company.

So, is the group video chat market is going up or down? It depends on where you look. Rounds, for instance, raised $12 million in the beginning of 2015 but didn’t grow its workforce since (It raised $20 million in total). LinkedIn shows that Rounds’ total employee count stayed around 40-45 people since January 2015. Regarding downloads, we can’t tell too much because the app was removed from both Google and Apple’s stores. When interviewed at 2015, CEO Dany Fishel didn’t disclose number of users but said that within few months the it soared 50 times. Now the company claims 40 million registered users, but that doesn’t mean we know how many daily or monthly users do we have.

In fact, most of the chances the app doesn’t engage with dozens of millions of users, as it is now closed to new users and will shut down next week. Houseparty, in comparison, enjoys a steady growth in its workforce as shown here:

Houseparty’s ranking in the application stores is fluctuated but is still growing. Look at the SimilarWeb ranking monitor: Housparty’s ranking was going up until November 2016. After that, it remained stable in the social networking category and suffered a slight decrease since then.

Apptopia, another mobile apps monitor, gives the same picture about Housparty’s ranking in the stores, but provides a little more pessimistic view when it comes to new downloads. Apptopia reports on an 11.3% decrease in downloads, and a decline of 6.4% in the number of the daily active users. Still, an increase of 20% in monthly active users is good news. This data tells that users keep group chats in a less frequent manner but still increasing the number of total group chats in a month.

The future will tell if Sequoia’s $50 million investment in Houseparty will be another Whatsapp, or just another Rounds.

Assaf Gilad

An ex-journalist from Calcalist, a leading business and tech news outlet in Israel, I'm now writing about startups for Zirra.com.