Statistics suggest that adding in-app messaging features can lead to a min. 30% increase in app opens and boosts engagement drastically. Let me paint a scenario as to how this works:

You have developed a feature-rich mobile app to provide valuable product(s) or service(s) to your users. The app has a high download count, and a decent number of accounts are being created but you see a strong dip in the curve when it comes to conversion i.e. actually buying your product and using your services. If you think from a user’s perspective few common reasons might explain why:

Users download your app because they are intrigued by its potential and the promises made in your marketing campaigns. They open the app, eager to explore its features and find solutions to their problems. However, once inside, they are bombarded with too many options, nested menus, and features making it overwhelming, especially on a small mobile screen.

On the other hand, you might be a relatively new app with excellent core features but limited content and resources within the app. This lack of information can leave users unsure about how to fully utilize the app or understand its benefits, causing them to abandon it prematurely.

Enter — an intelligent in-app chat assistant.

Now when the user opens your app, they have the choice to explore through the app while also having a friendly chat assistant icon. They tap on it, type their queries, or describe their needs in their native language.

The chat assistant instantly scans the app's content, features, and user data, providing concise, tailored responses. It guides users to the exact features or information they seek, suggests relevant tools or products, and even provides step-by-step instructions for more complex tasks.

This in-app chat solution transforms a potentially overwhelming user experience into a streamlined and personalized journey. It acts as a knowledgeable companion, ensuring users quickly find the value in your app without getting frustrated. The assistant can also gather feedback, track common user issues, and provide insights into how users are interacting with the app.

For smaller businesses with limited resources, the chat assistant can offer support even when human staff are unavailable. This ensures that users always have access to help, reducing the burden on your customer support team and allowing you to allocate resources more efficiently.

By leveraging the in-app chat assistant, you can increase user engagement, improve satisfaction, and boost conversion rates. Users are more likely to stay, explore, and ultimately convert because their journey through your app is smooth, intuitive, and tailored to their needs.

Through this blog, we'll develop a deeper understanding of factors to consider when incorporating chat features in your app or web-based product. We'll discuss factors such as different areas of costs, the choices between building in-house or integrating a 3rd party solution, and how to decide between the two.

We'll start by discussing 1-1 chat and then extend our analysis to the complexities of group chat and other advanced features. Let's start!

Building In House

For most ventures, the obvious first thought when considering a chat solution is to build in-house especially if they are a tech business and have an engineering and product team.

However, there are several factors to consider, including direct and indirect costs, current vs future recurring expenses, scaling and customization challenges, compliance issues, and more. Let's look at each one of these:

Costs

With any feature or functionality, you’ll have 3 choices — build, buy i.e. integrate a third-party solution or defer. A major factor that can flip you from one side to the other is cost. Let’s examine the cost components, both direct and indirect when building in-house.

Engineering Cost

The cost components are almost the opposite when building chat features in-house compared to buying an existing solution. Expenses scale with the size of the development team required when in-house based on the project's complexity. On the other hand, opting for a third-party solution like LikeMinds primarily just involves license fees that vary based on active user count and the specific services needed.

The other side of this argument is that while in-house development avoids license fees, it requires calculating required man-hours, infrastructure setup, and maintenance costs, which are notoriously difficult to estimate accurately because based on the industry, product, and form of the venture (B2B/B2C or B2B2C), all these factors have a very high degree of variation.

To help you with cost estimates of a similar solution as ours, we have prepared a breakdown outlining the estimated time and resources required to build a comparable solution:

The above analysis gives the effort estimation for a 1-1 chat. But if you are looking to build a group chat then it involves further, more complex features that will require additional effort as listed below:

The above analysis gives a glimpse of the estimated engineering effort however, at this point, it doesn’t include other factors such as primary design requirements, changes and updates, and testing cycles involved in the building process (i.e. Designer, Product Manager, QA). Once you add those, the costs will start piling up at a high rate.

When you convert these efforts and count the time and cost per time unit of each resource, you’ll get to a rough cost estimate for building chat feed feature with a mid-level experienced team:

Note that a thorough evaluation of the financial assumptions will require you to keep in mind the potential variability and unforeseen expenses, irrespective of the approach.

Also, keep in mind that these estimates are for building these features in India. If you account for PPP when based out of a country with higher manpower costs, the cost will be much higher.

Server Cost

There are a few variables that will determine the actual server costs you will incur when building in-house. Let’s look at them individually:

• Resource Utilisation: When running your servers, you need to maintain a buffer to accommodate unexpected traffic spikes or increased load on various components. This means that you can't utilize 100% of the server resources but will have to maintain them for scale nonetheless.
• Resource Scaling: Not all services or providers allow you to dynamically scale your machine resources to the closest size according to your demand. This can lead to either under-utilization (if you provision more resources than needed) or potential performance issues (if you don't have enough resources to handle traffic spikes).
• Multi-Tenancy: This is something that only a third-party vendor or service provider can go for because they can leverage multi-tenancy, where multiple clients share the same infrastructure. This lets them optimize costs more effectively and in turn reduce costs for you too. This is difficult to achieve when building an in-house solution for a single organization barring the exception of a parent company with multiple subsidiaries and/or sister concerns.
• Cost Optimisation: Building an in-house solution requires a minimum infrastructure cost upfront, which may not be optimized for smaller user bases. As the user base grows, the costs will scale accordingly. This means that you will be incurring a minimum fixed cost even with a relatively small user base and see higher costs with scale due to the buffer requirements as discussed above.

Time to Value Realization

The market demands can be extremely time-sensitive or seasonal so you’ll need to act urgently without any delay. To seize these opportunities you may need to incur additional costs to try to ship faster. Even then there may be a 6-12 months wait due to unforeseen factors and it might mean losing out to your competitors, especially those who chose to utilize a SaaS solution instead.

This possibly explains why only 34% of the companies seek to get a first-mover advantage, a true competitive edge missed by the remaining 66%. If you want to move into the first group, you need to account for strategic costs on top of your existing maintenance costs that we are discussing next.

Maintenance & Iteration Cost

To prevent your solution from regressing and to keep up with evolving compliance requirements (like GDPR, CCPA, ADA, PCI, HIPAA, etc.), significant ongoing investment is needed. Estimates suggest companies typically spend $10,000-$25,000 per year on maintenance. You'll also need to iterate frequently to provide what the user wants, which is a time-consuming process.

Supporting numerous technology stacks to maintain parity across all platforms requires substantial engineering effort and cost. Between iterating on your product, keeping compliant with new regulations, and maintaining multiple codebases, the required investment adds up quickly.

Ask yourself the opportunity cost of using your resources on maintenance tasks instead of core business priorities.

Opportunity Cost

Opportunity cost is what your developers could have achieved if they worked on something else. You can go as far as to say that every hour worked on building a feature in-house that can be integrated quickly with a third-party solution such as LikeMinds is a missed opportunity to bond and brainstorm with the team. 

Instead of building a chat experience from scratch, they could focus on critical business features that are unique to the business and can't be obtained from third-party vendors. They can also focus on customizing the 3rd party integration for your business goals. This allows them to deliver more value with their limited time and resources.

Other Considerations

Now that we have discussed cost aspects, let’s look at other factors such as customizability, scalability, security and compliance, etc. that you need to keep in mind when adding any feature in-house:

Customisability

One of the biggest advantages of building a feature or functionality in-house is that it gives you complete control over customization, allowing you to tailor the solution to your specific needs and requirements. 

Customisability is paramount because it directly impacts your ability to iterate quickly, differentiate your product, and deliver a tailored experience that meets the unique needs of your end users. Therefore, when considering external vendors, prioritize those that offer the most extensive customization capabilities for their chat solutions.

Security & Compliance

When dealing with user messages, especially in sectors like healthcare or finance, security is paramount. Building in-house means you're responsible for implementing end-to-end encryption, secure data storage, and ensuring compliance with relevant regulations. This requires significant ongoing effort and expertise.

Scalability & Reliability

Scaling a chat solution, especially when moving from 1-1 to group chats, presents significant challenges:

• Message delivery becomes more complex with multiple recipients
• Managing online/offline status for numerous users
• Handling increased server load during peak usage times
• Ensuring low latency for real-time communication

These challenges grow exponentially as your user base expands, requiring substantial engineering efforts to maintain performance.

Integrating 3rd Party Solution

Now that you know what goes into building a chat feature in-house, let’s look at the other option i.e. integrating a 3rd party solution:

Costs

Since you are not building in-house, there would be:

• No engineering costs, 
• No server costs,
• No opportunity costs,
• No maintenance costs, and
• No time to value realization costs

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Instead, there would be costs such as licensing, onboarding fees, etc. Let’s take a quick look at each one of them.

Licensing costs

Third-party vendors typically charge a recurring subscription fee, which can be based on various pricing models, such as:

• Per user/seat pricing: A fixed cost for each user accessing the software.
• Feature-based pricing: Different pricing tiers are determined by the features or modules included in the package.
• Usage-based pricing: Charges based on the actual usage or consumption of the service, such as storage, bandwidth, or API calls.

Developer Cost

If you are an early-stage startup or launching a new product, you may not have dedicated resources to integrate the solution from the third-party vendor with your existing systems and workflows. For that, you may need to engage an external agency or consulting firm.

These agencies typically charge project-based fees or hourly rates for their services, which can vary depending on the complexity of the integration, the number of systems involved, and the level of customization required.

Onboarding Charges

Some vendors may have a one-time implementation or onboarding fee to cover the costs of setting up the software, data migration, user provisioning, and initial training.

These fees can vary depending on the complexity of the implementation, the number of users, and the level of customization required.

Other Factors To Consider

Now let’s look at the other factors too that change when considering a third-party vendor instead of building in-house:

Customisability

With an external vendor, customisability may be limited, making it challenging to adapt the product to your unique use cases. Still, if you are thinking of going with an external vendor then a highly customizable solution will:

• Allow for faster integration and adaptation to your specific requirements.
• Provide more flexibility to tailor the solution to deliver the best possible experience for your users.
• Enable quicker iterations and experimentation with different features and product variations.

Note that a 3rd party solution will almost always be cost-efficient, especially for segmented offerings such as in this case, feed features due to economies of scale. 3rd party vendors serve multiple clients and therefore even though they incur engineering, server, and compliance costs, etc. these get distributed across their customer base.

Scalability & Reliability

When evaluating any ready-made chat solution, look out for highly scalable and reliable infrastructure designed to grow seamlessly with your app. While maintenance would still be required, look out for a service that provides sufficient support and robust documentation to smoothly navigate scaling challenges.

Scaling your app across multiple platforms like iOS, Android, web, and desktop introduces new challenges for maintaining consistent chat functionality. While an in-house team may initially build a seamless chat experience for one platform, they may lack the expertise to replicate it across others.

A third-party vendor like LikeMinds can bridge this gap, providing the necessary infrastructure and support to ensure your chat solution performs flawlessly across all platforms, enabling a cohesive user experience as you expand your reach.

Security & Compliance

As we saw, while building in-house it’s a great hassle to maintain security and compliance. Partnering with a third-party vendor can remove much of that burden IF they have these protocols in place. So if you end up choosing an external solution go with a provider that has these critical security protocols in place, eliminating the need for you to invest substantial time and resources into implementing and maintaining them independently.

How To Decide

At this point, you must have already formed a view based on your needs and resources about what may be a better option for you. Let’s compare each of the factors side by side and see which option ranks better as well as a few other factors that can tip the scale further in one direction:

Conclusion

Building an in-house chat solution offers maximum control and customization but requires significant upfront investment and ongoing resources. It may be the right choice if you have very specific requirements that off-the-shelf solutions can't meet, or if chat is a core differentiator for your product.

On the other hand, integrating a third-party solution can provide a faster time to market, reduced development and maintenance burden, and built-in scalability. This approach often proves more cost-effective, especially for companies where chat is an important feature but not the core product.

Ultimately, the decision should be based on your specific needs, resources, and long-term product strategy. For many companies, the benefits of a third-party solution – faster implementation, proven reliability, and ongoing support – make it an attractive option worth serious consideration.

Why Choose LikeMinds?

• Cost-Effective Solution: LikeMinds offers a cost-effective alternative to building an in-house chat solution from scratch. Our solution comes at only a fraction of the cost, delivering significant savings compared to the substantial investment required for in-house development.
• Lightning-Fast Integration: Our pre-built, research-backed themes allow for extremely quick integration. Most businesses can go live with our feed solution within minutes, simply by changing fonts, colors, and icons to match their branding.
• Customizable SDK: Our themes are fully customizable, which brands can plug into their existing workflows and then build on top of it as the product evolves.
• Scalable Infrastructure: LikeMinds ensures that the infrastructure stays ahead of demand, allowing for seamless scaling as your user base and engagement needs grow.
• Stringent Security and Compliance: Data security is a top priority for LikeMinds. We adhere to stringent compliance measures, such as SOC II Type II, ISO 27001:2022, and HIPAA, ensuring your data remains secure and compliant with industry standards.
• Comprehensive Package: Our offering extends beyond just a chat solution. It includes comprehensive guides for seamless integration, optimization, troubleshooting, and leveraging advanced engagement features, enabling you to focus on building differentiating features.
• Robust Stack: By partnering with LikeMinds, businesses gain access to a robust engagement stack that includes our high-performance chat solution, backed by a commitment to ongoing security, compliance, and scalability.
• Multi-Tech Stack Support: With LikeMinds, you get support for all the industry-leading tech stacks and platforms like Kotlin, Swift, Flutter, ReactNative, and React.JS. As you expand or have different tech stacks across platforms, we've got you covered, ensuring parity and seamless integration across your entire ecosystem.

By choosing LikeMinds, businesses can focus on their core product while we handle the complexities of providing a reliable, scalable, and feature-rich chat solution. Let us help you enhance your user engagement and communication capabilities, allowing you to bring your product to market faster and with confidence.