Monday, July 7, 2008

100 Million HABBO's & Still Losing Money - How to Make HABBO Profitable

Sulake reached a major milestone recently with 100 million created Habbos. WOW! That is simply awesome. Here is the PR; "Habbo Reaches 100 Million Registered Avatars Worldwide: Habbo, the world's largest virtual community for teenagers, announced today that its 100 millionth avatar has been created. As a pioneer in the virtual world landscape, Habbo has steadily grown its teen audience since launching in 2000. Currently Habbo attracts close to 10 million monthly visitors to its services worldwide. The 100 millionth avatar was created by a Habbo user in the United Kingdom." This is the "good news".

Now for the bad news ... get this - sources tell PaymentGuy that Sulake's HABBO, which began in 2000 and has expanded to 31 local communities with 100 million created HABBOs, has lost money every year since its launch. Simply unbelievable ... especially given Sulake has the largest international payment network of any mmog/virtual world operator. The only explanation is Sulake is simply not leveraging its massive global payment infrastructure optimally.

Reviewing their payment pages there are glaringly obvious problems like;

1. under or lack of emphasis on prepaid payment instruments despite a massively dispersed prepaid payment network (on the other hand, prepaid cards account for 40% of Gaia online revenues with credit cards at 60% for example - a winning combination);

2. no cross hotel redemption for HABBO virtual currency (Credits, Coins, Talers) meaning you cannot use HABBO credits purchased at the Finnish Hotel at the .com site which handicaps the utility of the payment infra and deminishes the "value" of the virtual currency itself;

3. no clear premium subscription strategy (like ClubPenguin has for example);

4. over-reliance on premium sms (as a payment method a great supplementary method but a real killer if its is the most popular or even defacto payment method for your site given the high commissions, fraud, service irregularities, spending limits and delayed receivables ...);

5. no WebKinz like payment methods (think HABBO avatars as dolls, merchandise and retail purchased brand items that in fact are payment methods ala webkinz interactive toys);

6. poor credit card incentives (Sulake should consider making August a credit card only month and see what happens to their numbers); and

7. irregular and inconsistent pricing for credits, items and memberships; it is very confusing what costs what and where do I find the HABBO catalogue anyway!

There are other problems but these 7 pop to mind after a quick look at their various hotel payment pages.

Don't get me wrong, HABBO is great and truly innovative. But Sulake should consider some changes to the way it employs its payment infrastructure. For example, Sulake should streamline its payment portfolio for HABBO to focus on 3 payment methods;

1. Online payments - credit cards (a la ClubPenguin) and online bank transfers (big in EU),

2. Prepaid Cards (ala Nexon and Gaia online), and

3. Premium smsm (still great for revenue and one off micro transactions for virtual goods and currency).

Ditch all the rest like IVR, ClickandBuy, PayPal etc... maybe keep the offline payments like UKash for example. But trim the rest! Incentivize the more profitable and less-fraud -prone methods (like prepaids) via discounts and incentives and consolidate the partnerships offering these services for better and more efficcient G&A.

PaymentGuy is pretty sure HABBO will turn the corner and start making money rather than losing money with a little fine-tuning. As ClubPenguin and WebKinz have proved, when it comes to payment methds and systems for kiddie virtual worlds, less is more!

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