Wednesday, July 9, 2008


PaymentGuy was delighted to be contacted by Eric Hayashi | Co-Founder, VP Marketing and Business Development of ROCKETON. Eric advises PaymentGuy his Team is creating a parallel virtual world; "Imagine a new type of virtual world layered on top of every website. You can take your avatar to any website and interact with other users right on top of the site." Here are a few articles recently written about ROCKETON:

* Mashable

* TechCrunch

* What'sNextBlog

If you are interested, I am pretty sure if you drop Eric a line he would be happy to let you into the system for a sneak preview and answer any questions you may have. Just email: web:

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!

Sulake Payment Systems Director Quits HABBO

... and joins NOKIA as a Business Developer for NGAGE. Wonder if/how this will impact Sulake's payment systems management. Inside sources tell PaymentGuy that with this resignation, the original team that designed, built and deployed Sulake's award-winning and industry leading payments infrastructure is no longer with the company. You would have thought Sulake would be prudent enough to retain at least some of their payment experts pre-IPO at least with some IPO carrots - apparently not ...

PayPal Predictions


PayPal had a great Q1, adding three more airlines, launching mobile-payments with Sprint Nextel, gaining access to two major PSP's with 18,000 combined merchants, introducing PayPal Pay Later across all EBAY listings, pursuing innovative promotions, and celebrating its 10th year anniversary. So what growth can we expect in Q2?

PayPal Merchant Services continues to make huge strides in signing up new merchants and capturing a larger share of merchant payments. At the same time, as PayPal Merchant Services becomes more ubiquitous across merchants, the more e-commerce growth as a whole (estimated at 17% in 2008) weighs on the division. After three consecutive quarters of greater than 60% Y/Y growth in TPV, I expect the Merchant Services to slow to 55% Y/Y growth in Q2. On-EBAY TPV is the wild card in Q2. If my 14% Y/Y growth in Marketplaces GMV for Q2 is correct, the effect on PayPal's on-EBAY TPV is staggering. Because of increasing PayPal penetration across EBAY Marketplaces around the world, my estimate would result in a 22% Y/Y increase in PayPal's on-EBAY TPV. To put this perspective, it would be the highest on-EBAY TPV growth in 6 quarters. Putting both of these together and doing the math, I expect overall PayPal TPV to grow by 36% Y/Y in Q2. And just like in Q1, I expect revenue growth will lag TPV growth by roughly 1% due to continued erosion in PayPal's take-rate (as a result of payment funding mix). I therefore predict record PayPal revenue of $613 million for Q2 2008, a growth rate of 35 Y/Y. If correct, this would represent another all-time record quarter for PayPal and a substantial acceleration in growth from Q1.

ClickandBuy Executives Quit - Seidel and Barthold Exit

Phillip Barthold, formerly ClickandBuy's VP Financial Services has left to join PayPal as a Senior Risk Consultant while Tim Seidel formerly ClickandBuy's Executive Director Legal and Compliance at ClickandBuy (Europe) Ltd. and VP Legal and Collections at ClickandBuy Services AG is now a Senior Manager Corporate Legal Counsel at Qimonda. When the Law and Money Chiefs jump ship, you know there's gotta be BIG trouble ... wonder how long until the ClickandBuy ship goes under. Stay tuned!