China 1 Habbo 0
From time to time I am so busy that I nearly miss important news – just like the closure of Habbo China back in August. Sulake had started Habbo.cn/Habbochina.com in January 2006 and completed its beta-stage in summer last year. The service had just effectively started out this spring, though; as Virtual Worlds News reports due to issues with their business partner in China, Guanzhou Optisp. On August 24 Sulake closed Habbo China – the official readout seems to point towards technical problems, more precisely the lack of penetration of Shockwave in Mainland:
“There’s quite many reasons why we closed down Habbo in China (for the time being). Yes, we had some technical challenges with Shockwave, but that was not an obstacle for us. This was mainly a business decision” (Communications Director Juhani Lassila)
However, the rumour pot was given a good stirr, from an intervention of the Chinese government to the service starting to loose large amounts of money – or as Lassila has put it:
“The challenging Chinese market and high operational costs led to the decision of closing the service for now.”
Dimworm’s english and chinese blog has an in-depth posting on the matter, conveying:
“Habbo has been another failed case of foreign companies entering China. The parent company disregarded the Chinese partner’s advice of lowering the price of some kinds of virtual goods. They thought the uniform pricing method works well all over the world, So there is no reason to change it in China. On the other hand, the parent company’s technology support is not good. The China’s partner had to deal with a lot of technique problems so as to neglect marketing endeavor.”
Guangzhou Optisp are no newbies to the business segment: they were running EVE Online and Legend 2005 etc. After the closure of Habbo China, GO cut off their game R&D in Guangzhou and their Beijing wireless service to concentrate on its game operation. Allegedly they were acquired by CDC Games International lately.
The lack of infrastructure must have been the prime reason for Habbo’s failure in Mainland. Not only is the market-penetration only half as deep as in mature markets like the US (between 15 and 30 percent, according to Adobe), but most of Habbo’s regular payment methods are pretty much non-existent there. Credit-card penetration is very low and there is little support for reverse-billing SMS. Therefore billing customers via land-line phones is a widely used payment method in China, but this comes with high surcharges. Probably Habbo’s business-model just does not work out well in such an environment.
With an eye on some of our own asian target markets, this was also our reason to choose an advertisement-driven revenue as the business-model for our service Coobico.
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