How Did Habbo Beat Zynga At the Virtual World Game?

HabboIf you think Facebook is the sole model of social games and virtual worlds, think again: With 15 million monthly users, a web-based world for teens with the odd name of Habbo is larger than most of Facebook’s top games, including Zynga’s virtual world YoVille, which counted nearly 20 million monthlies last year, but has since shrunk to nearly 9 million. Habbo, by contrast, has been growing fairly steadily since its launch in 2000. Created by the Helsinki-based Sulake Corporation, Habbo added a Facebook application only very recently, so this growth has come without leveraging the social network. How did they do it, and what can social games learn from Sulake’s success?

“Habbo Hotel has grown mostly virally,” Teemu Huuhtanen, North American president of Habbo developer Sulake, told me via email. “Word of mouth has been the main channel for growth.” (That plus some partnerships with big media brands like Twilight and “American Idol”.) In Habbo, players can furnish and customize their own hotel rooms, and visit the rooms of friends and strangers; there’s enough variety of manipulable objects that they can create mini-games or turn their rooms into themed roleplaying areas. And interestingly, Huuhtanen told me, Habbo’s users generally don’t want to link their avatars with their real world identities, as Facebook social games do.

“Teens, more often than others, wish to be someone else,” as Huuhtanen put it to me. “It makes sense then that their avatars would differ from their real world lives.” This insight (and Habbo’s gargantuan size) suggests a large market for virtual worlds and social games which do NOT leverage Facebook’s social graph.

As a business, Huuhtanen reports Habbo “just finished the best six months on all key business performance indicators, including revenue and traffic”, with a year-over-year revenue increase of 25 percent last quarter. (Total revenue in 2009 was $60 million.) The company earns revenue through virtual goods purchases, and because the world is played in 32 countries, the company has 150 payment methods, with premium SMS billing the most popular. (Worldwide, half of Habbo’s virtual goods are sold this way.) The most popular virtual goods are floor and wall furnishings for users to decorate their rooms– since launch, the company has sold over 800 million of these. This Summer, the most popular item is a water patch. (“You can gather several of them and build a swimming pool,” Huuhtanen explains.) Virtual items sell from 20 cents to $5, with the most popular items costing around 60-80 cents.

The most important lesson social game developers could learn from Habbo?

“In other social games, players play alone and the game developer provides the gaming elements to the player,” Teemu Huuhtanen answered. “[I]n Habbo, the users themselves create the games and have fun together with other users.”