Roundup: hi5 Restructures Around Games Portal Model, Strikes Payment Partnership with Paymo

Last week, major global social network hi5 reportedly laid off about half of its 100 person staff after a potential large funding round fell through at the last moment. From the sound of things, hi5 kept the groups that have been working on its virtual currency system in tact, and is essentially reorganizing around a gaming portal business model. It appears that hi5 is betting it can monetize its international audience much better through transactions than it ever could through advertising.

It was just last month that hi5 announced that it had created a universal virtual currency, hi5 Coins, for its application platform. Any developer can integrate hi5 Coints into their applications. Meanwhile, in February hi5 also launched a Flash games portal from developers like Arkadium and others. However, unlike other Flash portals on social networks, hi5 has integrated the games directly into the site’s communication channels and virtual currency system.

In order to make it easier for users to purchase the new currency, hi5 also recently partnered with Paymo, a global mobile payments network. Now, Hi5 users can purchase hi5 Coins via their mobile phones without the use of a credit card in 24 countries. The move reflects a general industry trend: purchases of online goods without the use of credit cards have grown significantly. In fact, Paymo reports that more than 75 percent of Internet users worldwide do not even have a credit card. By contrast, Paymo says, approximately three billion consumers own a mobile phone.

With mobile payment services like Paymo, Zong, and Mobillcash, users do not need to have a credit card or purchase currency cards to acquire virtual goods. Instead, these mobile payment services allow users to simply enter their phone number on their website and reply to a text message sent to them. Assuming they respond to the text, the charge is then placed on their monthly phone bill.

Though this payment method is easy, such convenience comes at a price for users. In addition to the price they pay for the virtual currency, users must cough up an additional 10 percent service fee that Paymo charges them. Paymo justifies the charge by noting that cell phone carries have their own transaction fees, ranging anywhere from 20-40 percent. Assuming that these statistics of credit card versus mobile phone consumers is accurate, even a small portion of that three billion would render this partnership worthwhile for both companies.