Habbo Spending Cap

The LA Times recently mentioned an interesting feature of Habbo.  Apparently, Sulake does not permit Habbo Users to spend more than $35 per month on clothes and furni for their rooms.

According to the reporter, about 10% of Habbo Users spend $17 a month buying virtual stuff.  So, if I can do a little math (which is dubious), Habbo has 100 million users registered, but on its website reports only 10 million "unique visitors" a month.  Still, this means ($17 x 1M) = $17 million a month spent on virtual stuff in Habbo.  So, for a year (x 12) that's a little over $200 million a year selling pixels to kids -- maybe approaching about 1/3 (or so) of what WoW is making.  Since I haven't looked at the actual financials (and usually only do math in private), feel free to correct me with a better number.

But however many kids are paying them, the fact that Sulake is making money this way isn't really news.  It's the price limit I find interesting and the curious  comment of Teemu Huuhtannen: "We really don't want teenagers to spend more than the price of two movie tickets a month on Habbo."  That's followed by Alex Pham (the reporter) making the observation:

If turning down money seems un-American, it is.  Sulake's Scandinavian origins meant it grew up in a market that heavily favors consumers' rights.

Limiting what kids can purchase = consumers' rights?  So, by extrapolation, in Scandinavia, I suppose the private candy manufacturers will only sell kids so much chocolate per month, because too much is bad for their teeth?  And video game makers will sell kids only one game a month so they can spend more time on their homework? And what else?

Pham's claim -- and the price limit -- say something interesting about virtual property sales, I think.  I honestly have no reason to doubt that Sulake really doesn't want to charge kids over $35 a  month ($420 a year) for certain pixels, for their own good.  I'm just interested in hearing more about what the "ideal market" for selling pixels to kids should look like (and why).

Photo Credit (from an art exhibit in Finland): Roxeteer

Note: In an earlier version of this post, I said today is Spore release day -- Doh!  Well, that was right if you don't live in the U.S.  If you do, you have another 2 days to wait.  Sorry!  In the meanwhile, you can play with the creature creator.

Comments

[Roger, FCD]

It's advertising to the kids' parents. I'm sure that they've noticed that very very few - if any - of their clients spend $35/mo. or more in Habbo.

[Jayne]

I'm sure Habbo's also protecting itself from chargebacks. The rate at which children steal their parents' credit cards and rack up obscene bills is alarming. Then the parents call up and say "My little Billy would never do a thing like that! You reverse the charges right now, or I'll sue!" Purchase limits seem like a smart way to keep everyone's blood pressure down and not have to spend so much support time investigating fraud and taking phonecalls from irate people.

[flashheart]

The consumers' rights thing is pretty clear to me. As consumers, children have different rights to adults, including the right not to be exploited by the service provider, and to have their personal and developmental needs protected. That means limiting the amount of stupid things they're allowed to do through youthful naivete.

Also, the consumer in this case is using their parents' credit card, as Jayne observed.

I think maybe the ideal market for selling pixels to kids would be one that didn't exist.

[greglas]

Thanks for the comments, this is great...

So, from Roger and Jayne, we get the cynical -- and perhaps correct -- observations that this is really not contrary to Sulake's economic self-interest because either 1) no kids would pay over $35/mo for furni, or 2) if they did, their parents would be irate enough that they'd incur chargebacks, potential bad press, etc. -- & other such things that would ultimately prove not so good for the bottom line.

From flashheart, we get "I think maybe the ideal market for selling pixels to kids would be one that didn't exist." Which I was sort of hoping someone would say, because isn't there something sort of like that lurking in either Huuhtannen's comment or Pham's -- for some reason they both seem to agree that kids spending *too much* on pixels would *clearly* be a bad thing.

I'm curious: might the same logic apply to adults -- or is it just kids that we're worried about?

[Jussi Laakkonen]

I attended a 2 hour presentation by one of Sulake's founders (Sampo Karjalainen) last week, and he also touched upon this. A few years back the Finnish consumer ombudsman received complaints about kids overspending in Habbo, and after a series of negotiations the weekly/monthly limits were created. The guide for the limits was "what would be a similar spend for a teenager in movies or other entertainment".

[greglas]

Ahah! Thanks so much Jussi -- I'm in your debt.

So this suggests that the impetus for the Habbo spending cap was not, I think, a culture of market actors operating with self-imposed and un-American restraint. Instead, it was an environment where the Finnish state could successfully negotiate with a private company to lead it to voluntarily impose a spending cap for the public good.

That makes a lot of sense. That's the way you'd think it would happen. And Habbo still has my respect for allowing itself to be nudged in this way.

There is, I think, a very significant cultural angle to this. Is there a similar consumer ombudsman running around to pixel-sellers in the U.S. and encouraging them to re-think their practices? Is the US FTC paying attention to kids' virtual worlds at all?

My impression is that we are relying primarily on these folks.

[brethart190]

May I Have 45 Hc sofas from habbo hotel

[greglas]

Um, no. Sorry. We don't do that here.

[Essi]

It might be worth noting that the weekly limit, in Finland, applies only to purchases done with a mobile phone (which all of the children have). If you make purchases via a bank account on the internet (only adults can have such accounts, but in theory children could have access to at their home if the adults aren't careful enough with passwords and such) there is no limit. Certain RL stores also sell these Habbo notes, which include codes and when you put those codes into Habbo, you receive credits. Buying these only depends on how much money the children happens to be carrying. In the latter two cases, I guess the case can be made that if the children spend too much, then its solely the adults' fault for either giving the child too much money or not hiding their bank account details.

[Vili Lehdonvirta]

Great post and comments.

quoth flashheart:

The consumers' rights thing is pretty clear to me. As consumers, children have different rights to adults, including the right not to be exploited by the service provider, and to have their personal and developmental needs protected. That means limiting the amount of stupid things they're allowed to do through youthful naivete.

I agree that when you are a merchant selling or advertising to children, you have to exercise some restraint. In Nordic countries, we also have legislation towards that end, and I support that.

But at the same time, I can't help wondering how you define the "stupid things" that kinds should not be allowed to buy, as opposed to the smarter things that it's ok for them to buy. To a lesser extent the same question applies to adults. I ended up bloggin about this at length. Greg's posts seem to have that effect on me!

[greglas]

Great post, Vili -- I'd love to see that paper if you can spare a draft...

[Michael Hartman]

I would actually put forth the possibility that Habbo is making MORE than WoW, not less. They seem to be far more honest about their numbers, and more forthcoming. WoW brags about 10 million users, but everyone knows there are actually half that.

I would also imagine Habbo has significantly lower fixed and recurring costs. It would be interesting to see some more analysis here. Habbo is even more impressive than I thought.

-Michael Hartman
Blogging about Online Gaming and Virtual Worlds:
http://www.muckbeast.com

[dmyers]

Greg, you are such an idealist, you silly.

I vote for the chargeback theory.

[Matt Mihaly]

Habbo is certainly not making more than WoW, or even close to it.

--matt

[Ginger Gray]

Well, actually, the fact that $35 is allowed every month is not true. You are allowed $35 per house phone, $48 per cell phone.

those are the only 2 methods that they can control spending on, other then that, you can buy as many prepaid cards as you want.

[Jesus Christ]

"Habbo is certainly not making more than WoW, or even close to it.

--matt"

Thus why he the article says 1/3 of WoW. Please at least read more then a few words to make a comment.

[Hugo]

Considering that a cancellation of a transaction will mostly always cost you $25 at any bank letting them get away with $10 isnt worth the trouble

so thats why i guess that number was choosen

its to much trouble to get into for just $10

if u are thinking $10 is $10 call your bank and lets see how long your on hold

it will make you think differently on the situation

[Susie]

What about the fact that kids can gamble? and the fact that they bought their coins with real money vs playing games like on a Club Penguin to get those coins, isn't this real gambling? and shouldn't it be illegal??? They have casino rooms...

And yes, if you buy Habbo cards, there is no limit to how much they spend...