August 18, 2006
Case Study

How to Get Teens to Pay for Virtual Content

SUMMARY: Remember the Pet Rocks of the 1970s? Today's teens wouldn't dream of something so low tech for amusement. Instead, how about a virtual community where they can create their own customizable characters and spend their allowances buying furniture they can't sit on, in a room they can't sit in?

See how one company gets teens to convince their parents to let them buy online content. For some, it's so addictive that they actually are *grounded* and banned from the site for two weeks.

Plus, how they overcame the difficulties of teens using their parents' plastic and keeping the content G-rated.

“There’s so much competition in the US market. Teens have a lot of options,” says Janne Kouri, Regional Director, North America, and VP Content for Sulake Corp., parent company of the Habbo community site for teens.

Still, Habbo stands out among gaming and community sites: Teens register for free and create customizable online characters called Habbos. For most teens, that’s all they need, but some want more and buy virtual Habbo coins, which they use to buy Habbo “furni” to decorate their virtual rooms in the Habbo Hotel and play online games and interact with friends.

The site also features a growing amount of music and movie content and celebrity chats. Like other community sites already taking from teens’ notoriously short attention spans, Kouri’s team knew they needed to grow membership quickly to gain traction in the US (Habbo originated in Finland and spread to the UK and other European countries).

What could they do to entertain while get teens interested enough to pay for online content, and how could they build something that watchful parents would approve of and work within the credit card companies’ parameters?

The key was to reinforce Habbo’s community aspect and add interesting content to keep teens coming back. Here are five steps they took:

Step #1. Build traffic

First, Habbo needed to get noticed in the teen world. Their target market is 13- to 16-year-olds, and most fall into the 14-15 age range. They decided not to offer a subscription model, except for the Habbo Club, which offers priority entry to the Habbo Hotel, nightclubs and other special features.

“The whole goal is to keep the site easily accessible for teens, and users would pay for additional services that they choose to use,” says Paul Thind, General Manager Habbo US.

To generate buzz, Habbo launched two “Habbowood” campaigns, a la Hollywood, where teens created short animated movies and submitted them in a contest to win iPods and Habbo currency, among other prizes. There was no ad revenue involved. “This was just a direct marketing campaign for us, mainly to drive new users and boost loyalty,” Kouri says.

The contest had a viral element, too: To win, players had to get the most votes from visitors to the Habbo site. This meant they had to promote and market their movies to their friends. Kouri’s team kept an eye on submissions to make sure the content stayed G-rated.

Step #2. Moderate the site

Professional online community moderators worked 24/7 to make sure that players had a safe experience in the hotel. Plus, experienced players with impeccable gaming records were invited to act as guides to new Habbos.

Step #3. Multiple payment methods

Thind knew they needed to offer several as many options as possible to purchase Habbo coins:
- Scratch cards, which are used as giveaways and in Canada
- Prepaid magnetic stripe cards
- Charges to cell phone
- Charges to home phone
- Money orders

They used the scratch cards at promotional events to distribute coins to give teens a taste of what they could do in the Habbo Hotel, like iTunes giving away a song.

Habbo recently tested a $10 prepaid card with a major drugstore chain. The card had to be swiped at the cash register to activate, and the receipt included a voucher code. If the receipt was lost, teens called the customer service department, which checked the unique card identifier and gave the voucher code again.

With cell phone payments, Habbo signed an arrangement to have a third party handle the payment processing.

Step #4 Allay payment concerns (as much as possible)

Thind knew this was a potential problem with parents as well as the credit card companies, so “we set a limit purposely on every payment method, anywhere from $20 to $30 per payment method.” They also worked on building a strong relationship with the credit card companies.

Habbo quickly reacted to any problems with parents upset over their children charging payments without their permission, offering partial refunds and banning teens from the site for periods of time.

Step #5: Ancillary revenues

Instead of traditional banner ads, Kouri’s team built ones that looked like outdoor billboards. When teens clicked on the billboards, they got more than typical online ad content. In a promotion for Sprite, Habbo created a virtual nightclub, “Club Thirst,” where they could enter contests and chat with the virtual character “Mr. Thirst.”

The company also offered branded contests. In a promotion deal for Antonio Banderas’ recent movie, ‘Take the Lead,’ Habbo sponsored a virtual dance competition. Teens created dance routines for characters and entered them in the contest, the final rounds of which were broadcast via streaming video.

Kouri’s team also struck deals with major and independent record labels to promote artists popular with young people. The focus is not on downloadable music clips but on celebrity chat. “We’re establishing Habbo as a place to interact with their favorite celebrities.”

Kouri hooked up with other youth-oriented media outlets, including, to get Habbo’s brand played up in advertising materials such as in-school banners, plus co-branded contests and some event marketing. With, Habbo hosted a “TeenPeople” lounge inside the community and TeenPeople promoted celebrity chats taking place in that lounge.

During the 2006 Winter Olympics, Habbo made a media swap with NBC, which had the official Olympics Web site in the US. Habbo was one of three sponsors inside that site’s games section, and visitors could cash in on their online game wins for Olympics gear or Habbo currency.

Thind and Kouri’s efforts worked. Habbo’s US site now draws 1.7 million unique visitors a month, although we’ve noticed that no more than 10,000 Habbos are online at any given time. Users stay on the site an average of 30 minutes per session and spend more than three hours a week on the site.

Teens use the site for six months to a year before they lose interest and move on. Thind is seeing the average paid revenue per use in the US between $15 and $16 per month. 88% of Sulake’s worldwide revenue is generated through members purchasing the virtual currency, while the rest is advertising driven.

Clickthrough rates for the “billboard” ads in spaces like the virtual nightclubs are 5.5% on average. “We’ve seen rates between 11% and 14% if you refresh your content on a weekly basis,” says Christian Batist, Sulake’s Senior Sales VP. “The users are curious about these ads.”

The contests have been particularly effective. “About 80 percent of our growth is viral,” Kouri says. “Teens love to share and they love to express themselves.” With the first Habbowood contest, Habbo received 400,000 video clip submissions worldwide and jumped to 700,000 with the second contest.

Regarding site moderation and teens who abuse the system, Habbo users follow a bell curve: 5% are really bad, 5% are really good and the rest fall in the middle. “We have a good community that’s very self-policed,” Thind says. “We have Habbo rules, but there are things that we still have to look into. Some content has to get filtered.”

One thing Thind noticed is that the US teen’s behavior is different than Europe’s. In Europe, they ask for permission, while US teens seem more prone to ask after the fact. For these teens, “what will end up happening is the parent will call, we’ll issue a partial refund and the parent will ask us to ban their kid’s account for two to three weeks. It’s like being grounded, Still, a lot of parents want the kids to play because Habbo’s less sexual and less violent. It’s a much safer environment than other things out there.”

The drugstore prepaid cards are still selling very well. “In December, they were the No. 1 prepaid card in the store for a couple weeks even though we were in stationery in some stores and other departments in other stores,” Thind says. “Teens still found the cards.”

Thind was wise to build a relationship with the credit card companies. “They’re very familiar with microbilling and micro-transaction-based businesses. They’ll put the fraud limits in place that will most likely not give us as much hassle. If you control the flow, you’ll have fewer customer service issues and fewer angry customers.”

Useful links related to this article

Creative samples of Habbo promotions

Air2Web Inc. -- Habbo’s cell phone aggregator:

Habbo Inc.

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