Frozen-rails-2014

Sulake's Biggest Challenge Yet

Sulake, the Finnish company behind Habbo Hotel that has some 10 million active users a month globally, has run into its biggest difficulties as a company so far. The company has seen its fair share of challenges in the form of financial difficulties that resulted in shutting down its country offices outside of Finland. Last night The Kernel broke the news that Channel 4 in the UK would reveal some very disturbing material regarding the teenage community. The Kernel titled their piece as "Habbo exposed as a paedophile haven".

Before airing the piece on Habbo Hotel, Balderton Capital confirmed to the BBC that they will exit their investment in the business at zero value. The investment firm held a 13% stake in Sulake which by even careful estimates would have been in the low tens of millions. Since the Channel 4 piece ran, Tesco and WH Smith have withdrawn the Habbo Hotel gift cards from sale in the UK.

Furthermore, Paul La Fontaine, the CEO of Sulake, issued a statement this morning that they will cease all discussions in the Habbo community until they have come up with a sustainable way to go about this.

This really has turned into a nightmare for the company. Their service runs on the basic fact that people can chat with each other and make new friends. This will most likely dramatically hurt the company in the short term in terms of its community, but it can also be seen as an opportunity to pivot the service into something more valuable in the long run.

Still yesterday, La Fontaine was trying to calm down the situation with a longer statement on the Sulake blog that addressed the allegtions Channel 4 brought up. Needless to say the statements weren't enough and they had to drastically change the way the service works - ceasing all chat in Habbo Hotel.

We have tried to reach out to Paul La Fontaine and Sulake's communications without avail. We will update this piece if we hear back from them.

Regardless, the outcome of this incident could have dramatic implications for Sulake - the worst being naturally the one that would force them to in time shut down the service due to diminishing usage which can only be explained by the amputation of its features.

Another way forward is, if Sulake is able to pivot the service quite dramatically into a new direction in the coming months. We will have to wait and see - regardless, this is one nightmare no one, be it an executive or an employee, would want to be affiliated with.

Image by Sulake.

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