Goldman Sachs says the metaverse is already here and is an 8 trillion dollars opportunity. In previous posts, we studied the learnings about virtual worlds, aka old-school metaverses and what made Habbo, the most successful virtual world for teens, became a social revolution with more than 300 million users registered during the 2000s and 2010s.
Unfortunately, virtual worlds’ success has slowly faded since 2012 and the general public just feels a general sense of nostalgia nowadays. Like any online community, its systems, culture and economy have been intimately familiar to loyal players, but could be impenetrable to newcomers. Habbo’s user base has gone from 16.5 million active users monthly to 850,000 as of today. What happened? In today’s article we will cover three topics:
The Trigger: The Great Mute
The Slow Death: Firing, Buggy Unity and #SaveHabbo
The Gray Market
The Trigger: The Great Mute
I am greatly saddened that following reports of abusive behaviors amongst a very small part of the Habbo community we have taken the decision to mute all conversations across the site.
— Paul LaFontaine, former CEO of Sulake
The Great Mute (also known as the Channel 4 Protest) was a Habbo-wide mute that occurred on Wednesday, June 13, 2012 in response to a news report by United Kingdom news program Channel 4 that revealed sexual allegations about Habbo. The mute affected all Habbo communities around the world and prevented any conversations from happening within the game for almost a month.
A two-month investigation led by Channel 4 found that pedophiles regularly used Habbo to engage underaged children in sexually explicit chat. Anchors from Channel 4 went undercover and entered Habbo posing as an 11-year-old girl. Immediately after registration, several sexual encounters were made, including webcam requests. The news report aired on British television on the evening of Tuesday, June 12th, one day before the mute. This wasn’t the first time a virtual child sex scandal occurred in a virtual world as reported by The Guardian back in 2007 for Second Life.
As a result of the news report, many companies that sponsored Sulake began withdrawing their support and funding. Examples of such companies include Balterton Capital and 3i. Some retailers in the United Kingdom also stopped selling prepaid cards that were used to buy coins. Similarly, the Habbo active population decreased. It was confirmed that Habbo experienced a staggering decrease in population numbers with many users quitting Habbo due to the mute. The number of online concurrent users fell from an average of 5000 prior to the mute to an average of 1200.
The Slow Death: Firing, Buggy Unity and #SaveHabbo
This drastic reduction of users caused the company to change their strategy and internal structure. In order to reduce costs, they envisioned a community where users exclusively relied on moderating and entertaining between each other instead of the active moderation and engagement with activities and competitions organised by the employees the users were used to.
According to an interview with 4Queijos, former Hotel Manager for the Portuguese-speaking community, Sulake fired the whole engagement department in 2012. Similarly, moderators from all hotels were laid off in favor of an automatic moderation system in 2015. Based on artificial intelligence methods, the automatic moderation function is not to respond to user complaints, but to follow the chat messages in real time and apply the sanctions whenever necessary.
On the other hand, since 2009, Habbo’s core technology has been Flash. In 2017, Adobe announced they would stop updating and distributing Flash Player by the end of 2020. After this announcement, Habbo started the plans for moving away from the platform’s Flash client, scheduled to be discontinued and replaced with Unity.
In December 2021, Sulake released the open Unity beta for several hotels just four days before Christmas. The beta was bug-ridden and poorly received by the community. “They made a huge miscalculation because there is 20 years worth of stuff to be implemented and Unity coding is difficult” says one player, who was a recipient of several player awards and returned to the game last year at the request of the developers. The discontinuation of Flash was then postponed twice until the full switchover on January 12. The following week, player numbers decreased almost 56 per cent.
This sloppy open beta came together with a set of controversial changes for the Habbo community —complaints included technical instability with more than 2,000 reported bugs, the removal of features that helped with moderation and player safety, new restrictions on player-to-player trading, and the introduction of fees and taxes that were construed as profiteering.
“Hell broke loose when in October, it was leaked that the bartering [trading] system was going to be removed,” says Kriegberg, a former player with over a decade of experience in the game, who despaired at the decision to remove one-to-one trading, an economic cornerstone that had been in place for over 17 years. The decision to centralise trading in the official marketplace was akin to a real-world government shutting down shops and telling business owners they could only sell their goods in one, enormous state-run supermarket
Hundreds took to Twitter to disagree arguing that the changes provide even more incentive to trade externally. Users believe the changes were financially motivated, and that they represented a misjudged focus on new players that has led to mass disenfranchisement. By the end of December, #SaveHabbo was trending on Twitter in many countries around the world, as parts of the community rallied against the new game version.
By the start of January 2021, Sulake was taking steps to pacify the community, issuing an official response to the #SaveHabbo campaign. In this statement, they said they will continue to improve and balance the new version of Habbo. However, a month later, they also announced the release of a downloadable version of the old Flash client. Players will be able to interact across both versions of the game, though the features of each will be different. When the Unity version has a satisfactory, playable state, they will deprecate, once again, the old Flash version. Note: both versions are still running parallely.
The Gray Market
Sulake claimed the mentioned changes would de-incentivise gray market trading and make it harder to steal items from hacked accounts, whilst centralising the economy around the marketplace would help develop selling and trading as a game mechanic. But what is the gray market and why does it exist?
As we have previously explained, Habbo has a real virtual economy. In-game items are valuable and some users are willing to pay other users for their furnis and credits instead of directly buying credits using Habbo payment methods for a more expensive price. The gray market is a community of mutually consenting vendors exchanging credits for real-world currencies on Telegram, Facebook and digital marketplaces:
Users need to do these operations outside the game because, according to Habbo’s Terms of Service, the sale of virtual items or credits for real-world cash is strictly prohibited and they can refuse the access to your account and virtual goods:
Virtual Currency or Virtual Goods cannot be redeemed by you for “real world” money, goods, or other items of monetary value from any party. Transfers of Virtual Currency or Virtual Goods by you outside of what we permit on the Service are strictly prohibited. This means you may not buy or sell Virtual Currency or Virtual Goods for “real world” money or otherwise exchange items for value outside of the Service.
These and other policies like not sharing any social network inside the game are probably inherited from the past, when Habbo was the #1 virtual world for teens. However, judging by recent player statistics, 70 percent of the current users are adults.
Closing Up
It’s time to move on. For the last three articles, we have studied the old-school metaverses, what made them successful and here what made them fail. The metaverse is coming thanks to the blockchain revolution. The big question is: can blockchain solve the safety, economy and community problems in virtual worlds?
The next chain of articles will cover what the blockchain technology is and how it can be applied to virtual worlds.