After a year in which the site was embroiled in a huge child protection scandal, lost many of its users and laid off staff, it chose the turn of the calendar as its moment to announce that CEO Paul LaFontaine was stepping down.

LaFontaine had only been in the job for a year or so, but in a blog post, LaFontaine bade a kind farewell to the community, referring obliquely to the abuse scandal and outlining the site’s biggest problem: low engagement.

The voice of the community is the strength of the community. Proof of this was clear in the summer. The community weathered a tremendous storm together, and Habbos stood strong. The way you reacted with one strong voice was inspiring.   You will be left in good hands. Our new Community Team will lead Staff in the Hotel to serve you. Engagement will increase, and the spirit of Old Habbo will rise again.

But his message hardly reflects the extent of the scandal — which led investors to drop the company — or the depth of the challenge facing the site.

Around half of Habbo’s active user base appears to have departed in the last year, causing a dramatic reaction inside the business. In the fall, Habbo decided to reposition itself as a platform for games, laying off 60 staff in the process. Changes were long overdue, but in the wake of the scandal they felt like panic. However, at least under LaFontaine it had some strategic experience in the field — he had come to Habbo from running ops and distribution at Playdom, the online game developer bought by Disney for $763 million in 2010.

LaFontaine’s post is being taken, for the time being, by Markku Ignatius (he’s the one on the right) — a long-time employee who was previously the company’s head of legal affairs and corporate communications. He will have had a busy 12 months, no doubt, but the jury is out on whether his experience will help Habbo navigate its transition to the tricky world of games.

But turning to Ignatius does not mean that the site’s owners are simply turning to old Habbo hands for guidance. He’s only acting CEO, and if it were simply that Sulake wanted to turn the clock back it would not have also lost CTO Markus Halttunen, an eight-year veteran, also appears to have departed, along with other staff who go back more than a decade. These changes are perhaps not a surprise, as the company was cutting a huge percentage of jobs, but it does show that the axe is falling on new staff and old.

The thing is, a shakeup may be the only way to try and save this situation — because all of Habbo’s problems are of its own making. Its woeful moderation allowed sexual predators to roam free around a site intended for kids and teens, and the product failed to change as the online world altered radically over the past few years. It may look at 2012 as its annus horribilis, but right now the question must be whether 2013 can really be any better.

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Dailymotion’s France EVP Martin Rogard tells Les Echos the Dailymotion Kids Plus package, will host a library of over 1,000 videos after acquiring licenses from producers, who will be paid according to subscriber numbers, including Inspector Gadget maker Cookie Jar.

The launch is interesting for three reasons:

1. It shows Dailymotion is searching for more non-advertising income.
2. It further illustrates that operators are attracted to chargeable kids’ content.
3. It comes as Dailymotion’s ownership is likely to change in the next few months.

1. Dailymotion fortunes

Dailymotion recently tied up with Pirate Bay co-founder Peter Sunde’s Flattr system to allow viewers to make micropayment donations to video creators they value.

But that pales against a full paid video strategy, which is ramping up. Dailymotion is likely to follow up its kids’ package with further categories including movies, Rogard tells Les Echos:

“We’re starting to educate our partners on the subject. Systematically, we will propose a mix of free and paid content. For us, it is important to walk on our own two feet.”

2. Kids boom

Netflix recently carved out its kids section with a separate UI. Amazon recently launched an unlimited kids content strand atop Amazon Prime. Each clearly believes  that on-demand cartoons and other shows are assets modern parents will happily pay for.

And why not? Prospects for kids content payment are healthy. FT:

“A study of 2,200 iPad-owning parents in the US and the UK, carried out by Kids Industries, found that parents downloaded an average of 27.2 apps for their children each year, spending about $100 in total.”

3. Investment coming

Today, Orange owns 49 percent of Dailymotion following its €61 million 2011 investment. When it invested, the telco also took an option to buy the remaining 51 percent. That right must be exercised by the looming spring 2013.

Although Orange may soon do so, such a deal would not be forever, 01net reports:

“Orange does not intend to stay a 100 percent shareholder of the site for long.

“The telephone company is looking for a new shareholder, and it has already mandated two banks — Messier, Maris & Associés of France and Raine of America.

“One avenue under consideration is to find a U.S. shareholder which would help to develop Dailymotion overseas.”

The implication here is that Dailymotion’s venture backers want out, and that, in their absence, Orange does not want full long-term ownership either.

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“Adding a 4G mobile broadband product with Clearwire gives our customers new connectivity options and allows Kajeet to expand our mobile service offerings so that we continue to lead in the creation and delivery of mobile solutions that are great for kids, families and educators,” CEO and founder Daniel Neal said in Kajeet’s announcement.

Kajeet is already selling mobile broadband dongles and hotspots through its education arm, which provides schools with devices and connectivity for learning purposes. It may now be planning to bring those devices over to its consumer-facing carrier business, which for now is focused on selling feature phones, smartphones and tablets.

Backed by Draper Fisher Jurvetson, Kajeet differentiates itself from the competition by offering parental control and management software with every device. Parents can define the phone numbers allowed to call the device, restrict usage by time and track their kinds using GPS. Modems are typically open connections to the internet, but Kajeet has developed similar management software for schools called Sentinel.

While putting a 4G hotspot into a child’s hands might seem extreme, it makes more sense if you think of the device as an internet nanny rather than a modem. Children are increasingly connecting to the internet with devices through Wi-Fi: tablets, e-readers, PCc, etc. By placing its protection software on a hotspot, Kajeet can expand its parental control services to devices it doesn’t sell or directly connect.

Photo courtesy of Shutterstock user Hasloo Group Production Studio

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Hulu Kids comes with shows from PBS, Nickelodeon and Lionsgate, and the content is sorted by age groups. The total number of shows listed on the section currently stands at 43. A spokesperson confirmed that Hulu is working on bringing Hulu Kids as a separate content section within the Hulu Plus app to additional devices.

The new Hulu Kids section is noteworthy for two reasons: First of all, Hulu is obviously taking a page from Netflix’s playbook here. Netflix launched its own kids section on the web last summer, and has since started to bring the section to a number of mobile and connected devices. The main difference between the two offerings is that Netflix actually changed its design for the kids section to make it more visually appealing and easier to navigate for kids, whereas Hulu just relies on its recently relaunched web UI.

But Hulu Kids is also interesting for another reason: Making this kind of content exclusively available to Hulu Plus subscribers shows that Hulu is starting to put a much bigger emphasis on its paid offering, and slowly deemphasizing the free Hulu.com website in the process. The fact that these kids shows are available ad-free is good news for parents who don’t want their kids confronted with advertising, but it’s also a sign that Hulu is moving towards becoming a more direct competitor for Netflix, which has always been ad-free.

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While MindCandy has bought IP before, this marks the first company-sized acquisition for hotly-tipped startup, and an interesting one too. Origami Blue was formed by refugees from Disney’s Black Rock studio, which was closed down in 2011. But although Black Rock specialized in racing games like MotoGP, it seems that Mind Candy is buying it for work they’ve since been doing on augmented reality applications and animation. The company said in a statement that the OB team would become the engine behind a new experimental development arm it’s calling “Candy Labs”.

But it looks like the company’s ambitions don’t end with a single purchase.

A recent job listing for a manager to work on M&A suggests that the company is looking for more than just the odd tumble — and may be at the start of a serious acquisition spree.

The ad, which ran a couple of months ago, suggests that more buyouts could be on the way.

Applicants would be required to “set strategy and source potential M&A and investment targets,” it says, monitor the market for potential movement and “determine bidding strategy and negotiate deals.”

It’s a big step from the company not least because it hints at an apparently strong financial position — achieved despite relatively modest venture funding from big names like Index and Accel.

While its last audited accounts show £1.2 million of profit on revenues of £7.5 million (that’s $1.8 million on $11.6 million), they go back to the end of 2010. Since then, the company has increased its user base to around 75 million people globally, and last year Spark Ventures cashed out in a move that valued the company at $200 million. In the meantime, Mind Candy boss Michael Acton Smith says “”our valuation is now substantially higher than that” and the business has been talked up as a potential IPO candidate.

Side note: interestingly one of Moshi’s biggest competitors, Club Penguin, (which is also owned by Disney) has its UK headquarters just a stone’s throw from Origami Blue’s offices.

Update: Clarified MindCandy’s 2009 purchase of the website Tutpup, which Acton Smith says “was a simple IP acquisition. No staff came across with the deal.”

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Earlier this week a report by the U.K’s Channel 4 News alleged that Habbo — a cute, blocky isometric environment which lets young users chat to each other — had become a haven for pedophiles, pornographic chat and inappropriate content. It also accused the site of knowing about the sort of activity that was taking place but failing to do anything to stop it: an image totally at odds with the site’s family-friendly style.

That led to venture capital Balderton, which had been an investor in Habbo’s parent company Sulake since 2005, to return its shares in the company and shut the door on the business. And now the company’s largest shareholder, 3i, has followed suit.

The Daily Telegraph reports that 3i will be cutting the cord:

3i, which has a 16 per cent stake in Habbo, said the revelations were “challenging” and announced it would be resigning from the site’s Finnish parent company Sulake.

In a statement, 3i said: “3i has actively supported the Sulake board in determining the right course of action in these very challenging circumstances.

“Following a board meeting today, we have resigned our board position and will cease to be a shareholder in the company.”

That boils down to nearly 30 percent of shares being ditched by investors, although it’s not entirely clear whether 3i and Balderton had effectively given up on the investment already, since Habbo has been struggling to make money for some time. Given that 3i gave up on venture capital entirely in 2010, the investment is unlikely to have had many defenders inside the company.

It seems that the decision by Sulake CEO Paul LaFontaine to mute all conversations across the site — effectively turning off all chat and putting the world on life support — was not enough.

No doubt 3i’s decision was also influence by the fact that a troika of British retailers have also taken a stance against Habbo, with chains Tesco, WH Smith and Game all deciding to pull the company’s gift cards from the shelves. Although it may not entirely kill off the company’s user base, it’s starting to look like it could have dealt a crippling blow to the business.

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Facebook is testing new features that would give children under 13 access to the giant social network, according to a report published Monday in the Wall Street Journal. Although one version of this new program would require children to have accounts that are linked to an adult so that supervision is easier, some parents have raised concerns about allowing pre-teens access the network at all due to Facebook’s past handling of privacy-related issues. Others, however, argue that plenty of younger children already access Facebook anyway despite the 13-year-old age limit, and that Facebook is wise to make it official.

In fact, the widespread flouting of the 13-year-old limit — a survey by Consumer Reports found that more than 7 million children under that age are on the network — is described as one of the primary motivations behind the proposed changes. The Journal quotes sources “familiar with the matter” as saying that Facebook is afraid it could face governmental scrutiny because of the large numbers of younger users who access the network, in many cases with the help or knowledge of their parents. The company has already been criticized and sanctioned by regulators a number of times over its handling of privacy.

Zuckerberg has said he wants to appeal to younger users

Facebook didn’t confirm that it is working on the kind of features described by the Wall Street Journal, but CEO Mark Zuckerberg has said in the past that the issue of allowing younger users access to the network was “a fight we [will] take on at some point.” And a comment from the company suggested that it is aware of — and concerned about — the problem of unauthorized access by kids. As a spokesman told the newspaper:

Recent reports have highlighted just how difficult it is to enforce age restrictions on the Internet, especially when parents want their children to access online content and services. We are in continuous dialogue with stakeholders, regulators and other policy makers about how best to help parents keep their kids safe in an evolving online environment.

When I asked the people who follow me on Twitter for their thoughts on the proposed changes, one of the main arguments for not allowing children under 13 to access the social network was that they aren’t old enough to make appropriate decisions for themselves — about what to share with others, what content they should comment on, what kind of behavior is appropriate, and so on — and that many parents might not supervise them properly. Some said they were concerned children would find ways around any restrictions Facebook might impose, such as requiring parental approval for friending other users or posting content.

@mathewi Some adults struggle with privacy settings; under 13s could run into problems in that regard

—
Gary Hilson (@GaryInToronto) June 04, 2012

On a related point, some parents said they were worried about the permanence of Facebook content, and the impact that over-sharing or other bad decisions by younger children might have on their lives as they get older. Just as some university-age users have found that their behavior on the social network can cause problems for them as they apply for jobs, some parents say they don’t want the questionable choices their children might make as 10-year-olds to impact the way their families or friends or others see them. As one child advocacy group told the Journal:

The idea that you would go after this segment of the audience when there are concerns about the current audience is mind boggling.

Is it better to train kids early for online life?

The opposing argument is that social networks and the way they affect our lives are things that children are going to have to come to grips with sooner or later, and therefore it’s better to introduce them to the concept gradually rather than blocking them from it until a pre-determined age like 13. Provided Facebook gives parents enough controls over what their children see and do, this theory goes, allowing kids access to the network not only has positive benefits — since it allows them to connect with family and friends more easily — but can provide a good training ground for broader lessons about internet behavior.

Supporters of this viewpoint point out that most children are already capable of accessing plenty of other much more questionable internet sites without their parents’ knowledge, and that this can cause far bigger problems than Facebook ever could. Allowing kids access to the social network would be a better alternative in many ways, they argue.

On a personal note, I allowed my youngest daughter — now 14 — to set up a Facebook account before she turned 13, even though I knew that this was against the site’s terms of service. At the time, I felt that she was more than capable of handling the responsibilities of being on the network, and I thought it was important that she develop the skills of doing so in a relatively safe environment like Facebook. She also knew that I would be friending her and would be able to see her behavior online (and she has two older sisters who I knew would help me keep an eye on her as well, which made a big difference).

Is it better to try and stop younger users from joining networks like Facebook until they reach a certain age, even if we know that large numbers of them are going to do so anyway? Or is Facebook better off making it easy for them and then requiring certain restrictions on what they do, so that they — and their parents — can get ahead of the problem? Let us know what you think in the comments, or by taking the poll below:

Post and thumbnail images courtesy of Flickr users James Emery and Dutchmassive

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According to a report this week from Open Rights Group and the London School of Economics, many local mobile operators are using aggressive — but haphazard — child protection filters by default, leaving adult customers unable to see perfectly ordinary websites instead of preventing kids from accessing adult material.

As the report says (PDF):

“There are serious consequences to badly implemented, default child protection blocking systems. They include restrictions on markets, censorship, a failure to address young people’s diverse needs and a false sense of security for parents.”

The document outlines more than 60 reported cases where websites have been erroneously flagged as containing adult content — and these are just the small number of cases reported to the Open Rights Group’s blocked.org.uk complaint service.

This really isn’t just an oddity. I regularly run into blocks when browsing news or data online on my phone, which is on a business tariff with Vodafone — surely a product most kids wouldn’t be using.

And in fact, just yesterday we received a message saying that the adult filter for France Telecom-owned Orange was blocking GigaOM.

Now, I know we’re a site for grown-ups, but that’s just silly.

If your operator is deciding on your behalf that what we write is off limits — including now, of course, the fact that we’re telling you that these blocks are faulty — then there’s really no reason to suspect it couldn’t happen to anybody, at any time.

Spreading censorship

And it’s not just in Britain, either. This sort of approach is happening all over Europe, in a variety of ways.

In a piece for Foreign Policy, the author and activist Rebecca Mackinnon outlines some of the incursions being made — and points out that, crucially, none of this is happening because of regulatory pressure.

“This type of problem is serious enough, in enough countries, to have made its way to the U.N. Human Rights Council. Last year, the U.N. special rapporteur on freedom of expression, Frank La Rue, delivered an official report to the council that not only condemned the censorship and surveillance practices of authoritarian countries, but also warned of dangerous trends in the democratic world that threaten citizen rights to free expression in the Internet age.

“One of his major concerns is ‘over-broad private censorship, often without transparency and the due process of the law’. He singled out two examples of how governments are, ironically, using law to delegate enforcement responsibilities and functions to the private sector: Britain’s Digital Economy Act, which could potentially disconnect Internet users suspected of illegal downloading, and France’s similar ‘three strikes’ law.

The result of all this?

In the name of protecting us, mobile operators are now becoming the de facto censors of the web, whether we’ve asked them to or not.

Photograph copyright Shutterstock/Pixel 4 images

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New information came out regarding an EU project called the pan-European framework for electronic identification, authentication and signature (PEFIAS) is out — and it’s had some interesting tweaks.

We heard about this plan for the first time late last year, when it was proposed as a good way of making online transactions more secure. But now it seems the scheme will also be used to prove people’s age online. Why? For the kids, of course. The one-size-fits-all nature of the internet is increasingly a headache for regulators who are trying to protect children, and here the EU wants to provide a possible cure.

This new mission for PEFIAS was revealed in the European Commission’s Strategy for a better internet for children. It’s a weighty document that’s full of suggestions for keeping kids safe online — not just on the desktop, but also on tablets, mobile phones and game consoles, where the EC wants parental control tech to be built in.

The EC is also calling for a new system of age classification to be devised for apps, and it has already proposed a new data protection regulation for safeguarding children’s online privacy.

Of course, none of this makes any sense unless users can prove their age. Hence:

The Commission intends to propose in 2012 a pan-European framework for electronic authentication that will enable the use of personal attributes (age in particular) to ensure compliance with the age provisions of the proposed data protection regulation.”

We’re looking at PEFIAS again, but this time it’s not about electronic signatures; it’s about proving how old you are. And industry is also expected to “implement technical means for electronic identification and authentication.”

For what? Will EU citizens have to use their e-ID to opt in for viewing porn, for example? Will social network profiles have to be linked to real-world, passport-grade identities? These are questions that officials will hopefully answer when they make their full proposals public at the end of May.

It’s far too early to get paranoid about this, but that’s just the kind of reaction that often follows mission creep. Just look at the likes of ACTA — it may have kicked off with the best anti-counterfeiting intentions, but picking through the details revealed additional implications that made it an altogether more sinister beast.

Tech changes

There’s plenty in the strategy for the tech and content industries to chew on, too. Here it’s hard not to see things getting less EU-specific, because the products we’re talking about aren’t just made for Europe.

Here’s what the EC wants industry to do:

Who’s going to pay for this? Is the EU going to fund the development of this technology? Are we looking at new responsibilities for the likes of Apple, Facebook and Microsoft? Would state-funded development of child-friendly apps distort the market?

Right now we can only ask questions. Soon, hopefully, we’ll have some answers.

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Pixykids announced today that it has secured $3 million in funding including a $2 million investment from ATA Ventures. The money will go toward launching an immersive social platform for children ages 6-12 starting in the second quarter. Others have tried to work this same market including Imbee, Everloop, KidZui, Moshi Monsters, WoozIn, Club Penguin, but most have focused on gaming, virtual worlds or social networking. But Pixykids is looking to break out by being a one-stop shop for all kinds of interactivity for children.

Children will be able to make a 3-D avatar and their own wall, create artwork and upload photos and videos that feed into their own portfolio. They’ll be able to share that with family members including parents, grandparents and uncles and aunts along with other friends on Pixykids. There will be tools for chatting and video conferencing and many other features to come. Pixykids is looking to become a Facebook-like platform for a curated list of applications. It’s starting with some of its own applications but is reaching out to developers to build apps for Pixykids. So there could be games, animation or movie making apps added depending on what users want.

“We consider ourselves at the intersection of Facebook and Disney,” said CEO and co-founder Rajul Kadakia. “Pixykids has user generated and personal content. It’s not just text or chat, but photos and videos and identity with engaging apps that connect people. What’s unique is that we’re also like Disney with rich interactive content and sticky play patterns for the family.”

Unlike Facebook, Pixykids complies with COPPA, the Children’s Online Privacy Protection Act, which oversees rules for sites aimed at children under the age of 13. COPPA requires sites that want to collect and use childrens’ personal information to get verifiable parental consent, which can entail receiving a signed form or accepting and verifying a credit card number. Pixykids also has measures in place to monitor for bad words and abuse, and there’s also a self-flagging system so kids can tattle on bullies and rule-breakers. And parents are the ones who approve the friends a kid can interact with on the site. The idea is to set the kids free inside the world and let them draw in their parents and other family members when they want to share.

Michael Adair, Pixykids’ COO said said one of the key aspects of Pixykids will be the involvement of the entire family. He said Pixykids can serve as a family-friendly alternative for Skype, YouTube and other services that are not COPPA compliant.

“We’re not just a kids site, it’s about doing stuff you care about and sharing with the extended family,” said Adair, who was previously VP of Corporate Development and Finance at Glam Media and Head of North American Sales Finance at Google.

He said the service will look to monetize through a variety of ways, including freemium service, subscriptions, virtual goods and potentially third-party sponsorships. Kadakia created Pixykids after first trying an online scrapbooking service. But she realized the bigger opportunity was in taking some of the same ideas and applying them to children. Pixykids will open up a beta in the second quarter with a public launch scheduled for the third quarter.

Pixykids is entering a crowded market but I like the whole-family and one-stop shop approach it’s taking.  I could see wanting to check-in and finding out what my nieces and nephews are doing or chat with them online.

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