Habbo’s future is bleak as child sex scandal explodes

habbo

Things are looking bad for Habbo, the Finnish virtual world for teens, as explosive revelations about the site continue to ripple through the industry.

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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