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Sunday 17 January 2010

First thoughts about Balancion

I got an invite to the Balancion personal finance application beta a week ago, and have played with it somewhat since. I've tried a few similar tools before, ranging from the finance packages of the banks I've been a customer of, to a few desktop applications. Until now, I haven't been sufficiently impressed by them to continue using any for any significant period, but I think Balancion might be one to stick around for a while.

Balancion solves the two issues my previous experiments have failed at: first, it covers the entirety of my personal accounts (or very close thereof), because it isn't limited to just the services offered by one bank (the failing of Nordea's, Sampo's and OP's packages, at least the last time I tried them), and second, it doesn't force me to spend my evenings manually typing in boring details, thanks to its tools for downloading the data from the banks and other institutions. Of course, that's just table stakes for the game, really, but my previous experiences have shown even that much is not a given in a market the size of Finland. I would imagine larger market areas have had more focus on this type of stuff - American banks seem to advertise compatibility with Quicken or MS Money - or now with Mint, the hottest entry in the area. German banks apparently have a standard for transaction data exchange. None of that has been available to individuals in Finland.

What currently lifts Balancion above the table-stakes minimum is how it deals with "uncategorized" expenses. Other tools allow searching for similar historic transactions and categorizing all of them at once. Balancion applies that to the future as well, and learns to recognise more and more stuff as you go. Setting the books up for the first time does require a few hours of clicking around, but it gets less and less manual as time goes. That's what makes it a joy to use (as much as any financial application can be a joy, that is!)

At this point in the beta, it's a bit limited; just tracking income and expenses, plus a few (quite useful and informative) visualizations of the same, which already can be helpful in recognizing big expense areas and saving money. However, I'm looking forward to seeing more of the budgeting, expense management and investing tools in the service. It's pretty clear how this can develop and where the opportunities for the business lie. The crucial question is, how can Balancion add partnerships and cross-sell features while retaining the trust of the users. Thus far, their communication indicates they understand how important this will be to their success.

I'm not terribly happy about the way Balancion authenticates me, though. The email/password login is standard, though I'd prefer to use OpenID to avoid managing one more password. What really bugs me are the mandatory "security questions", which they require to be able to change the password. Such questions, especially since they were limited to two out of half a dozen pre-selected questions only reduce security (seriously, it does not take much investigating to figure out the maiden name of my mother). If this is what their security advisor Nixu truly has recommended to the team, I'm disappointed in Nixu as well. Anyway, I answered the questions with something random - so now I can't change my password at all. This probably was not what they intended.

For anyone interested in this category of services, I would recommend checking out the venture capital pitch presentation of Mint.com, the US equivalent of Balancion. If you want to try out Balancion yourself, ask me for an invite here in the blog comments or by tweeting @osma.

Thursday 14 January 2010

Technology factors to watch during 2010

Last week I posted a brief review of 2009 here, but didn't go much into predictions for 2010. I won't try to predict anything detailed now either, but here's a few things I think will be interesting to monitor over the year. And no, tablet computing isn't on the list. For fairly obvious reasons, this is focused on areas impacting social games. As a further assist, I've underlined the parts most resembling conclusions or predictions.

 

Social networks and virtual worlds interoperability

As more and more business transforms to use Internet as a core function, the customers of these businesses are faced with a proliferation of proprietary identification mechanisms that has already gotten out of hand. It is not uncommon today to have to manage 20-30 different userid/password pairs that are in regular use, from banks to e-commerce to social networks. At the same time, identity theft is a growing problem, no doubt in large part because of the minimum-security methods of identification.

Social networks today are a significant contributor to this problem. Each collects and presents information about its users that contribute to the rise of identity theft while having their own authorization mechanisms in a silo of low-trustworthy identification methods. The users, on the other hand, perceive little incentive to manage their passwords in a secure fashion. Account hijacking and impersonation is a major problem area to each vendor. The low trust level of individual account data also leads to a low relative value of owning a large user database.

A technology solution, OpenID is emerging and taking hold in a form of an industry-accepted standard for exchanging identity data between an ID provider and a vendor in need of a verified id for their customer. A few of current backers of the standard in the picture on the right. However, changing the practices of the largest businesses has barely begun and no consumer shift can yet be seen – as is typical for such “undercurrent” trends.

OpenID will allow consumers to use fewer, higher-security ids over the universe of their preferred services, which in turn will allow these services a new level of transparent interoperability in combining data from each other in near-automatic, personalized mash-ups via the APIs each vendor can expose to trusted users with less fear of opening holes for account hijacking.

 

Browsers vs desktops: what's the target for entertainment software?

Here's a rough sketch of competing technology streams in terms of two primary factors – ease of access versus the rich experience of high-performance software. “Browser wars” are starting again, and with the improved engines behind Safari 4, Firefox 4, IE 8 and Google Chrome, a lot of the kind of functionalitywe're used to thinking belongs to native software or at best browser plugins like Flash, Java or Silverlight will be available straight in the browser. This for sure includes high-performance application code, rich 2D vector and pixel graphics, video streams and access to new information like location-sensing. The plugins will most likely be stronger at 3D graphics and synchronized audio and at advanced input mechanisms like using webcams for gesture-based control. Invariably, especially the new input capabilities will also bring with them new security and privacy concerns which will not be fully resolved within the next 2-3 years.

While 3D as a technology will be available to browser-based applications, this doesn't mean the web will turn to represent everything as a virtual copy of the physical world. Instead, it's best use will be as a tool for accelerating and enhancing other UI and presentation concepts – think iTunes CoverFlow. For social interaction experiences, a 3-degrees-freedom pure 3D representation will remain a confusing solution, and other presentations such as axonometric “camera in the corner” concepts will remain more accessible. Naturally, they can (but don't necessarily need to) be rendered using 3D tech.

 

Increased computing capabilities will change economies of scale

The history of the “computer revolution” has been about automation changing economies of scale to enable entirely new types of business. Lately we've seen this eg by Google AdWords enabling small businesses to advertise and/or publish ads without marketing departments or involvement of agencies.

The same trend is continuing in the form of computing capacity becoming a utility in Cloud Computing, extreme amounts of storage becoming available in costs which allow terabytes of storage to organizations of almost any size and budget, and most importantly, developing data mining, search and discovery algorithms that enable organizations to utilize data which used to be impossible to analyze as automated business practices. Unfortunately, the same capabilities are available for criminals as well.

Areas in which this is happening as we speak:

  • further types and spread of self-service advertising, better targeting, availability of media
  • automated heuristics-based detection of risky customers, automated moderation
  • computer-vision based user interfaces which require nothing more than a webcam
  • ever increasing size of botnets, and the use of them for game exploits, money laundering, identity theft and surveillance

The escalation of large-scale threats have raised the need for industry-wide groups for exchanging information and best practices between organizations regarding the security relevant information such as new threats, customer risk rating, identification of targeted and organized crime.

 

Software development, efficiencies, bottlenecks, resources

Commercial software development tools and methods experience a significant shift roughly once every decade. The last such shift was the mainstreaming of RAD/IDE-based, virtual-machine oriented tools and the rise of Web and open source in the 90s, and now those two rising themes are increasingly mainstream while “convergent”, cross-platform applications which depend on the availability of always-on Internet are emerging. As before, it's not driven by technological possibility, but by the richness and availability of high-quality development tools with which more than just the “rocket-scientist” superstars can create new applications.

The skills which are going to be in short supply are those for designing applications which can smoothly interface to the rest of the cloud of applications in this emerging category. Web-accessible APIs, the security design of those APIs, efficient utilization of services from non-associated, even competing companies, and friction-free interfaces for end users of these web-native applications is the challenge.

In this world, the traditional IT outsourcing houses won't be able to serve as a safety valve for resources as they're necessarily still focused on serving the last and current mainstream. In their place, we must consider the availability of open source solutions not just as a method for reducing licensing cost, but as the “extra developer” used to reduce time-to-market. And as with any such relationship, it must be nurtured. In the case of open source, that requires participation and contribution back to the further development of that enabling infrastructure as the cost of outsourcing the majority of the work to the community.


Mobile internet

With the launch of iPhone, the use of Web content and 3rd party applications on mobile devices has multiplied compared to previous smart phone generations. This is due to two factors: the familiarity and productivity of Apple's developer tools for the iPhone, and the straightforward App Store for the end-users. Moreover, the wide base of the applications is primarily because of the former, as proven by the wide availability of unauthorized applications already before the launch of iPhone 2.0 and the App Store. Nokia's failure to create such an applications market despite the functionality available on S60 phones for years before the iPhone launch proves this – it was not the features of the device, but the development tools and application distribution platform were the primary factor.

The launch of Google's Android will further accelerate this development. Current Android-based devices lack the polish of iPhone, and the stability gained from years of experience of Nokia devices, yet the availability of development tools will supercharge this market, and the next couple of years will see accelerated development and polish cycle from all parties. At the moment, it's impossible to call the winner on this race, though.

Tuesday 8 December 2009

The balance of great products and rapid evolution

I wanted to link to Andrew Chen's recent article, Does every startup need a Steve Jobs, because it's a useful discussion about the differences between technical feasibility, design-led desirability, and business viability, a triplet productized by IDEO, and one that we also identified a decade ago at Razorfish (wow, it's really a decade ago!). As for the question in the title - no, I don't think that's the only way to create greatness, though clearly if you have Steve at your disposal, you could do worse than have him run everything. :)

Seriously though, at least in this consumer-targeted software business that I'm familiar with, it's crucially important to have those three principles well represented at every level of the business. Sure, it's possible to create a successful business with just two or perhaps even just one of those viewpoints, especially if you can get away with copying someone else but just doing it with better economics. However, to create something new and be successful, it'd be a mistake to ignore business, technology or design. Sadly, of the three, design is the one most commonly ignored. According to this interview of Ken Auletta of his new book, even Google ignores it, Marissa Mayer notwithstanding.

Anyway, what I'm particularly interested about is how can you marry great design with incremental, rapid iterations on the market. I'm pretty sure I've understood how to iterate out in the open with regards to technical work, and relatively comfortable with iteration regarding business aspects. I've yet to come up with a really convincing argument for iteration and design on a very granular basis - well, I can convince myself, but I'm having less success convincing designers. :) If anyone cares to share their secrets, I'd love to hear more.

Wednesday 11 November 2009

MySQL - could we please move on already?

I've kept away from this debate since last April, but this eternal dragging-on is getting to me. Could we please move on already regarding the Oracle-Sun-MySQL decision? I'm a customer of MySQL, and I don't really savor the idea of becoming a customer of Oracle. Even so, I'd much rather see Oracle own it, than leave it straggling, let alone see this process drag on and on. This is helping no one.

I'm using a product from a company from which I buy commercial support, but I could switch to using a binary-compatible Open Source tool any day I chose. I am not bound to remaining a customer of the company I'm buying support from for any period longer than the current contract. I can definitely live with that obligation. I can live with the OSS-tool (whether we want to call it MySQL Community, Percona, MariaDB or whatever, I don't care) instead of the commercial product - in fact, I'm getting the understanding that the OSS-tool may in fact be better suited to my requirements than the product. So, I have no issue being bound Oracle, should the merger go through, because I am not bound to them. I can see as much interesting related technology being developed outside the discussed commercial unit as inside it, so I'm certainly not worried about the future of the tech.

At this point in time, I could buy support from at least a couple of different organizations to replace and extend that which I've bought from MySQL/Sun. I have absolutely no reason to think that option would go away should the merger be approved, despite what certain founders now claim. If it's not commercially possible to develop and support a database product without being in full control over its copyright, then how come Percona has a business? If it's possible to provide such support for GPL software on a limited basis, but not on a big-business enterprise level, then how come Red Hat is a successful public company?

I use MySQL as an infrastructure component to run a business which could be described as software-as-a-service. I do not redistribute the code base as part of a licensed product. There are companies who do that, but they've always done it with the full understanding that what they're doing is dependent on having to license something from an independent party over which they have no control. If they don't like licensing from Oracle, then they can choose to re-engineer their solution to work on top of some other database engine. It's not like those don't exist, or like technology, licensed or not, hasn't always carried that risk with it.

I can't avoid thinking that some of the parties keeping this thing from reaching completion are dreaming of Skype -- selling the same business twice. Hey, more power to them if that happens, but frankly, that was dependent on Ebay making a stupid deal at the time. I just do not see what that has to do with anti-trust and why the European Commission needs to be involved. THIS is hurting the market, more so that Oracle is likely to.

I have nothing further on the matter. Thank you for your attention.

Thursday 27 August 2009

Reflections on Nokia Maemo

Earlier today Nokia announced their first handset based on what is likely to be their mobile operating system of the future - the Nokia N900 Maemo. I didn't think I would bother to pay attention, but somehow, I ended up doing so anyway, and this post is a result of that time spent thinking about it. I like quite a few things about it, but can't avoid being deeply bothered by other aspects. I hope by writing this I can make some small contribution to its future.

Why do I care? After the frustrations and disappointments with Nokia devices in the past years, I've tried not to. However, they're impossible to ignore in Finland, I have family reasons to hope this road leads to something good, and it's an attempt to make an open platform -- and I care about open platforms. Why do I feel qualified to comment? Well, because this is not really about devices, it's about software. And software is what I've always done, and managing software organizations is what I think about daily.

There's lot to like about the N900. I haven't seen, let alone played with one, but as far as the specs go, it's a pretty nice set of hardware. Same performance as the iPhone 3GS (which also makes it faster than any Android device announced), 3D acceleration, lots of storage (and a memory card slot), and, as a welcome change from many other Nokia devices, completely standard connectors (3.5mm audio, micro-USB tethering and battery charger). On the hardware side, the only thing not to like about it is the lack of a finger-usable, multi-touch display. This device, like all the other Nokia devices before it, require a stylus or at least long fingernails. It makes up for that by being really high resolution.

It's also based on an open source, Linux-based operating system Nokia has been developing for several years with community participation, Maemo. This makes it more attractive to me on a personal level than iPhone (which is way too closely guarded and controlled by Apple), Palm WebOS (open, but little track record), or even Android (open, but built out of pieces which have far less common with normal Linux than Maemo). It should be fairly clear that all four mentioned are way ahead of things like Symbian S60, which clearly needs to be taken behind the shed and put out of its misery, not matter what Nokia's representatives say about it official capacity.

On a more professional level, the inclusion of Flash 9.4 in the platform is a big deal. I'm anxious to get hold of one and see how much work it is to make Habbo work on it. This could be the first handset capable of technically running it (enough performance, enough resolution, good enough software), though obviously tuning our service to a mobile device would still need work on UI and other pieces.

However, like I wrote above, there's also plenty that bothers me. First of all, unlike most people probably realize, this is actually the 4th Maemo device in about as many years that Nokia releases. First was the Nokia 770 Internet Tablet, essentially an early adopter test device. Then came N800 -- running an updated OS which required applications to be ported to it, but which never was officially released for the 770 (putting the early adopter developers in a rather awkward position). Less than a year later N810 added a physical keyboard and an OS upgrade (which fortunately could be installed, with some difficulty, on the N800). That was quite a long time ago, though.

In the meantime, Maemo has been completely reinvented. The original UI toolkit has been switched to QT, which Nokia bought in the meantime, and all of the (rather limited quantity) applications require significant rework to be compatible with the OS release on the N900. The public reasoning for this compatibility break has been pretty weak -- "to ensure compatibility with S60", which also is moving on to QT framework. Why is this weak? Well, because the transition over on the S60 side also requires all of the (somewhat more numerous) applications developed for that platform to be significantly reworked. In other words, Nokia broke compatibility on both its old smartphone platform and the new platform at the same time, and offered little transitionary compatibility layers to either side. Not for the first time, either. S60 applications have been broken between upgrades several times before, too.

This track record is highly worrying. Despite their years of practice and ambitions to have a lively third party mobile applications market, Nokia has clearly not grasped the importance of a stable platform to the developers they mean to attract. This lack of understanding of one of the most basic requirements is enough to counter pretty much everything I wrote about Maemo versus its closest competitions a few chapters earlier.

Contrast the above to iPhone OS 2.0 to 3.0 transition. Sure, a few things did change. However, developers were given months of notice ahead of time, and the changes, apart from added functionality, were all pretty minor. Of course, Apple has a long history of making major upgrades while retaining forwards compatibility, with the Mac OS 68k to PowerPC, then to OS X, then to Intel CPU transitions.

It's also taken a LONG time for this device to be announced. I don't know, but I get the feeling it's something like a year late. The break in launch schedule between N810 and N900, the amount of changes in the Maemo platform, and the design of the device compared to for instance the N97 all scream "last year" to me. Besides, everyone knew this was coming ages ago. In the time between the launches of N810 and N900, Apple has managed to update the iPhone twice. This lack of predictability in the release cycle doesn't bode well for the next device in the line.

There is nothing more important for progress in software development than cycle time. The only cost-effective, productive way of making software today is to get feedback on it often, and the longer it stays unreleased, the more the feedback is late when it comes. This seems to be another area where Nokia has not been able to shake off their "we make hardware" mentality. Unline hardware, software can be updated with no extra cost. That's an advantage nearly everyone else has learned to make use of, and Nokia, if they truly desire to become a software and services powerhouse, has to finally take to heart.

N900 is not an "iPhone killer". I don't think it's meant to be. When its development started, it's unlikely the iPhone had even been announced. However, it's the best chance for Nokia to ever develop a device better than an iPhone. I hope they will - the world needs competition, and I would like to see Nokia be part in that. However, at this rate they will never catch up - Apple will have released two more major updates before the next Maemo device unless Nokia gets their act together.

I'm still hoping.

Monday 4 May 2009

What does Oracle mean for Java?

Over the past two weeks I've been mostly focused on MySQL, but the big-ticket item in the Sun/Oracle deal is not databases, it's Java. However, it's also the domain which is far less clear to predict. It was a big deal when Sun decided to open source Java, but the fact of the matter is that the first fully open source release isn't out yet, and Sun has been keeping the testing and certification kit off-limits for open source communities. This means it would still be far too easy for OpenJDK to be killed off.

I've been keeping clear of Oracle for several years, and can't even begin to guess what their position on this is. Oracle has been a pretty active contributor to Linux in particular for several years, and I'm sure their open source strategy and how it works together with their business is pretty well established within at least the engineering parts of the company. At the same time, their notoriously aggressive market tactics make sure that everyone's wary of their next move. Java is a huge part of Oracle's business, and after they purchased BEA, I wouldn't be surprised if Oracle wasn't already the biggest Java company (in terms of revenue) ahead of both Sun and IBM. After completing the Sun acquisition, that'll be guaranteed.

That's a big balance shift for the overall Java community. Now, Oracle is a smart company. My worry is they might emphasize short-term tactical market advantage (owning all of Java, JRockit, Glassfish and WebLogic to compete against other middleware and business applications) over long-term strategic benefit of a unified platform competing with .NET and the host of open source platforms from PHP and Ruby to Python. With such a wide field, following up on, and improving on the open source platform process would be the right thing to do - and it would help me :)

Thursday 30 April 2009

The difference between conversion and retention

Picked up a piece of analysis today from my newsfeed regarding Twitter audience. Nielsen has posted information about Twitter's month-to-month retention (40%) and compared that to Facebook's and MySpace's. Pete Cashmore over at Mashable promptly misread the basic information and came to an entirely wrong conclusion about the stats, titling his post about it as "60% quit Twitter in the first month". A simple misunderstanding of basic audience analysis like this is the crucial difference between explosively growing traffic and a failure. That's a fail for you, Pete.

What's wrong? Well, retention is a separate matter from conversion. 40% conversion from a trial registration to being a continuing active user to the second month would not be a bad conversion rate. It's not stratospherically great, I've seen better, but I wouldn't be terribly unhappy about such a figure. However, Nielsen didn't say anything at all about first-to-second month conversion. This is what they DID say: "Twitter’s audience retention rate, or the percentage of a given month’s users who come back the following month, is currently about 40 percent."

That's pretty plain English when you take the time to read it. Month to month, regardless of visitor lifetime, not first to second month. On this metric, 40% retention is not good at all, and will definitely be a limiting factor to Twitter's traffic and audience size over time, just the Nielsen article points out (and shows the math for). For any given retention rate, there just is a certain maximum audience reach beyond which any new traffic can't overcome the leaving base, since new traffic is not an inexhaustible supply.

And since today is a busy day, that concludes the free startup advice. Take the time to understand the difference between these metrics, you'll thank yourself for it later.

Thursday 2 April 2009

Amazon order sizes, ideal behaviour, and proof of market friction

I wrote last fall about the "sweet spot" in pricing and spending patterns for a microtransaction-based service and business model, where I posited that given flexible consumption, revenue could be maximized by ensuring the lowest possible minimum price point; one which is preferably closer to 1 cent than one 1 euro. Depending on the goods sold and amount of logistics overhead, the minimum profitable price may of course be much higher, and depending on the payment mechanisms available, the minimum price for which the consumers effort overhead exceeds the cost of the good may also be fairly significant. A chocolate bar may be sellable for 40 cents, while few durable goods can achieve a price point lower than a few euros. For virtual goods, the minimum pricing is mostly a question of efficient mechanism for transferring low amounts of money, because the minimum "size" of the good sold can be in theory reduced ad infinitum, and distribution costs are a non-issue.

Last week there was a Facebook Developer Garage day in San Francisco where a couple of interesting presentations were given. I wasn't there, but browsing through the material I found this slide about the distribution of order sizes among Amazon customers (slide 10 in the deck):

It's interesting to see the similarities on this chart to the behavior in virtual goods. In this data, the observed behavior follows the power law model in an ideal fashion at price points over $25, but the drop-off below that order size is remarkably fast. This is the result of primarily the goods sold and the logistical overheads implicit in that; it just doesn't make much sense for someone to order $5 worth of goods from Amazon given the shipping costs and delays incurred on top of the purchase.

For virtual goods, the drop-off point can be much lower, but still, a similar drop off does happen - again because below a certain price point and transactional overhead level, neither the consumer of the good nor its producer see value in the market. At prices above that, the transactional model does however exhibit the power law distribution. Again, by reducing the minimum marketable and profitable price point, there is a big potential customer base to be gained at the bottom end of the pricing scale. Most companies leave an amazing amount of revenue on the table by not addressing this issue.

Sunday 28 December 2008

A year-end review

2008 is nearly over, and it's time to take a look at what happened over the year, as well as to take a peek at the the coming 2009. A year ago I made a guess that social networking services would open up and start sharing their profiles – well, practically everyone but Facebook are doing some of that, and Facebook is trying to get everyone to depend on them – not that “create dependency” isn't a part of Google's and MySpace's plan, too. Unfortunately, we haven't yet found a meaningful way for Habbo to participate in this festival, due to differences in demographies, interest areas, and the priority of running a profitable business, instead. Still looking for that solution, though.

I also guessed that productivity applications would seriously move to the cloud – and was a bit too optimistic on that one. Sure, the applications are there, but I don't really see any of them having replaced the desktop-based counterparts – nor do I see that happening next year, either. People are, rightly so, focused somewhere else, and while over the long run moving off to the cloud will make sense from both productivity and cost standpoint, it's still too much of a jump, and too expensive to make.

The increasing popularity of netbooks, Internet access via 3G networks, etc, will have an impact on that, though. Perhaps we'll all move out to the net in a completely different way: not via our old productivity apps, but via entirely new class of applications. Something else than Facebook and Twitter though, I hope.

What else? MySQL was acquired by Sun, and we're all still waiting for the next step. The Register (I can't believe I keep reading it) has somehow gotten the impression that Sun has slowed MySQL down – nah, it's been this slow for at least three times that long. Fortunately, the acquisition may have been a catalyst for the MySQL developer community to start doing something else instead of waiting, and I'm really looking forward to the improvements Percona and Drizzle are making to keep MySQL competitive. As for Sun – time to stop confusing a good thing with dubious business models and bad release engineering before you lose all your customers, I'd say. At the same time, I'm also super-interested in the stuff Sun is doing on the hardware side of database storage with SSD-optimized solutions. Can't say I paid much attention to Sun there for a while, but they're making what seems like an unlikely comeback.

For Habbo, we've continued making progress on the track chosen late 2007 – revolutionary changes made incrementally. Biggest one this year, the free second currency of Pixels, was just launched a month ago. Several improvements are coming up for that, of course, and a whole lot of other stuff is in the works, or at least being thought of. We're trying not to hold anything longer than it absolutely needs to, so everything radically new continues to be launched sort-of unfinished and get improved along the way. It just ends up being so much better that way, as the feedback makes a significant contribution to the overall design.

This a weird time. The world is reeling from what indeed may be the worst economic crisis in 75 years (though I'm not well versed enough in history to be able to tell myself), and still (or because of it?), opportunities lie all around, ignored by most. It's never easy to tell which direction is most promising, but now I'm finding it incredibly hard to choose and prioritize between the possible things to focus on. Still, 2009 is definitely going to be a year to really focus on even fewer things than usual, and really kick ass on those.

If you made it this far, thanks for reading. I wish you a great year 2009, whatever it is you're doing.

Tuesday 25 November 2008

New reward models for Habbo

As I hinted at last Thursday, and as was noted by Sulka yesterday, we are introducing a second currency to Habbo. We've had Coins (or credits) since the beginning of the service as the purchasable in-game currency, and the business model of Sulake is primarily based on sales of this currency to end users via a variety of mechanisms and sales channels from premium SMS billing (our original method) to credit cards, PayPal transactions and prepaid voucher cards purchasable from kiosks and stores like R-Kioski and 7-Eleven around the world.

Since yesterday, starting from our pilot site Habbo UK onwards, there's now a second currency as well, called Habbo Pixels. This one can't be bought -- you have to play Habbo to get it. There's a whole new set of cool things you can do with this currency, that can't be done using Coins. Naturally, the process doesn't end here, and we'll be introducing plenty more features tied to Pixels, Coins or both over the following months as part of our routine monthly releases.

Because of this tight connection to our primary business model, and because trading is such a big feature of the gameplay in Habbo, the implications of this change are pretty substantial. And so was the process by which we arrived at making this change - starting from (at least on my part) utter confusion of why anyone would want to complicate their economic model by introducing this big new variables. Once we got that part (thanks to everyone who patiently explained why it makes sense), implementing this still took its own sweet time, as did all of the pre-analysis on why it wouldn't immediately collapse our end-user sales and drive the company out of business -- that it would be fun for users was less of a worry.

I've been for a while convinced this will be huge for Habbo. It's way too early to tell whether that will truly be so, but the first indications sure look promising. Our UK service had a new peak simultaneous users record on the day of the launch of Pixels (20% increase -- if you care, you can follow those figures on the front page of each Habbo site), and the community feedback is overwhelmingly positive, despite its normal bias towards resisting change. We'll be following this closely, and follow-up articles are sure to appear in many places.