Sulake buys out virtual community IRC-Galleria
Intention is to spread the concept abroad, as has been done with Sulake's Habbo Hotel
The Helsinki-based firm Sulake - the company behind the international teenage virtual community Habbo Hotel, which has now spread to nearly 30 countries - has acquired IRC-Galleria, a similar operation that is frequented by up to 850,000 weekly Finnish visitors from the 14-30 years age-group.
On Monday, Sulake announced the purchase of Dynamoid Oy, the company behind the IRC-Galleria activities, for an undisclosed sum. The deal is to be paid for with Sulake stock, such that the seven Dynamoid stockholders will take a holding in Sulake.
At a recent shareholders' meeting of Sulake, a decision was reached on a stock issue of no more than 200,000 shares. If the Dynamoid owners were to collect the entire pot, some 8 per cent of the entire Sulake share capital, the six young men and one woman would become millionaires. Sulake was valued last summer at around EUR 300 million.
Sulake is due to be listed on the Helsinki Exchanges next year.
The basic ideas behind the two virtual communities allow for a marriage of minds. In essence, Habbo Hotel is a blend of online game and chat room, in which users can create their own character and talk with others online. The revenue comes from buying virtual "furniture and fittings" using credits that are ultimately the users' real money, paid in via SMS, credit cards, or money orders. On-site advertising is also used, but only to a limited extent. As many as 7.5 million young people (pre-teens and teenagers) are believed to use the Habbo Hotel sites in the different countries each week.
IRC-Galleria, meanwhile, is the biggest World Wide Web-based virtual community in Finland. Originally set up modestly as a picture gallery for the Finnish users of the online chat rooms of Internet Relay Chat (IRC), by earlier this year it had mushroomed into an operation with more than 400,000 registered users, mostly young adults between 12 and 25 years of age, and had long since outgrown the initial connection with IRC.
In the case of IRC-Galleria, the revenue source has come through advertising, from SMS-based services, T-shirts, and certain VIP privileges, for example the ability to modify the images attached to users' home-pages within the site.
With its aggregate 850,000 weekly visitors, IRC-Galleria is Finland's seventh most-popular netsite, just ahead of the Helsingin Sanomat portal. In terms of weekly hits, the image gallery is the largest site in the Nordic region, with an astonishing 400 million single hits each week. It has been estimated that as many as 65 per cent of Finnish 15-17-year-olds visit the site.
After having successfully launched Habbo Hotel on the world, Sulake - a firm ranked recently by Deloitte's as the 12th fastest growing technology company in Europe - plans to do the same with the IRC-Galleria model, which has hitherto been localised only in Russia and Germany.
Since the two communities are pitched at somewhat different audiences, with the Habbo Hotel guests being rather younger, there is little danger of overlapping in the clientèle.
The IRC-Galleria name is not really known abroad, and the Habbo Hotel brand would be hard to use to market a site directed at young adults, so a name-change may be in prospect.
In any event, success will require moving onto the turf of the world's largest such virtual community, MySpace, which currently boasts more than 100 million users and operates on much the same principles as IRC-Galleria.
IRC-Galleria (in Finnish), 415,000 users, 5.9 million images
Habbo Hotel (taken from the UK version of the site)
Sulake Corporation (Wikipedia)
Sulake corporate website