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Social Networking - Friday, January 21, 2005

Sulake Labs - Profile

HQ: Helsinki, Finland

Founded: 2000

Management: Finns everywhere. Founders of the company are Jussi Nurmio, Sampo Karjalainen and Aapo Kyrölä and the CEO is Timo Soininen. Apologies to our readers, but we don't read Finnish so we have no clue who these people are.

Investors: Benchmark Capital invested $23.5M in Sulake in January 2005 along with previous investors 3I Group and Finnishtelecom company Elisa Group. Benchmark clearly believes in this space as it has also invested in Linden Labs' Second Life - an American counterpart to Sulake Lab's Habbo Hotel.

Business Model: Company created fast-growing virtual world for teens called Habbo Hotel, populated by avatars that they create and buy. Habbo existed in multiple countries but plans are to launch in other geographical areas, create mobile content, target other age groups and sell merchandise. Company announced its revenues for 2004 at $18M. Revenues derive from sales of credits - in Europe bought via cel phones - which buy items on the site: pizzas, room decorations, etc.

Competitors: Second Life, DigitalSpace, Ozgate.

Dirt: We have been pissing on virtual worlds for years because these all seem to be geek vanity projects with no business model, but Sulake is the first one to show promise. The company has: a) understood that it needs to set the stage for teens to flirt with each other by bringing Euro design elements and grown-up lounge-life to an online world b) developed a business model by selling kids cool accoutrements to help them become more attractive to other teen-agers. As with social networking sites in the US like Friendster, however, we could easily see Habbo Hotel becoming a passing fad, with Habbo Hotel ending up as a hangout for losers and freaks, with all the cool kids headed to more exclusive virtual worlds. We presume Sulake foresees this and plans to create ever newer, cooler worlds. Sulake is awfully confident and has brought on a huge headcount given where its revenues are. Let's hope these Finns won't be left out in the cold.