June 13, 2012

Habbo Loses Key Investor Over Allegations Of “Sexually Explicit” Content

European venture firm Balderton Capital is dumping its 13% stake in social gaming company Sulake, creator of the popular online teen game Habbo, over revelations of "explicitly sexual interactions" among players on the site.
Balderton had been an investor in Sulake for the past eight years, and was its second largest shareholder.  The venture capital firm said it was also resigning from Sulake´s board of directors.

“We didn´t take this decision lightly, as we have been investors in Sulake for over 8 years, but the standards required to run a website that children have access to are very high. We felt the company was not meeting those standards,” a Balderton spokesperson told the Kernel.

The discovery of Habbo´s failure to protect its young users against sexually explicit material came to light following a scathing expose by Britain´s Channel 4 News, which uncovered "very sexual, perverse, pornographic violent" interactions taking place between players of the online game.

Habbo has some 10 million unique users per month, and is one of the world's largest online communities for teenagers. The game is set in a virtual hotel, where kids create avatars that move from room to room, chat with other users in public or privately, and furnish their rooms using real world credits.

Rachel Seifert of Channel Four News said she spent two months on Habbo, and engaged in multiple online chats in which she quickly found herself in the middle of conversations of an extremely explicit sexual nature.

"Within two minutes I was being asked individually 'do you have a webcam?', 'can we chat on MSN, on Skype?'" she said.

"I was also within a couple of minutes asked to strip, fully naked, and asked what would I do on a webcam."

Ms. Seifert said she had played Habbo some 50 times, and had similar experiences on every occasion.
Sulake´s CEO, Paul LaFontaine, issued a statement on Tuesday, emphasizing the company´s record and commitment to child safety online.

“To keep users safe, we filter content and block inappropriate users. We also employ more than 225 moderators, tracking some 70 million lines of conversation globally every day on a 24/7 basis,” LaFontaine said.

“We work with child safety organizations and local police forces to address inappropriate behavior.”

“Habbo´s leading safety systems were recognized as making the service one of the safest social networks in a 2011 European Commission report. Last year we were also awarded the commendation of ℠Safer by Design´ from the Child Exploitation and Online Protection Centre (CEOP),” he said.

La Fontaine addressed the scandal more directly in an email response to VentureBeat, saying he was “incredibly concerned to see the findings of the Channel Four News investigation.”

“We have responded immediately to remove offending content. We already filter content and block inappropriate users. Since hearing about the findings of the investigation we have increased the number of active moderators at any given time and strengthened our automated filtering technology. We have also begun to undertake a comprehensive review of our practices to ensure that user safety is further strengthened in the future.”

“My top priority has always been our user´s safety,” he said.

“I was sorry to hear of Balderton´s decision to withdraw its involvement, but my priority right now is to address the issues raised by the investigation. I remain committed to ensuring the right thing is done.  I am encouraging anyone concerned to contact me on Twitter @PaulLaFo.”

Balderton is also an investor in the youth-oriented social networking sites Bebo and Weeworld.