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Summary:

Co-written with Carleen Hawn and Wagner James Au. Update: Hollywood and media giants have a newfound affection for virtual worlds for kids, and are willing to spend big dollars on communities like Club Penguin and Webkinz. The latest rumor floating around is the Sony is interested […]

Co-written with Carleen Hawn and Wagner James Au.

Update: Hollywood and media giants have a newfound affection for virtual worlds for kids, and are willing to spend big dollars on communities like Club Penguin and Webkinz. The latest rumor floating around is the Sony is interested in buying Club Penguin for about $500 million, according to PaidContent.

We had heard a similar number last week and since then have been trying to lock down the details on this. Sony is apparently not the only company to express interest in Club Penguin. News Corp., bid $200 million on the kids virtual world but apparently that wasn’t enough.

In an effort to get some clarity on the situation, we reached out to Lane Merrifield, co-founder of New Horizon Interactive, the Kelowna, British Colombia-based company behind Club Penguin, who emailed us back with the following response:

As Club Penguin has gained popularity, we have been approached by numerous organizations. Although I can’t rule out the possibility that Club Penguin might enter into a partnership with another company at some point, I can confirm we would only pursue that sort of arrangement with an organization that shared and respected our founding principles and core values.

When asked if there were talks (previous or ongoing) with Fox and Sony, Merrifield wrote to us, ” The information you have is not correct.”

Nevertheless if the deal does happen it would be a big payday for Merrifield and co-founders Lance Priebe and Dave Krysko. Merrifield says the trio turned down earlier investment propositions from “professional money,” including venture capitalists.

Club Penguin isn’t the only company generating interest. Disney, for instance, is rumored to be interested in Woodbridge, Ontario-based Webkinz, another Canadian tween site that has been growing a break neck pace, and is a kid favorite. Business 2.0 had an excellent piece on the Kid-focused online communities, written by one of my co-authors, Carleen Hawn. Other communities like these two sites – though for different age groups – include Habbo Hotel and Gaia Online.

One of the reasons these kid-focused communities have taken off versus the more complicated communities like Second Life is that they are dead simple and highly focused.

Most of these online worlds run on Flash, so there’s no complicated client download/installation. Basic participation is free on Club Penguin, but revenue is drawn in through monthly subscriptions and sales of cyber goods to upgrade the game. Webkinz exists on a subscription model of sorts, too, only here the fee-to-play is a retail purchase of a stuffed toy in a bricks and mortar store. Ganz, Webkinz’s parent company, is one of Canada’s largest manufacturers of stuffed toys. (Now that’s clever biz dev.)

Since they’re aimed at kids and teens, these sites tend to be tightly regulated. Bad language or rough play between avatars gets kids suspended on both sites. It is the safety features of these non-combat-oriented MMOs, together with the low-cost learning opportunities that create a value proposition for parents (and investors). The draw for the kids is the thrill of participating in a dynamic virtual community. It’s just plain fun.

  1. My 2 nephews loves this website that everyday they visit it to play games and chat with their classmates and schoolmates. Sony will take this site to the next level with more interactive features for kids. Not a bad deal…

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  2. what is the point of virtual worlds? social networking sites are great and can help build business for companies, but is this the trend/evolution in human interaction?

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  3. Jesse Kopelman Wednesday, May 16, 2007

    Slightly off topic, but; why do I keep seeing Zwinky commercials on Saturday Night Live and Late Night with Conan O’Brien? Surely there is not much demographic overlap? Or is Zwinky the new thing to do as a stoned college student?

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  4. My children loved it for about six months then moved on. Seems a crazy to pay 7.5 x revenue multiple for such a short lived fad site.

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  5. The real challenege with these sites is creating great kids content to feed the growth. The amount of time spent on these sites is amazing, and often I’ve seen my nieces and nephews lose interest in the site once they’ve encountered content that they’ve seen before. Outsourcing or licensing of kids content could help, or else the growth of the kids virtual world wil slow.

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  6. Another one to add to the mix – we’ve been working on this: Ty Girlz http://www.tygirlz.com

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  7. hi,there i love this game i started playing it today i have to be a member to order to buy things with my penguins money.I have a ? for you for the memberships do you pay them real money or the penguins money?I need to no.today i started and i have over 250 friends on here and it is the bomb.
    Please let me now so that my kid can buy things without clicking any-thing that is real money.bye bye

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  8. Maybe it is a fad, but right now social networks are here to stay and place like webkinz world and club penguin are the kid’s social networks. My kids have all sorts of toys and the only ones that they have maintained interest in are their webkinz stuffed animals. I have spent a lot of time on the site and I am amazed at how educational it actually is. I tried out Quizzy’s corner and actually found out that this is a great tool for me to learn some new things also and spend quality time with my kids too. No, I don’t think I will put my webkinz for sale just yet!

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  9. I love this game so much but I have been contacting club penguin but no respose.Can you contact me at windi_g@yahoo.com I would like the activation code. I would really like to play club penguin please contact me.

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