Call it Habbo Hotel meets Web 2.0. A free, web-based, casual virtual world with 2.5D graphics aimed at teens 13 and up, SmallWorlds, whose public beta launches today, at first looks like a more graphically rich version of the phenomenally successful (if aging) Finnish MMO. Like Habbo, you create a cartoon avatar and use it to socialize, both in public areas and your own private spaces. But here’s the twist: It’s integrated with sites like YouTube and Flickr, so you and your friends can import images, videos and audio into your virtual living spaces, where your respective avatars can enjoy that content together.

But why incorporate all those Web 2.0 streams into a virtual world? I put that question to Mitch Olson, co-founder of Outsmart, the New Zealand developer behind Small Worlds.

“We wanted to create a virtual world that engendered emergent properties and behavior,” Olson told me. “Emergent in the sense that novel and sometimes unexpected results are created out of a
multiplicity of relatively simple interactions.” They plan to publish the first of their APIs in coming months, he added. “[U]sers should expect to see a lot of Web 2.0 widget and game content in general.”

SmallWorlds is expected to launch commercially in August, at which point they’ll offer upgraded “premium” accounts at $5.95/month; they plan to bring in additional revenue through advertising and virtual item sales. As such, they’ll debut in a highly competitive field, going up against Metaplace from Raph Koster and Whirled from Three Rings, both of which have a similar, web-based MMO angle, and are expected to hit the market soon. Indeed, SmallWorlds is about to enter a big world of casual next-gen gaming.