Thursday, October 18, 2007

Virtual worlds for kids

A version of this piece was published in Marketing in 2007

3D environments like Second Life and World of Warcraft have made good headlines over the past year, with marketers wrestling with the implications for brands and the opportunities in potential new markets. 
But recent coverage has been more sceptical – despite the oft-quoted millions of registered users, relatively few are actually in-world at any one time - SL in particular has continued to show small numbers, with only 40,000 online as I write, at breakfast time on the US West Coast.
Advertisers and retailers, who initially had rushed in are having second thoughts – scaling back their operations and closing stores.  So are virtual worlds just a bubble, or are we going to see long-term growth? 
To answer that question, we need to look at tomorrow’s users.
Because whilst virtual worlds for adults are seemingly more niche environments, those targeting kids and teens are experiencing phenomenal growth, and fuelling multimillion dollar acquisitions.
Launched in 2005, Club Penguin was acquired by Disney for £350m in August this year.  Designed as a games and chat space for 6-14 year-olds, the site has over 12m activated users.
Plenty of functionality for non-subscribers ensures there are always plenty of kids online, and provides a place for future subscribers to become addicted to the site.  And the business model works – there are 700,000 paid subscribers who get to decorate their igloos, dress their penguins and adopt more puffles – the digital pets in the site.  At $58 a year, this site’s already generating around $40m in subscriptions – hence Disney’s interest.
But this isn’t a trend restricted just to the US.  One of the biggest kids sites is Stardolls – a site founded by Scandanavian mother who had a lifelong interest in paper dolls.  From its homestyle roots, Stardoll has grown to have over six million users every month, and is backed by Index Ventures, the VC that backed Skype, Joost and Betfair.
There’s no subscription here, but members buy (and parents encouraged to give) stardollars, the currency that can be spent on clothes for your Stardoll, or decorating your suite.