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Kids Site Sold for $350 Million USD

Social Networking for Kids Comes of Age

     
6:18 am on Aug 2, 2007 (gmt 0)

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In general, sites for kids were regarded as not a good niche. A $350 million dollar investment by Disney turns that opinion on it's head.

From NYTimes [nytimes.com]:

Disney said it would pay $350 million for Club Penguin, a virtual community... More than 700,000 users now pay $5.95 a month to customize penguin characters and then chat and play games with other “penguins.”

“Kids are starting to go to the Internet first, so it is important for us to operate in that space,” Robert A. Iger, Disney’s chief executive, said in an interview.

Three daddies in British Columbia are paid $350 Million for the site, plus another $350 Million if they meet performance targets in two years. Not bad for a site created two years ago.

What's interesting is that it doesn't seem as if the site was promoted using keywords to rank organically on search engines. Not sure if they did any PPC, but it looks like they built a good website and promoted it to their demographic, and word of mouth took it from there.

2:00 pm on Aug 2, 2007 (gmt 0)

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To be a success organic and ppc traffic need to be a small percentage of your traffic. I'm not saying organic is not important. I'm just saying that to be a huge success people need to just know about your site. If you have a high percentage of your traffic from search engines that means you don't have much of a brand presence.
2:04 pm on Aug 2, 2007 (gmt 0)

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700,000 x 5.95 = $4,165,000 per month

annual turnover = $49,980,000 probably mostly profit

Surely there must be something wrong with this figures

Can anyone shed some light on this,

Is the 700,000 users accurate or must be adjusted somehow

2:45 pm on Aug 2, 2007 (gmt 0)

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What a great site! I almost joined... then I realized how old I am... ;-)

It is like a mini version of Second Life... only this world seems to actually have people using it.

3:17 pm on Aug 2, 2007 (gmt 0)

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I was just talking to our Pastor's daughter last week about this site. she was just so excited over it all the stuff she was doing I really think it was the part of them making things that was such a draw.

She had all her friends on it. I live in texas. I asked her how she found out another friend.

3:22 pm on Aug 2, 2007 (gmt 0)

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Yea, I wondered about the numbers too.
3:47 pm on Aug 2, 2007 (gmt 0)

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The numbers would have been verfied before the sale. Pretty standard. These guys did a great job building a business from brand exposure to their key demographics. Search traffic doesn't appear to be a part of their strategy. Brilliant.
3:48 pm on Aug 2, 2007 (gmt 0)

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the numbers are correct as a business usually brings in 5 to 7 times the gross so that would put it in the range of 350 million

man that is a ton of cash

3:51 pm on Aug 2, 2007 (gmt 0)

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It was doing so well, I would have had a tough time selling it.... what I am saying... not at that price... =)
4:46 pm on Aug 2, 2007 (gmt 0)

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"We interrupt our regular programming for this 'moment of observation'."

Ahhh . . the irony of all those PCs, powered by electricity from coal fired power plants, playing virtual penguin . . as the polar ice caps melt away.

Somewhere in this moment of great success is the evidence of an inexorable decline.

"We now return to your regular programming . . . "Oooo! Ahhh! Wow!"

4:59 pm on Aug 2, 2007 (gmt 0)

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Wow. I remember playing that game years ago...it seemed like someone with too much free time wanting to create a cute online game. More power to them if they sold it for $350M, that's insane.
6:53 pm on Aug 2, 2007 (gmt 0)

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Wow! That is a lot of money! Congratulations to the founders and let's hope for Disney's sake that it isn't just a passing trend.
7:03 pm on Aug 2, 2007 (gmt 0)

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it looks like they built a good website and promoted it to their demographic, and word of mouth took it from there.

Is there a better way of marketing online?

I seem to remember a certain search engine that was built on word-of-mouth.

7:25 pm on Aug 2, 2007 (gmt 0)

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Was that site built in flash? If so that's impressive.
6:15 am on Aug 3, 2007 (gmt 0)

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One kid in my son's school discovered that site a while back. Word spread like wildfire - half the school are members now. I don't doubt the figures for a minute. It's a great site and I am thrilled for them.
9:17 am on Aug 3, 2007 (gmt 0)

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It looks like it's based on Penguin chat, which someone made years ago. I wonder if it's the same people or what.
12:09 pm on Aug 3, 2007 (gmt 0)

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I don't understand the numbers either...

Let's say it takes $10M (which is way too much) to build a quality site. In fact, that number becomes "noise" when you're thinking about $350 million.

That means Disney is willing to pay $500 to aquire each of the 700,000 members that are paying $70 a year in fees. That's insane. Something's not right.

1:02 pm on Aug 3, 2007 (gmt 0)

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I agree. Something's not right with the numbers. It's a great buy and a great site, but the numbers don't add up.
1:23 pm on Aug 3, 2007 (gmt 0)

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Social networking for children? Looking at this site, my first concern was that it would attract pedophiles and stalkers. So I signed up (so difficult finding a name that isn't taken already! infuriating.), then sat with my daughter and played it last night for a while.

She was not interested in the "chat" aspect, but she liked the little games that your penguin can find as it waddles around the glacier. We played the games, and earned coins. nice! with the coins, you can dress up your penguin by adding clothing, hats, accessories etc. then when you want to buy a hat for your penguin... bam! gotta be a member - go ask your parents for $5.95.

Now, for a kid so young she can barely read (her penguin kept saying things like "xcfghui" and "MOM" and "vvvvvvvvvvvvv", and the other penguins said "You're Weird" and walked away), the site doesn't seem to pose any privacy threat. And it's cute. Every screen has a little icon showing that conversations are moderated... but are they really? who can tell.

Sadly, the penguin thing is SO 1996. Seriously, was it just me or were you confronted by penguins everywhere you went? warent thar like 5 movies made that year starring penguins?

IMHO $350M is a big number, but it's a good buy for Disney. Wait a few weeks and watch as the branded commercial messages start to smother the glacier. Disney could have spent that dough making a new feature-length animated picture which would have attracted a fraction of the repeat-watching audience.

also ... Club Penguin is entertainment that can't be pirated and redistributed. Piracy is crippling Disney's movie distribution and DVD sales.

6:01 pm on Aug 3, 2007 (gmt 0)

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I found clubpenguin via miniclip 12 months ago while looking for a fun flash game for my 4 year old to play - a year later, he still wants to play everyday, and everyday I hear "when can I be a member?".

Talk about brand loyalty - he can't wait to show his friend who have not yet heard about it.

5 year olds contributing to viral marketing - Its scary, but it is an awesome product...

10:59 pm on Aug 3, 2007 (gmt 0)

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Sadly, the penguin thing is SO 1996. Seriously, was it just me or were you confronted by penguins everywhere you went? warent thar like 5 movies made that year starring penguins?

Do you really take your children to the movies?
It has been 2 penguin related movies this year.
:)

5:36 am on Aug 6, 2007 (gmt 0)

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Its a good addition to disney's portfolio, I believe more than 700,000 users pay $5.95 a month to customize penguin characters and then chat and play games with other penguins.

[edited by: engine at 9:21 am (utc) on Aug. 6, 2007]

1:02 am on Aug 7, 2007 (gmt 0)

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Do you really take your children to the movies?

absolutely. often. they love it.
1:12 am on Aug 7, 2007 (gmt 0)

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March of the Penguins (2005)
Madagascar (2005) (featuring penguins)
Happy Feet (2006)
Farce of the Penguins (2006)
The Wild (2006) (featured penguins)
Surf's Up (2007)
and ... Club Penguin
12:34 pm on Aug 8, 2007 (gmt 0)

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i am thinking of china internet
12:59 pm on Aug 8, 2007 (gmt 0)

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this is what every big company does. Take a look at Sky sports, Mtv and all the others. They are all buying out the sites that have community features in them.