Disney Buys Ad-Free Club Penguin for $350 Million

Kid-Focused Virtual World Key to Video Games, Media Networks

By Abbey Klaassen and Andrew Hampp

Published: August 01, 2007

NEW YORK (AdAge.com) -- Move over, Donald, there's a new favorite bird at Disney. Walt Disney has snapped up the snow-covered virtual world/social-networking portal Club Penguin for $350 million -- and promises to pay another $350 million through 2009, depending on the growth of Club Penguin's earnings. The acquisition will be part of Disney Internet Group.

Club Penguin is an online portal whose young members assume the identities of penguin avatars living in a frozen penguin world where they can even furnish virtual igloos.

New name
Geared toward children aged 6 to 14, the site lets users adopt penguin avatars, talk to each other, play games and furnish virtual igloos. Although the URL will remain the same, the company will be renamed Disney Club Penguin and will be expanded internationally, Disney execs said on the earnings call just minutes after announcing the acquisition. The company will also use Disney Channel, Radio Disney and Disney.com to help promote the site.

The company said the price was based on the economics of growing the site's subscribers domestically and expanding outside the U.S., but "we'll see opportunities to exploit Club Penguin on other properties," said Disney CEO Bob Iger, citing video games, consumer products, possible presences in theme parks and opportunities on media networks.

"Our vision has been to create online destination where kids around the world can interact with each other and play games alongside their favorite Disney characters," he said. Disney already has ventured into the virtual world with Disney Fairies, where children can create fairy avatars. Disney Fairies will relaunch in 2008 as a more robust virtual world based around the Tinker Bell character. Later this year, Disney will release Pirates of the Caribbean Online, a project that has been in development for several years.

Dominating the under-12 set
Disney's acquisition of Club Penguin should help the company aggregate its dominance of the under-12 set online. But the tween-focused Disney brands have bought space on other popular virtual sites. Cartoon Doll Emporium, a year-old site targeting girls 6 to 16, has partnered with Disney's "Hannah Montana" and "High School Musical," with tie-ins to each show's respective musical extensions as well. The site averaged 4 million unique visitors last month.

Club Penguin earns revenue through paid subscriptions. It has 12 million activated users with access to a more limited version of the world and 700,000 paid members who have access to the full world and can increase their status. Earlier acquisition rumors reported by TechCrunch said Sony was looking at Club Penguin for a $500 million-plus price tag. Disney said the margins at Club Penguin are "significant."

So far Club Penguin has shunned advertising -- its three co-founders call that a safety decision and have said they're tired of marketing aimed at young children. (Cue irony here.)

Club Penguin competitors include Webkinz, Stardoll, Gaia, Habbo Hotel and Viacom-owned Neopets.

Link to AdAge Article

Researcher Finds Increasing Acceptance Of Cell Phone Ads

AS A DEBATE WAGES ON Madison Avenue whether consumers will be tolerate advertising over mobile phones, a leading academic who has been studying the subject has released new findings suggesting that a sample of technically oriented college students are growing increasingly receptive to text message ads on their cell phones and other mobile devices. The research, the latest in an ongoing series of tracking studies being conducted by Ball State University advertising professor Michael Hanley, found that 56.3% of the students he has tracked over a two-year period accepted ads if they would get something for free - such as premium content or consumer promotions - in exchange. About 37.4 percent of college students said it would only take the offer of a free ring tone for them to would accept advertisements on their cell phones while 21.4 percent preferred a discount or coupon to a restaurant, movie or grocery store and 20 percent wanted free minutes, upgrades, access to the Internet or music.

While it's unclear whether the research is representative of the national population, Hanley says it at least indicates some important changes among the college crowd.

"Just a couple of years ago few college students accepted ads on their mobile devices because they felt it was an invasion of their privacy," Hanley said. "Now all you have to do is offer free ring tones, cash or access to the Internet because this age group has grown up with cell phones and other mobile devices. It is the way they communicate with each other as well as with the outside world."

The study also found 36.7 percent of college students received a text message advertisement in 2007, up 13 percent from 2005. College students are less worried today about how a business obtains their cell phone or mobile device contact information. The percentage of students who said they were "very concerned" dropped by 25 percent while "concerned a little" fell by 33 percent.

Link to MediaPost Article

Kids Embrace Technology For Its Usefulness

by Wayne Friedman, Wednesday, Jul 25, 2007 7:00 AM ET

WHILE KIDS AND YOUNG ADULTS may be immersed in digital media, there are limits to what they want to know about the technology, according to new research. A massive study--jointly produced by MTV Networks and Microsoft Digital Advertising Solutions--surveyed 18,000 kids ages 8-14 in 16 countries, offering a wide range of results on digital entertainment and communications platforms. One major finding is that kids are not focused on the detailed workings of the technology itself: It matters more to them how technology lets them communicate and be entertained. Only 20% of teens and young adults showed any "interest" in technology. Research on mobile technology data also revealed some interesting observations. In Japan, for example, kids don't really own their own PCs--not until they get to college. As a result, their main digital device is the mobile phone. MTV/Microsoft also observed kids' growing number of technology-connected friendships--all with an eye to observing how those relationships can influence brands. Kids 8-14 will have an average of 11 online and face-to-face friends--a number that will quickly rise. Young adults 14-24 have an average of 53 online and face-to-face friends. According to the press release, "friends influence each other as much as marketers do. Friends are as important as brands." Bill Roedy, vice chairman of MTV Networks International, says the study "will help us build stronger and more innovative alliances with business partners across our 137 TV channels and 260 Web and mobile services." For the still TV-centric MTV, the study showed promising data for television viewing--59% of kids 8-14 still prefer traditional TV over the computer and the Internet. One major exception is in China, where the study noted that 8- to-14-year-olds prefer online over TV. The countries in the study included: The U.K., Germany, Holland, Italy, Sweden, Denmark, Poland, U.S., Canada, Brazil, Mexico, China, India, Japan, Australia and New Zealand.

Link to MediaPost Article

Kids' summer day calling increases by an hour

MVNO Disney Mobile released some interesting metrics from its recent "Cell and Tell" survey: 10- to 17-year-old mobile users spend an hour more on their mobiles during a summer day than they do on a school day. In the summer they spend some three hours and 45 minutes on their mobiles. About 44 percent of kids use texts as their primary form of communication. 52 percent have texted from a movie theater and 28 percent have texted from the dinner table. Within ten minutes of waking up, 26 percent of the kids polled say they send a text. Of course, 96 percent of respondents said they talk to their parents via mobile phone every day, while 20 percent talk to their parents at least five times a day.

Link to Fierce Wireless Article

For more stats on kids' mobile usage:
- read this article from The Washington Post