It's All Virtual

As a parent, their existence is virtually unavoidable – the online companion to a kid-themed product.  A Reuters article (published by MSNBC) titled “Disney’s Penguin spreads its wings globally“, describes Disney’s ambitious plans with its Club Penguin virtual world.  Operating out of Sao Paolo, Disney will launch the first non-English version of Club Penguin in Brazil.  There are additional plans to launch in other Latin American countries and France.  Forget the climactic limitations of the species – penguins will now be spanning the globe.

When Disney acquired Club Penguin in 2007, one may have thought that the strategy was around product/brand integration of Disney properties (and characters) with the Club Penguin world and audience.  While that possibility still exists, it seems Disney is looking to Club Penguin as a full-fledged brand in its own right.  Accordinng to the article:

Within two years of launch, Penguin claimed more than 12 million registered users, of which about 900,000 were premium subscribers typically paying $5.95-$6.95 per month for access to additional features and virtual collectibles.

If I’m doing my math right, 900K subscribers paying $6.50 a month (taking the midpoint of the prices quoted) amounts to $70.2MM in revenue per year (wow).  And here’s a clear sign of Disney’s plan to grow Club Penguin as its own brand:

Over the past year, Disney has been busy taking some of its most popular licenses, such as “Pirates of the Caribbean,” “Cars” and Tinkerbell and creating virtual worlds around them.

But with Penguin, that strategy has been somewhat reversed, giving the property the chance to leverage Disney’s retail muscle. The recent launch of a toy line includes plush versions of popular characters, a set of figurines as well as an Igloo Playset. The brand was also extended into the lucrative game field with the introduction of “Club Penguin: Elite Penguin Force” for the Nintendo DS.

So if you’re a parent paying for that premium subscription, the next thing your child will be asking for is the Igloo Playset, along with the Club Penguin game for her Nintendo DS.  Or, she’ll be asking you to buy the Nintendo DS so that she can attain Elite Penguin Force status!  Also mentioned in the article is a related, kid-themed virtual world, Webkinz:

Of course merchandising is not new in virtual worlds and has already proven to be far more than a branding play. Toronto-based Ganz is estimated to be earning more than $100 million annually from collectible plush toys and accessories kids buy that allow them to unlock virtual goods online at Webkinz World.

I’ve found Webkinz model to be quite interesting, as they’ve reversed the traditional marketing flow.  Instead of online promotions to drive product sales in the physical world, Webkinz employs small stuffed animals as a physical world “footprint” to drive kids (and their parents) online.  So the physical “product” is sort of a loss leader (or, promotion) to generate online memberships, where the online world is the true end game.

And once you’re in-world at Webkinz World, there’s lots to do (and buy) – collect KinzCash, play online games, collect Gems to exchange at the Curio Shop, etc.  Then there are additional toys that tie in to the world, called W-Plus Items (e.g. bookmarks, charms, body spray, lip gloss, etc.).  There’s also trading cards and a recently launched Webkinz eStore, where one can make purchases of virtual goods.  All in all, it’s not surprising that Ganz (parent company of Webkinz) generates $100MM per year.

By launching an online presence, toy makers seem to have the following goals:

1. Commerce (including subscriptions)
2. Branding
3. Both!

With Club Penguin and Webkinz, the clear focus is on commerce – but keep in mind that once you’ve established a strong footprint and audience, you will have opportunities for branding – imagine subtle tie-ins within Club Penguin to other Disney properties (including exclusive offers for Club Penguin members).  On the branding (microsite) side, I checked some toy brands (off the top of my head) and found the following:

1. Cabbage Patch Kids – Flash-based microsite.  If the original Cabbage Patch product launched today, I’m nearly certain they would have developed a full-blown virtual world
2. BarbieGirls Virtual World – This looks to be branding focused – but may have related commerce
3. Beanie Babies 2.0 – Flash-based microsite
4. Playtime in Ponyville – Microsite for the My Little Pony franchise

One notable exception – a quick search did not turn up any microsite or virtual world for the Leapfrog franchise.  Perhaps that’s in the works for 2009!  Anyway, as a parent who has enabled/used some of these sites at home (for my child, of course!), I see them as a powerful branding vehicle that builds customer loyalty and (potentially) spurs product sales (both in the virtual and real worlds).

I compare the microsite to banner advertising – but instead of having your creative agency design your next Flash banner ad, spend a little more and have them build out a Flash microsite.  Then, your destination becomes your “advertising” and instead of trying to reach your audience across the web, you find that your audience comes to find you.  This is much more efficient than running a large amount of banner impressions and television commercials.  Your microsite fulfills the advertising concept of “frequency and reach”.

And that’s a wrap for now – my daughter needs this computer to access Playtime in Ponyville.