Last week, MTV Networks acquired the active kids online community site, Neopets, which was a research joint venture partner of Jack Myers Media Business Report throughout the 2004 presidential
election. In March 2004 we published a detailed commentary on Neopets, outlining for our subscribers the company's business model and our enthusiasm for Neopets' growth prospects. That column, the first industry report on Neopets, is even more relevant today and we are pleased to re-publish it for you.
Once in a rare while, a new media content company comes along that seems to have put all the pieces together — a good idea, excellent execution, perfect timing, and the management team to make it work. Such a company is Neopets, which you probably have heard of if you
have children who spend a good deal of time online, and probably have not heard of if you do not. Other than a recent New York Times article, the company has been low profile about its revenue model for Internet survival that includes advertising, integrated marketing, extensive merchandising, and brand extensions.
Neopets.com positions itself as "the greatest Virtual Pet Site on the Internet," with a global community of more than 60 million virtual pet owners who spend more time on Neopets.com than any other site. With a primary target of eight to 17 year olds, Neopets.com members can
play a constantly expanding spectrum of 140 games, trade, participate in auctions, and send personal greetings and instant messages, and all at no cost. For parents, however, the costs come into play when their addicted children beg for the extensive plush toy collection, playing
cards, CD-Rom games, and other Neopets goodies. But few parents complain; instead they consider the costs a small price to pay for their children's enthusiasm and the educational
benefits they receive.
Neopets EVP Rik Kinney pointed out in an exclusive interview with Jack Myers Report that "the Internet has failed in many ways to deliver on the promise of interactivity and engagement. Many forms of advertising are still 'push -- in your face.' At Neopets.com, members choose to
visit, they have a good time, they are involved, they interact, and they receive messages advertisers want to deliver in a very engaging format. There is no traditional banner or button
advertising. "
Kinney, who was joined at our interview by SVP Corporate Development Jeff Snetiker, believes
"what we're doing is so unique we have been working directly with major marketers and brand managers to develop recommendations for the integration of Neopets.com into their marketing strategies. What we are doing is so different and out of the norm, it requires a whole new level of
education and customization. We need to work closely with those responsible for the actual execution to create their applications in a way that relates to the Neopian environment." Advertisers who have been sold on building an "immersive Neopian experience" include General Mills, McDonalds. Mattel, Wrigley, Heinz, M&M Mars, Disney, Campbell Soup, Hershey, Nestle, Procter & Gamble, Kraft Foods/Nabisco, Frito-Lay, and Lego, along with several entertainment clients. Disney hosts a Disney Theater complex complete
with theater, game room, and refreshments. Visitors can simulate an actual theater-going experience and watch Disney trailers, at the same time banking NeoPoints in their private Neopian bank account.
Neopets.com Leads Internet for Time Spent and Page Views Per User
Neopets was launched in December 1999 and expanded in April 2000 after being acquired by marketing research executive Doug Dohring. The company became profitable just three months later
and has expanded into one of the Internet's most successful commercial sites. Comparing Neopets.com's industry-leading average time spent per user per month of 4:47 hours, Nickelodeon's Nick.com registers :34 minutes of average use and Yahooligans.com only :03 minutes. Neopets.com generates an Internet high 1,348 average page views per user per month compared to MTV's 27 pages and eBay's 209. Neopets.com ranks fifth for total
month page views, generating 3,978,374,000 while #1 ranked Yahoo generates nearly 20 billion views and #7 ranked Disney Online captures 527 million page views monthly. (Data according to Nielsen//NetRatings). These figures are from December 2003, see the accompanying charts for updated rankings information-May 2005 (Data according to Media Metrix).
Neopets constantly monitors the responses to ad campaigns to determine if they are working as expected, says Kinney. "We can identify the most effective parts of a campaign, increase product trial, and help make marketing recommendations through research and analysis of
user patterns. Privacy is completely protected, obviously, but aggregated information is readily available."
Television Expansion Being Considered
Neopets is currently exploring the creation of a branded television program, but is challenged by the limiting nature of television that would force the company to condense its ten different online worlds, 46 pet
species with hundreds of variations, and to integrate user interaction and the immersive qualities of the advertising relationships. "Typical animated television characters are brought to life through television and film," Snetiker points out. "In Neopia, the audience creates characters. The characters become individualized pets and companions. Users are invested in the health and
well-being of their pets. Each individual user has the ability to build their personal Neopian experience in a family-friendly environment. They adopt, care for and nurture their virtual pet; they choose the land the pet lives in, how it interacts with other pets, and what it eats.
Global Translation Engine Creates Virtual "United Nations of Neopia"
An extraordinary technological advance allows subscribers from multiple countries to communicate seamlessly with each other, while the Neopets.com translation engine instantly translates. A child in
China can interact with a child from New York in their native languages, while each child sees the communications only in their own language. Neopets.com is among the leading sites in the United States, Canada and Australia, and has been translated into eight additional languages, including Japanese, Korean and Chinese. Kinney reports 38 percent of Neopets.com visitors
are from outside the United States, and with the translation engine, he claims Neopets.com can become "a United Nations of Neopia." With the translation of the site, Neopets is available to nearly 90% of the worldwide Internet population.
NeoPoints Engage Users in Commerce and Finance
Subscribers earn NeoPoints by completing an occasional survey (limited to one every three weeks), playing and winning games such as "Cinnamon Toast Crunch Umpire Strikes Out" or "Hot Wheels World Race," watching movie trailers and commercials, or buying and profitably
selling valuable commodities such as McDonald's Fries or Heinz' Easy Squirt ketchup bottle. Food items can either be fed to your Neopet or held onto as speculation and profitably sold or traded at a future time. Subscribers can purchase virtual stocks in thirty Neopian companies
and "learn to manage money, develop budgets, understand responsibility, and experience real world economics," said Kinney. A Neodaq Index of stocks is published daily. Some companies increase in value but recently two virtual companies went bankrupt and their value plummeted. Neopet owners can also use their NeoPoints to take their "pets" shopping, have them cared for during family vacations at the NeoLodge, or even treat them to a pet massage at the NeoSpa.
Offline Expansion Generates Incremental Revenues
Kinney reports Neopets is expanding its non-virtual offline world with new voice-activated Neopet plush toys that can actually "recognize" each other through audio IDs, call each other by name, and
carry on conversations with each other! In 2005, a new Sony PlayStation Neopets game, "The Darkest Faerie" will be released. A richly visual Neopets Magazine is published six-times annually. "The emotional attachment users have for their Neopets and for the site is an unbelievable phenomenon," Kinney concluded. The average subscriber has more than one Neopet and they
become immersed in the sponsors areas and products. Immersive advertising rivals and even exceeds the impact of television, plus it is extremely interactive." Dohring, Kinney and Snetiker are confident they have identified a new model for advertiser-supported content and for expanded online content that represents a model for future media company growth.
For more information, contact Rik Kinney at rik@neopets.com or Jeffrey Snetiker at jeffs@neopets.com.
