Big money in virtual worlds

Club Penguin

Club Penguin – cuddly 3D virtual playground for 6 to 14 year olds has just been bought by Disney for $350m plus a further $350m earn out.

According to Techcrunch the company is flying with expected revenues of $65m this year and profits of $35m.  Awesome margins.

Club Penguin apparently gives a substantial portion of its profits to charity – a factor that was a stumbling block for some acquirers and explains why the profit multiple (10x including earnout) isn’t that exciting.  There was a lot of interest in this asset – including from the likes of AOL and Sony.

I think there will be many others after this.  I’m hearing Second Life will do revenues around the $100m mark this year, and Habbo did €51m last year – putting them in the same ball park as Club Penguin from a valuation perspective.
To my mind all of this activity is very much phase one for virtual worlds.  None of the most successful worlds are mainstream in the big markets of US and Europe, so that is all to play for.  And after that there is the 3D internet story which is an order of magnitude bigger.  More of that another time.