IAC’s Zwinky has been carefully growing their pre-teen social networking service. It started out as an online avatar creation tool. They later created a virtual world where those avatars could socialize. Usage of the service has been growing, under heavy advertising, as well. They currently have over 9.5 million registered users with 4.6 million active users per month that spend an average of 64 minutes a day in their virtual world, Zwinktopia.
Zwinky is now expanding the service to their users pocketbooks, or rather those of their parents. The site is now letting users purchase batches of “Zbucks”, their virtual curency, instead of having to earn them. They join a growing group of other tween sites with paid virtual economies as well (Club Penguin, Habbo Hotel, Gaia). Users can purchase them using PayPal or credit card at a rate of about $10 for 2,000 Zbucks. With the Zbucks, users will be able to purchase their own avatar accessories or furnish their virtual rooms in Zwinktopia. Zwinky is not only making money from the Zbucks, but also through sponsorships and sales made through the virtual goods.
So far users have spent over 500 million free “Zbucks” on the site since launch. There’s no telling how strong the uptake of the new paid currency will be, but other services have shown a clear market for virtual goods. The passion around World of Warcraft drove a black market for virtual gold. SecondLife has also driven a paid virtual economy. While virtual goods seem hokey for outsiders, startups that create a meaningful environment find their customers willing to pay to save time earning currency or get at exclusive items.
This is an interesting development for a number of reasons:
- This is the first time I have seen a corporate successfully launch a cool web service. Kudos to IAC for getting it right where so many others have struggled – but it also shows that what was an art is becoming a science. There are enough successes out there now that the lessons can be learned and copied by great executives who don’t necessarily need a great gut feel for the market they are going after.
- It will be instructive to watch how the launch of a paid for currency goes. That said by my maths 500m Zbucks at $10 for 2,000 Zbucks is equivalent to $2.5m in real money so they have some way to go before they will get a meaningful revenue contribution from this new feature.
- There are enough virtual worlds out there that it is starting to emerge as a distinct category.