Penguins win the Internet!

I confess that even though my kids have been talking about the site for months, I didn’t realize that Club Penguin.com is Canadian until it got bought yesterday by Walt Disney Co.

Disney has agreed to pay US$350 million (or more) for Kelowna-based New Horizon Interactive, which launched in October 2005. In two short years, it cracked the nut of the Internet: convincing people to pay for content. More than 700,000 subscribers pay $5.95 a month ($57.95 a year) for access to the site’s games and immersive experience. (You get to assume the identity of a penguin and accept “missions” in a snow-covered cartoon landscape.)

With all the other diversions on the Internet, I asked experts (my kids) what they like about Club Penguin. “It’s fun. You get to be a penguin and walk around, and talk to people… and it’s safe. It’s censored.”

According to the writeup on the site, the company’s three founders (and sole shareholders) “set out to create an online world for kids where they could safely play games, have fun and interact…. The Club Penguin team got to work, consulting with educators, law enforcement representatives and other parents, doing extensive research into online safety, and conducting widespread testing. Eight whirlwind months later, in October 2005, Club Penguin opened to the public with about 25,000 users.” It now has more than 12 million activated players. And no advertising or marketing of any kind. (Well, for now.)

I find it interesting that even my kids appreciate the safety of the site: no nasty lurkers allowed. Some 80% of Club Penguin’s staff is made up of safety personnel and moderators.

CEO Lane Merrifield, who once worked at Disneyland, founded the company with Lance Priebe and Dave Krysko. Yesterday he told reporters: “For us, this whole decision was based around being able to connect with infrastructure that we wouldn't be able to build on our own and being able to take this thing further, and to more countries and more children around the world than we would be able to on our own."

A Disney spokesman said, “What Lane, Dave and Lance have achieved in creating such a large community around this incredibly engaging, immersive environment in so short of a time is phenomenal… We welcome their unique culture, and both we and they are excited about seeing what can come from combining their innovations with Disney’s brand strength and entertainment assets.” The press release (you can read it here) also contains interesting details about the rest of Disney’s strategy for dominating the Internet like it once owned prime-time TV on Sundays.

Merrifield says 10 per cent of the purchase price will go toward Club Penguin's foundation, which supports child-focused charitable work in developing countries.

According to the Ingram 2.0 blog of the Globe and Mail’s Mathew Ingram, the deal could be worth as much as $700 million to the founders if certain performance targets are met.

In the language of the kids today, three Canadian entrepreneurs have just won the Internet. It couldn’t have happened to nicer guys.