Nine-year-old Lane Kovich spends part of her day, every day, playing with her on-line virtual pet Kewl Dude on the website Neopets.com.
Little does she know her green friend -- which looks like a cross between a dragon and a lion with a horn jutting out of its nose -- is part of a $160-million (U.S.) gamble by Viacom Inc., as the media conglomerate gobbles up the private Glendale, Calif.-based Neopets Inc.
Yesterday's move puts Viacom in charge of Neopia, a mythical on-line world full of frolicking Neopets species such as Gelerts, Wockies and Scorchios. That world beckons Lane and many of her grade 3 classmates, who rush home from school to log on to the website, where they feed and play with their on-line friends, earning a virtual currency called Neopoints. "He's cute," Lane said, describing Kewl Dude. "He looks sort of like a dinosaur but he's a lion. He has brown eyes."
At first glance, virtual pets and New York-based Viacom -- parent company of MTV Networks Inc., CBS Corp. and Paramount Pictures Corp.-- appear to be an odd combination. But Neopets pulls in a staggering five billion website page views each month, and 79 per cent of its 25 million users are children under the age of 17.
Viacom's purchase gives it access to a marketer's dream demographic of fickle and often elusive kids.
Neopets chief executive officer Doug Dohring said his virtual pet company should fit well with Viacom children's entertainment properties, such as Nickelodeon, and provide a future for television and direct-to-video deals.
"The media companies are all looking for content, because that's what drives viewership and ultimately drives advertising revenue and other revenue," he said in an interview. "I think we just wound up being a perfect fit for Viacom."
Mr. Dohring founded Neopets in April, 2000, just after the dot-com bubble burst. He declined to offer specific financial information for the company, but said "we've been profitable and cash-flow positive for some time now."
By comparison, Viacom is a media juggernaut that owns, among other things, VH1 musical network, Nickelodeon, Infinity Radio and book publisher Simon & Schuster Inc. In 2004, Viacom chalked up revenue of $22-billion, but posted a loss of $13-billion, reflecting writeoffs in its radio and outdoor advertising businesses. Yesterday, its stock closed up 3 cents to $33.59 on the New York Stock Exchange.
"If you look at [Neopets]demographics, they are perfectly aligned with the MTV demographics," said Jeffrey Dunn, president of Nickelodeon Film and Enterprises. "We love it from a creative approach, we love it from an audience approach and when you add it together with the other space we have on the Web, it's a perfect one-two punch from an advertising point of view."
The sale of Neopets came at a time the company had reached a critical mass in the on-line youth market, Mr. Dohring said. Its website has been translated into 10 languages, its product licensed to retailers such as Minneapolis-based Target Corp., and its characters inked to a motion picture deal with Warner Bros. in March.
The private business's two main revenue streams are on-line advertising and licensing, but an emerging offshoot is polling the consumer traits of oblivious youngsters playing with their Neopets. The company then sells consumer results to companies looking to target children under the age of 12, answering questions like "how much free time do you usually have per day after you are done with your daily chores?"
Children like Lane, entranced with Kewl Dude in Nanaimo, B.C., are likely unaware of these kind of business deals as they play games such as "the wheel of excitement" with their virtual friends. So far, Lane has collected 3,779 Neopoints that can be used to buy virtual food.
For the site's 25 million other users, yesterday's sale and its many numbers boil down to one question: what happens to the virtual creatures at Neopets?
Nothing, Mr. Dunn said. The Neopets site is doing well enough on its own without interference from Viacom, he added. "They're unique within the company; we don't have anything that looks like this," Mr. Dunn said. "They do something that's different, and we're going to continue to allow them to do that."
Neopet FAQ
What is a Neopet?
A Neopet is an on-line virtual creature that needs to be cared for, played with and fed on-line. Users select a character from among 49 different species, give their character a name and unique characteristics, and plunk them down in a virtual world known as Neopia.
What does it do?
A Neopet travels around Neopia's fantasy locations, such as Mystery Island, talking to other creatures, winning games and collecting virtual currency called Neopoints that is used to buy food and items.
What does it cost?
Registration is free.
Why does Viacom want it?
Neopets strikes at the heart of a fickle youth demographic and Viacom Inc. hopes to add the popularity to its MTV and Nickelodeon brands. One of Neopets Inc.'s emerging revenue streams is on-line market research, where the company boasts "unparalleled" access to young people.
How does the site make money?
Neopets Inc. has two major revenue streams: on-line advertising (which accounts for roughly 60 per cent of revenue) and product licensing. The company has also signed a movie deal with Warner Bros., and licences for plush toys in stores such as Target Corp. Sony Corp. is developing video games.
How many Internet hits a month?
A total of 25 million registered users generate a staggering five billion page views a month. Users have created 140 million virtual creatures and generate 60,000 new creations each day.