Three hard-working, family-oriented guys from the picturesque mountain town of Kelowna, B.C. A website that is filled with nothing but wholesome, kid-friendly entertainment featuring that most kid-friendly of animals, the penguin — and not a single advertisement, pop-up window or spyware-installing toolbar. The only way the Club Penguin story could be any more Canadian is if the site featured Mounties in it. The company even donates 10 per cent of its profits to charities involving underprivileged youth. If Mother Theresa had kids, this is the website they would play on. The site is so clean it almost squeaks. Congratulations to the Club Penguin team — nice guys (and Canadians) do finish first sometimes.
As was widely rumoured a couple of months ago, Club Penguin is being acquired, but not by Sony, who was said to be deep in takeover talks with the company when I last wrote about it. Instead, the wildly successful virtual world for kids — which was started by three guys from Kelowna, B.C. as a side project about a year and a half ago — is being bought by The House That Mickey Built.
At the time of the Sony rumours, Disney was said to be interested in buying Webkinz, another Canadian-built virtual world for kids. According to the Wall Street Journal and PaidContent, the price tag on the current deal is $350-million cash plus an “earnout” of $350-million based on future performance. That’s a pretty handsome return on a little over a year’s worth of work, and from what I have been told — by at least one VC who was kicking himself for not being able to get in on the deal — ClubPenguin.com had not taken any substantial venture capital money whatsoever. The Globe did a story on the guys who created the site last fall.
Staci at PaidContent has a good overview of the deal (so does the Journal) including some comments from Disney CEO Bob Iger, and points out that members of Club Penguin are pretty protective of the site (which carries no advertising of any kind). Mike Arrington says that previous talks with Sony and others got derailed in part because Club Penguin donates a chunk of its profits to charity.
I didn’t get a chance to write about this yesterday when it broke, but I think it’s pretty amazing (if true) that ClubPenguin is talking with Sony about getting acquired for somewhere in the neighbourhood of $500-million or so (TechCrunch says $500-million, but PaidContent says that the price is closer to $450-million). Om Malik has some details here. Either way, those are pretty amazing sums of money for a company that has only really been around for a year or so. As my Globe and Mail colleague Barrie McKenna wrote in a story last fall, the company was started by a couple of guys in the relatively sleepy (at least when I was there last) resort town of Kelowna, B.C.
Parents with kids, the founders deliberately chose not to include advertising on the site, and in fact haven’t advertised the site either — growth has been entirely through word-of-mouth. Judging by the speed with which it spread through my family, from eight-year-old daughter to friends and cousins, it is the childhood equivalent of Facebook (as is its cousin Webkinz, also a Canadian success story aimed at kids, which Om says Disney has looked at).
Two big questions remain: Can ClubPenguin keep growing at a rate fast enough that it makes $500-million look like a good deal? And can the company find a partner that has the same philosophy about marketing to kids?