Company Background


 

NeoPets, Inc., a subsidiary of MTV Networks, Inc. based in Glendale, California, operates one of the most popular youth-oriented website in the world, Neopets.com, an online entertainment network whose members create "virtual pets" that inhabit a mythical land called "Neopia." But creating and caring for their virtual Neopets is merely the first step members take into this constantly changing world. The Neopets experience is multi-faceted and provides hours of entertainment through a myriad of games, activities, entertainment venues, and ever-developing and challenging content. While the site has some of the same characteristics as other game, novelty, amusement and teen sites, it surpasses them all in interactivity, depth of content, and substance. With membership growth in excess of 30 million in just the past six years, Neopets is also one of the fastest growing websites on the Internet, and is consistently ranked among the top-10 stickiest sites on the Internet by Nielsen//NetRatings & Media Metrix.

History

The website, www.neopets.com, was founded by British college students Adam Powell and Donna Williams. The Neopets website initially went live on November 15, 1999. The development from a simple website into a viable business took NeoPets, Inc. company founder and CEO, Doug Dohring, just a few short months. With the guidance and expertise of an experienced management team, NeoPets, Inc. developed into an operating business by April 2000 (following its February incorporation), and reached initial profitability by July 2000. During that same period, the company brought on the artists, writers, programmers, sales and support staff, and many of the additional senior management that currently comprise The NeoPets Team.

In just six years, the Neopets website has grown from operating on a single server to over four hundred servers. The site peaks at just over two gigabits of bandwidth each day (the equivalent of approximately 1400 T1's), and generates over 20,000 new account registrations daily.

Growth Rate

Neopets' membership has grown at an astounding rate - from approximately 90,000 in April 2000 to more than 30 million in June 2005. Approximately thirty-nine percent of Neopets' members are age twelve and under; forty percent are between the ages of thirteen and seventeen, and twenty-one percent are age eighteen and older. Significantly, Neopets' explosive growth rate has been "viral" - meaning that the impetus for this dynamic growth has been word-of-mouth from user to user, not commercial advertising.

Site "Stickiness"

As reflected in Neopets' high "stickiness" ratings - an online measurement term that refers to a site's visitor involvement, time spent online, and pages viewed, Neopets has rapidly become one of the preeminent youth communities on the Web. Neopets users spent an average of 5 hours 24 minutes* per month on the site, which puts it ahead of Yahoo, MSN, AOL and eBay, and well ahead of other youth-targeted sites such as Disney, FoxKids, and Yahooligans. Indeed, with Neopets members viewing over 2 billion pages* of content per month, Neopets more than doubles the combined page view totals of Alloy.com, Bolt.com, CartoonNetwork.com, Disney Online, EverythingGirl.com, PBSkids.org, Seventeen.com and Yahooligans.com.

Advertising Philosophy

Because participation on Neopets.com is free, Neopets generates revenue through family-appropriate screened banner ads (shown primarily to users age 13+), as well as through user-initiated brand integrated advertising, which incorporates a sponsor's message into existing or customized activities and games within the website. All site advertising is clearly denoted as such, so that users who prefer not to see the user-initiated advertising content can easily avoid doing so by simply not clicking on those games and activities. NeoPets has never required any of its users to view or play an advertiser-sponsored game or activity in order to enjoy the site's millions of pages of free entertaining content, and less than 1% of all site content accessible to kids age 12 and under (who comprise 39% of the site's total membership) contains any form of advertisement.

Merchandising and Licensing

NeoPets also generates revenue through the sale of Neopets-themed merchandise. Currently, Neopets has nationwide distribution in specialty retailer Limited Too of limited edition plushies, doorhangers, and seasonal items. Additionally, Sony Computer Entertainment America has produced and distributed two Neopets-themed video games - "Neopets: The Darkest Faerie" on the PS2 platform (released in 2005), and "Neopets: Petpet Adventures, The Wand of Wishing" on the PSP platform (released in 2006).

Translation Initiatives

A major NeoPets initiative in 2003 and continuing to the present is the translation of the site into languages other than English. Beginning in August 2003, Neopets has been translated into Japanese, Chinese (both traditional and simplified), Korean, Spanish, German, French, Italian, Portuguese and Dutch. The ability for site members to play in languages other than English has permitted NeoPets to expand even further its international audience, which in turn has increased cross-border communication and understanding by young people everywhere. Simply stated, a core mission of NeoPets is to be the largest online family-friendly youth community in the world. The opportunity for anyone anywhere in the world to access the site in many different languages is key to attaining this goal.

Recent Developments

In June 2005, NeoPets, Inc. was acquired by MTV Networks, Inc. a subsidiary of Viacom, Inc. for $160 million. The sale brought together two of the most innovative providers of youth online entertainment. With the acquisition by MTV Networks, NeoPets is well positioned to develop new online opportunities and accelerate its progression into offline venues.

In March 2005, NeoPets announced two partnerships. The first was an agreement with IN-FUSIO to create the first Wireless-to-Web (W2W) entertainment application of its kind, giving players full access and interactivity from their mobile phones to the online Neopets world. Launched in June 2006, this application permits players to manage their accounts, buy and sell virtual goods, explore, play mini-games and care for their various pets, in addition to enjoying exclusive wireless gameplay elements that are directly integrated into the existing website. When connecting to Neopets from a cell phone, players can access newly created areas of the site, exclusive pet species, characteristics, items and rewards, as well as additional ways to earn Neopoints, the currency of Neopia. The innovative implementation of this application captures many of the core aspects that make Neopets.com one of the stickiest websites in the world, resulting in an engaging stand-alone game as well.

The second partnership of note was with Warner Bros. Pictures to develop and produce animated feature films based on new and existing stories and characters from the virtual world of Neopets.com. The announcement was made by Jeff Robinov, President, Production, Warner Bros. Pictures, and Doug Dohring, Chairman and Chief Executive Officer, NeoPets, Inc. Dylan Sellers will produce the projects with Dohring; Warner Bros. Pictures' Courtenay Valenti will oversee production for the Studio. NeoPets, Inc. will co-finance development. Recent productions by Dylan Sellers include Warner Bros. Pictures' A Cinderella Story starring Hilary Duff; and Agent Cody Banks and its sequel Agent Cody Banks 2: Destination London.

The Neopets Community

Neopets members are entertained by the challenging and continually evolving free content offered on the site. With new lands to explore, over 100 games to play, stories and comics to write for The Neopian Times® (the site's online weekly newspaper), contests to enter, and friends to communicate with, Neopets.com contains literally thousands of activities. Neopets members are not merely passive visitors in the land of Neopia. Rather, members actually expand the site's content. For example, members participate in various interactive activities that permit them to acquire "Neopoints" (the site's virtual currency), which are used to purchase food and other Neopian Items necessary to feed, interact with, and otherwise develop their Neopets.

Members are also encouraged to purchase, create and design their own unique shops throughout the Neopian Marketplace, which they can stock with Items won or collected from around the site, and then "sell" to other members. Through smart purchases and trades with others, members can turn a "virtual" profit, increase the size of their shops, and thereby increase their visibility on the site. Additionally, members can write and post news items for The Neopian Times, submit their artwork to the Neopets Art Gallery, set up their own bank accounts, invest in the "NEODAQ" Neopian Stock Market, explore the various levels and lands of Neopia, and make friends with other members through NeoMail®, the site's internal email system, and through the site's message boards and guilds.

Summary

To succeed in today's marketplace, a company must not only provide a unique and valuable product that attracts and maintains a defined and loyal audience, but also be founded on a sound economic base that demonstrates profitability and growth. NeoPets, Inc. successfully meets these criteria. With its dynamic, exciting, and entertaining content, coupled with multiple innovative revenue-generating business strategies, Neopets is well positioned to succeed in the "online" and "offline" marketplaces of the world.

* ComScore Media Metrix - July 2006


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