Webkinz, the Business

Seeing this article in Business 2.0 prompted me to think through what's neat about the Webkinz business model. My daughter's getting right into the "tween" target market now so I get to see how she interacts with lots of different websites. She'll download every free trial or sign up for anything if it looks like fun. But the moment it wants money, she drops it and moves on to the next game or web site, because she knows it's almost impossible for her to pry a credit card out of our fingers. She'll also spend 4 hours straight on a game then never come back to it.

Webkinz beats both of those problems and has really trapped her. First of all, they got their money up-front when I bought a Webkinz in an airport gift store almost two years ago. I'd never let her spend even $5 on some online game, but I didn't even think twice about dropping $15 on a stuffed animal. So they got their money up-front. No begging and pleading to get mom and dad to whip out the credit card.

Then they keep it "sticky" by limiting how often they can play each game. I can often look over at her computer and see "Sorry, but you need to wait another 8 hours before playing that game again." So she can't just burn herself out. She has to keep playing the games though, so she can earn Webkinz dollars to buy virtual stuff for her virtual dog.

Then I saw the "exclusive" items that kids can get. I guess there are special virtual items that you can get only if you register 10, 15, 20, etc. Webkinz on your account. That's 10, 15, 20, etc. stuffed animals at $12+ apiece.

It's an interesting business model. The stickiness and rewarding raving fans isn't that new, but the way they get the money out of an up-front purchase is.

I just wonder how long it will be until someone works out their key algorithm and builds a key generator for Webkinz codes, flooding their system with fake virtual pets.

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