Neopets started out in 1999 as a small project by two British college students, Adam Powell and Donna Williams. Powell did the programming while Williams designed and drew the creatures and other graphic elements. Initially, Powell and Williams intended the site for other students, so they included a lot of inside jokes and Britishisms. Some of these elements remain, notably in the site's continued use of British spellings for words like "grey."
Powell and Williams were soon overwhelmed by the site's popularity, so they sold it to market research expert Doug Dohring [ref]. Dohring kept the site's creators on-board, moved company headquarters to Southern California and started developing what he hoped would become a "media empire."
In June of 2005, Dohring sold Neopets to MTV, a division of media conglomerate Viacom, for $160 million [ref]. He stayed with the company through the sale. As of the sale date, Neopets reported 92 million accounts. Adjusting that number for users with multiple accounts, that represents about 30 million unique users. Children under age 13 make up 39 percent of those users, with 40 percent between the ages of 13 and 17, and 21 percent over 18. In addition, 57 percent of users are female, a very high number in the traditionally male-dominated online gaming market [ref].
Neopets is able to turn those numbers into profits a number of different ways. The most obvious method is something Dohring calls Immersive Advertising, a unique way of incorporating ads into Web sites. It works a little like product placement in a movie or TV show. Along with the Neopian-themed games, Neopets users will find games that are thinly disguised marketing tools. These games reward players for answering trivia questions about a TV show or a toy. Owners can buy McDonalds food for their pets or play a Pepperidge Farm game. A taxi game uses an image of a cell phone to send messages to the player -- the game is sponsored by the maker of the phone, a model designed for kids. Retail sales make up a portion of Neopets' revenue as well, including the CCG, action figures, plush toys and the PlayStation game.
While Neopets uses the marketing information they collect to design new games and marketing partnerships, they also use it to make money. The company owns a huge set of research data on children 12 and under, a difficult demographic to get because marketers must comply with the Children's Online Privacy Protection Act (COPPA) and obtain parental permission. Neopets claims more than 50,000 kids in their marketing database. Neopets sells market research (not personal data) to other companies, trading on Neopets' "unparalleled access to young people," as the company press kit phrases it. As of January 2006, Neopets was operating on 300 Linux-based servers pumping out 1.7 gigabits of bandwidth each day [ref, ref].
In the next section, we'll discuss some of the problems Neopets has faced.