With Web 2.0 fever finally starting to wane, the investor community
has been pumping some serious dollars into virtual worlds and MMOGs
— about $345 million in 39 virtual worlds
in the first six months of 2008. And the third quarter has started off
with a bang, with veteran (it was started in 2003) virtual world/online
community Gaia Online
announcing that it has raised $11 million in Series C funding from
Institutional Venture Partners. Gaia raised $12 million last year from
DAG Ventures, Benchmark Capital and Redpoint Ventures; its funding now
totals $32 million. Interestingly, none of the older investors
participated in the latest round. The new money indicates that the San
Jose, Calif.-based company might not be profitable just yet.
Last year, when Disney acquired Club Penguin
for about $700 million, the conventional wisdom was that Gaia would be
the next one to get snapped up. Since then, we’ve heard rumors
that the company was talking to quite a few suitors.
The reason there has been an increased investor interest in virtual
worlds is because the sector captures a highly lucrative younger
demographic, notably teenagers. eMarketer expects the number of teen
Internet users visiting virtual worlds to rise to 20 million by 2011
— from just 8.2 million in 2007. And unlike the demographic of
the traditional gaming business, which is facing a crisis of attention,
teens tend to be a more engaged audience, and are more likely to
participate in virtual economies and newer forms of advertising.
Gaia’s attempts at commercialization have met with some resistance from its community — read the comments in response to one of our previous posts. Nevertheless, it still has a thriving community and continues to grow at a rapid clip.