Last week, I was blown away to hear that Disney was acquiring Club Penguin for $350 million dollars with an option for the price to top $700 million over the to next couple years. Sure, I had heard of Club Penguin but $700 million, really?

For those of you without kids at home, Club Penguin is a snow-covered virtual world where tweeners between the ages of 6 and 14 play online games, adopt puffles, interact with each other and trick-out their igloos. The site is an advertising-free zone with a subscription based business model with 12 million activated members and 700,000 paid accounts ranging from $5.95 per month to $57.95 annually.

But come on, $700 million? I had to dig deeper. What I learned was that, by all accounts, Club Penguin is truly a remarkable success with well over $50 million in revenue, a great business model, high member retention, little or no venture money invested and a huge return for shareholders. This kind of success will surely create a flood of interest from entrepreneurs and the venture capitalists in the space. But does that next big hit already exist?

Using a completely un-scientific approach, I looked at a couple of leading leisure gaming sites that appear to focus on social networking and gaming for kids. I poked around on gaiaonline.com, neopets.com, stardoll.com and webkinz.com using People Counts as a proxy for success. What I learned is that webkinz.com is the clear momentum leader with 25% MOM growth and thundering 1424% YOY growth, surpassing clubpenguin.com in March, in terms of the number of kids hitting the site on a monthly basis.

Now, I had heard of Webkinz and truth be told there are a bunch these plush toys around my house and I have watched my own kids show me their virtual pets wearing crazy hats and, of all things, running on a treadmill. Webkinz, however, is not a subscription model like clubpenguin.com but is an interesting twist combining specialty retailing and this virtual community. Each Webkinz plush toy comes with its own secret code that unlocks membership in Webkinz world where kids play games, earn kinzcash and chat with others on their friends list. The secret to this success is that these toys are highly desired and kids collect them. Retail prices for Webkinz start at $12.99 and up and my kids have at least ten each and a wish list that’s even longer. Hot on the list for my son is the Black Lab which is rare find causing my wife to constantly scour the shelves of our local retailers looking for the next addition to our extended family. My daughter proudly declares that her friend Shannon has over two dozen Webkinz and Lil’Kinz in her collection.

Webkinz momentum is even further demonstrated by looking at the daily Velocity between webkinz.com and clubpenguin.com. Velocity quantifies the relative change in daily engagement between these two sites. This means that not only has webkinz.com passed clubpenguin.com in people visiting the site but that, over the last 45 days, kids using webzinz.com are more engaged on webkinz.com.

Will Webkinz be the next acquisition? Can Webkinz model of buying toys create more value than a subscription model? These are certainly tougher questions. One thing is certain, however; tweeners are a highly desirable segment of online consumers and sites that can effectively engage them in a safe and trusted environment will have the opportunity to create a great business and generate significant return for their shareholders.

Got to go, my wife just called and the Paper Store in Acton has both the Black Lab and the Chocolate Lab on the shelves and I cannot come home empty handed, again.

Facebook may be the darling of the web 2.0 press, but it was MySpace that grabbed the most attention from consumers in June. While it’s no surprise that MySpace has retained its lead in the Social Networking Ranks, its large spike in June attention showed that the site may have more room to grow.

In April, when Facebook improved its share of attention by 23%, we highlighted where this traffic was coming from, on a state by state basis. Given MySpace’s recent spike in attention (which is even more significant given its massive size), now is an ideal time to take a closer look at MySpace visitors.

The chart above shows MySpace traffic by state for the month of June. There are a few distinct differences between this chart and the identical Facebook distribution map.

• While state population density is still a key element in visit density, a far greater share of MySpace traffic comes from California, compared with Facebook.
• MySpace receives a massive amount of visits; In addition to receiving over 25% more visits-per-visitor a month than Facebook, the site jumped to 72 million unique visitors in June, generating over 1.3 billion total visits (and forcing a large change in scale from the Facebook Map).
• Compared to Facebook, MySpace appears to have a more even geographical visit distribution.

In terms of the top 20 social networking sites, June was a positive month. The chart above shows the top 20 social networks, ranked by attention* , for the month of June. Looking at this measure of how much time users spend on a site, compared to the number of total people who use the site, gives a clear indication of successful engagement.

• The top 6 social networks all grew in terms of attention, with Bebo and Tagged both improving by nearly 50% month over month.
• Hi5, which, like big mover Tagged, just received a $20 million round of financing, fell slightly in June.
• Overall, the top 20 social networks received 13% attention in June.

June may have proven to be a good month to be a social network, but the summer’s just begun. With 3 months of warm weather and plenty of sun, the real attention may migrate offline. Stay tuned.

Remember how your best friend went out to buy a dog just so he could get more attention and more dates? What better way to meet people? Forget walking the dog 10 times just to see the hot blond down the street - instead, create a profile for your dog on dogster.com!

One of the fastest growing pet sites and… who knew?.. a competitor (albeit small) in the cluttered social networking space, dogster.com boasts close to 200K users per month, keeping pace with dog.com, a canine merchandise site and surpassing i-love-dogs.com and chazhound.com, general dog portals.

Dogster web promotions have been successful in driving people traffic to dogster.com as seen above, but the increases have yet to persist. Their sister site, catster.com, has not seen the same spikes, but is still popular due to all the meow lovers out there. And really, you can’t herd cats, but you can post for them!

Dogster traffic spikes were a result from the 24-hour Dogster & Catster video playlist challenge in December 2006 and the 2007 Next Web Awards which took place over April and May. Dogster.com’s inclusion in The Next Web Awards 2007 social category for ‘most promising and upcoming services’ was not a stretch. Although dogster did not win, it certainly held its ears high in the average stay category, competing against ‘up and coming’ twitter.com, entrenched friendster.com, and dark horse bebo.com!

Maybe average stay is competitive for dogster.com (and catster.com) because it is just so hard to type with a paw, its takes longer? Um, ok … it’s those darn photos? The networking? Let’s see …

It is your turn to check out dogster.com or catster.com! Don’t do it for me, do it for Mistral, Charlie, Cassius, Coco Bean, Turks, Caicos, Sasha and Bubbles!

The first time I wrote about YouTube, it had just crossed 20 million visitors in the U.S. Just 4 days after my post, YouTube was scooped up by Google for $1.65B in Google stock. At today’s stock price, the deal is worth over $2B.

There is certainly something magical about reaching 20 million. Web 2.0 darlings, also prime acquisition targets – Digg and Facebook both crossed this milestone last month.

• Digg edged out Facebook, with 2.3 million additional unique visitors
• Facebook is growing 3x faster than MySpace (on a percentage basis)

To size up the quality of these visitors, let’s go beyond unique visitors. Let’s look at some key site engagement metrics:

• MySpace is #1 across all metrics
• Facebook is #2 for all metrics except UVs
• Average stay on MySpace is 2x more time than on Facebook

Now take a look at the chart below. After a relatively slow start, Digg is now outpacing everyone else. Facebook is beginning to look up again after spending most of 2006 in flat territory. Both Digg’s and Facebook’s growth and expansion strategies seem to be paying off in a big way.

Let’s see how things look in six months. My Facebook invites are up 2x over the last month. Something big is indeed happening. Microsoft and Yahoo should take a long deep look at this as well.

With the introduction of applications to Facebook, the social networking site has gotten considerable attention from the media, and has driven increasing comparisons to its behemoth competitor MySpace. But no matter how many hours Redbull’s Roshambull Facebook App can waste at Compete’s office, in terms of traffic, Facebook is where MySpace was a good two years ago.

Both Facebook and MySpace experienced significant growth trends soon after launch - though Facebook initially grew faster. Because these sites are social by nature, growth was primarily viral. As a result, early adopters of both Facebook and MySpace could be defined as the ultimate socialites –the ones that got the party started. But where are these two groups now? Are they still loyal to the services they essentially jumpstarted? Looking at the groups of early power users at Facebook and Myspace* the amazing “stickiness” of social networking is crystal clear.

The chart below shows how early power users* of each site are currently interacting with both Facebook and MySpace.

In May of 2007, nearly 2/3rds of early MySpace power users were still using the site, and using it heavily; this group was visiting MySpace almost 30 times a month, despite having joined the site over 2 years ago. Early Facebook Power users were still on Facebook as well; over 71% using Facebook in May 2007, and visiting the site an average of 27 times in a given month. At first glance, Facebook seems like a “stickier” site, since a higher percentage of early adopters are still active members. However, MySpace’s period of initial growth was much earlier, so it would naturally have less early users.

• A large percentage of early Facebook adopters belong to both Facebook and MySpace. This group (51% of early Facebook power users) also uses both sites heavily, visiting MySpace an average of 23 times in May.
• 6% of early Facebook adopters have abandoned Facebook in favor of MySpace but this group is much less active, visiting MySpace an average of 12 times a month.
• Early MySpace users are much more loyal to MySpace than Facebook; only 18% use both MySpace and Facebook. This subsection also represents lighter Facebook users, visiting the site only 16 times a month (compared to 30 at MySpace).
• 34% of Early MySpace users have abandoned MySpace all together, but only 1% have simply converted to Facebook Users.

Recent changes at Facebook have made the site a serious competitor to MySpace. But if early adopters are any indication, users are entrenched with MySpace and simply tack on another social network membership rather than leave the service they initially joined. This brings about the next question; where are social networking newcomers joining now? Stay tuned.

*For this analysis, early power users were defined as those visitors visiting Facebook or MySpace at least 60 times over the course of 3 consecutive months during the period of time period that each site grew from 1 million to 10 million visitors. For MySpace, this time period was May 2004-March 2005. For Facebook, this time period was June 2005 – December 2005.

Consumer-generated content is becoming increasingly popular, but many companies are still unsure how to get the most out of this new and engaging way to reach customers. Compete’s Stephen DiMarco is presenting about this and the importance of transparency at today’s Interactive Advertising Bureau Forum: User-Generated Content and Social Networking. The forum is sold out, but you can view the presentation here!