It's Saturday lunchtime and kids are feasting on cupcakes and getting their faces painted. The scene could be a children's party anywhere in the world, but this event was thrown by Moshi Monsters, a company with global ambitions to become the "Facebook for kids."
Moshi Monsters, formed in the U.K. three years ago, signs up a new member every second. It hit 50 million registered users this month; by the end of 2011, it expects to have 70 million to 80 million members in 200 countries, including one of every three U.S. kids.
In many countries, more than half of 6- to-12-year-olds are already signed up to the site, where children adopt a pet monster, interact with their friends' pet monsters, and -- by completing educational games -- earn an online currency called "Rox."
Moshi Monsters carries no ads and is free to use, although a subscription of around $8 a month buys premium access to the site. Games are "short-play optimized," meaning that after 15 minutes, the rate at which you can earn Rox diminishes rapidly. The idea is to encourage children to go do their homework or play with friends instead.
The bulk of Moshi Monsters' $200 million-plus revenue comes from offline sales of toys, cards and magazines, but the brand is deeply rooted in the worldwide web, and every piece of merchandise carries a code that drives kids back online.
Ed Relf, the chief commercial officer of Moshi Monsters' parent, Mind Candy, has masterminded the company's marketing efforts since its launch.
Ad Age : What kind of marketer are you?
Mr. Relf: Our mantra is "No metrics, no marketing." If we can't track it, we don't do it. We measure all ROI by individual marketing channel -- our first TV campaign achieved 650% ROI.
We are ahead of the game. A lot of marketers have not got their heads round offline ROI, but we measure TV by unique URLs in each country. In the U.S., when we first launched, we did no national TV buying. We bought by market and tracked the ROI of each individual state. That way we can spend money where we know it will generate money and our advertising investment delivers a huge budget.
We use the metrics to constantly iterate our campaigns. The day we changed our background to pink skies, we trebled our click-through rates. Even changing the colors of individual words can have an impact. So often creative banners are put out there and nobody bothers to look at the metrics. We agonize over every single thing. Every time we tweak, we learn. It's incredibly refined.
Ad Age : How fast are you growing?
Mr. Relf: You'd be hard pressed to find a company growing as fast as ours. Last year our revenues were up 300%. We opened an office in New York in May -- our first outside the U.K. -- and in London we expect to double from 50 to 100 staff by the end of the year. We are all shareholders, so we all have a stake in success.
Ad Age : What is the relationship between Moshi Monsters online and offline?
Mr. Relf: We have turned the toy industry on its head by building from online to offline. We are the first true brand where the online world is the heart of the brand, and all the offline properties drive engagement online. We know that something on the web may be cool one week and not the next, so by taking Moshi offline we can build on the relationships that people have with the toys, the magazines and the cards, and drive them back to the website.
Moshi Monsters Magazine launched in February, and from the first issue it was the biggest monthly online kids' magazine in the U.K. We are selling 100,000 [copies] per issue, and the main reason people buy the magazine is to unlock the online content.
Ad Age : Who are your competitors?
Mr. Relf: Something like Sanrio's Hello Kitty perhaps, because they have taken the brand global and kept it fresh. Club Penguin and Neo Pets are not a fair comparison, they are online games for kids, while Moshi is a game, a social network, an entertainment product -- it's an entertainment brand.
We want to be the Pixar of kids' entertainment. Pixar spends so long making sure everything is immaculate and we apply the same love, care and attention to everything we do.
Ad Age : What are your plans for expansion?
Mr. Relf: We are English language-only at the moment but we are planning to internationalize later this year, with local sites in China, South America, Japan and Russia. There's still a long way to go.
Ad Age : How do your agency relationships work?
We are very analytical with our agencies, and we expose them to tangible KPIs [key performance indicators] -- whether that 's number of users, decreasing churn or increasing engagement -- and measure them every day.
I have worked in places where it takes as long to sign off the budget as it does to create the campaign. It's a broken model -- it doesn't work. Here, we have an idea in the morning and we execute it by the afternoon. It's the only way it can work in the online space. It gives us a massive competitive edge.
Ad Age : Can you continue this level of growth?
Mr. Relf: Oh yes. There's no doubt. The advantage of the virtual world is that our online nucleus is living, breathing, ever-evolving. We are not a cartoon series that doesn't change or a brand that doesn't evolve -- 80% of Moshi's work is developing new content. If you don't evolve, kids get bored quickly. We've maintained this growth for two-and-a-half years and everything suggests we can do it for another 20 years.