MTV Networks' Pet project likely to pay off

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MTV Networks got stuck on NeoPets, much like all its users do.

Last week, MTV Networks, which includes Nickelodeon, bought the children's character business NeoPets in a deal analysts say is well worth the $160 million purchase price, and not only because the average time spent on the site is computed in hours, not minutes (in May, it was over three hours).

Internet insiders have long described the site with the antiquated term, "sticky." But in NeoPets' case, the word "sticky" has real heft. Its 30 million members worldwide-primarily kids and teens-create NeoPet characters, name and nurture them and spend hours playing games to earn points that allow them to buy their pets food and toys. NeoPets not only brings Nickelodeon that massive kid audience, it also brings an expertise in "immersive advertising"-which is new to the banner-on-every page MTV Networks' Web sites.

The acquisition "could have been interesting for any number of companies who wanted a potentially powerful ad platform for reaching kids and teens," said David Card, senior analyst at online-market-research firm Jupiter Research.

BEYOND THE SECOND SCREEN

NeoPets is an example of an online company that is accomplished in uniquely Internet-oriented areas, such as community building and integrating advertising into content. But an experienced offline media partner like MTV Networks allows NeoPets to grow beyond the second screen. "It is a great partner for NeoPets because it knows how to create programming and merchandising," Mr. Card said. "I'm a believer that modern media is multichannel. If NeoPets was ever going to be a big entertainment play, it has got to go beyond online."

Even so, the online audience the deal creates is impressive. Neopets.com and Nick.com together reach an unduplicated audience of 6.6 million users, according to Nielsen/NetRatings' May data. "You have two of the leading brands now able to harness together to reach advertisers," Herb Scannell, VP-MTV Networks and president, Nickelodeon Networks said.

NeoPets' users are not just little kids. Some 60% are 13 and older. Of those, 40% are between 13 and 17, and 20% are 18 and over. The site is translated into 10 languages and each user sees the same site wherever they are in the world.

The site's ad strategy has been to integrate advertisers' brands into the content with "immersive advertising." So, for example, Disney film trailers are shown in the Disney Theatre when the user clicks to see them, a McDonald's area features a stamp-collection treasure hunt and a game sponsored by Procter & Gamble's Crest challenges the player to brush a Grarrl pet's teeth with a new electric toothbrush. Traditional ad forms like banners have only been on the site for the last year.

"The advertising integrates and has a context within the site," explained Doug Dohring, CEO, NeoPets. "We make it interesting and fun." The creative team that builds content is also responsible for coming up with many of the clients' ads.

Since users must register to participate in site activities, NeoPets knows their age, gender and location. It targets ads geographically and demographically, displaying campaigns unique to a particular geographic region, and refusing to show banner ads to kids under 12. Ads appear on only 1% of the site.

Mr. Dohring encourages new advertisers to test immersive marketing by conducting surveys on their campaigns. For members who partake in immersive content, there is a lift in brand awareness and purchase intent higher than the industry norms. When online survey firm Dynamic Logic followed up NeoPets' tracking for a video-game-company promotion, it found aided brand awareness of 62%, vs. 3% for the market norm. Purchase intent was 13%, vs. 2% for the market norm.

"You do one or two of these studies with a new advertiser and they get the idea that it's good stuff," said Rik Kinney, exec VP, NeoPets.

From a financial perspective, following Viacom's approval to split off its assets this month, adding a hot Web property bolsters the cable network/movie studio package, which is marketed on Wall Street as a fast-growing stock. For Nickelodeon, whose upfront revenue gains were in the mid-single digits this year, multiplatform integrated deals are especially prevalent. "Not only is the online medium gaining momentum, but people are doing business differently, doing upfront deals that include online," Jim Perry, Nickelodeon's senior VP-ad sales, told Ad Age as he wrapped his upfront sales.

contributing: abbey klaassen

On target

NeoPets knows age, gender and location, and can target ads geographically

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