Cool jazz piano playing in the background, a pink penguin named JellyJuju orders a cheese pizza and a lemonade. Another penguin, wearing a chef's hat, waddles to the table, tossing the pie in the air and catching it.

Welcome to Club Penguin, the MySpace of the primary school set, where kids control their penguin avatars, throw snowballs, hang out in their igloos and make friends in an online world built just for them.

People ask us: are you guys a massively multiplayer game? Are you an online world? Are you a social networking site? said company co-founder Lane Merrifield, who came up with the idea while watching his five-year-old playing on the computer.

What we really want this to be is an online playground or an online sandbox.

Unless you have a small child -- or are one -- you may be surprised or even alarmed to learn that thousands of children barely old enough to read are already online.

But in the last few months, virtual networking environments aimed at kids as young as six have swelled into serious businesses, earning millions for their grown-up creators.

In August, none other than Disney paid $350 million for Canada-based Club Penguin, with a promise of $350 million more if it meets its traffic targets.

Club Penguin says it has 10 million users, of whom 700,000 have managed to persuade their parents to pay subscriptions of a few dollars a month so they can use virtual money to buy clothes for their penguins and furniture to decorate their igloos.

They can go waterskiing, hang out on the beach, play games or work as waiters in the pizzeria.

Parents can choose to restrict their child's penguin chat to pre-selected phrases picked out of a menu, or let them type in their own phrases which are filtered by software and human monitors to keep out personal information or naughty talk.


Club Penguin's biggest rival, Webkinz, has turned Ganz, a 57-year-old family-owned Canadian company that makes stuffed animals, into a hi-tech media firm.

Company President Howard Ganz hit on the idea of building an online world for stuffed animals while looking for a way to make plush toys more relevant for the 21st Century.

Kids seem to be born with a mouse in their hands, said spokeswoman Susan McVeigh. There just isn't that barrier to the computer. It just seems so natural to them.

Stuffed gorillas, frogs, cats and dogs come with passwords for Webkinz World, an online site where kids bring their pets to life, make friends and challenge other kids' pets to games.

As in Club Penguin, Webkinz users can buy clothes for their pets and decorations for their rooms with virtual cash, which they earn by playing games or taking educational quizzes.

Ganz doesn't reveal sales figures, but has been selling the toys throughout North America as fast as it can make them.

Shops throughout the United States and Canada had Webkinz Sold Out signs posted for much of this year, and parents lining up whenever a shipment came in.

The sites have been greeted positively by police, who have long worried about young children finding their way onto unprotected Web sites aimed at teens, such as MySpace.

Kid-oriented sites offer parents a safer way to introduce children to the Internet, said Detective Inspector Brian Ward, of the Child Abuse Investigation Command at Britain's Metropolitan Police High-Tech Crime Unit.

It is the first time we've come across a sort of chat experience that is aimed right at the beginning, of a first-use club for a child using the Internet, Ward told Reuters.

I'd far rather this than to go straight onto a social networking site where there would be far less protection.