Club Penguin - Business Model

Business Model

Prior to being purchased by Disney, Club Penguin was almost entirely dependent on membership fees to produce a revenue stream. Nevertheless, the vast majority of users (90% according to The Washington Post) chose not to pay, instead taking advantage of the free play on offer. Those who choose to pay do so because full (paid) membership is required to access all of the services, such as the ability to purchase virtual clothes for the penguins and buy decorations for igloos; and because peer pressure has created a "caste system" separating paid from unpaid members. Advertising, both in-game and on-site, has not been incorporated into the system, although some competitors have chosen to employ it: for example Whyville, which uses corporate sponsorship, and Neopets, which incorporates product placements.

An alternative revenue stream has come through the development of an online merchandise shop, which opened on the Club Penguin website in August 2006, selling stuffed Puffles and T-shirts. Key chains, gift cards, and more shirts were added on November 7, 2006. October 2008 saw the release of a line of plush toys based on characters from Club Penguin, which were made available online (both through the Club Penguin store and Disney's online store), and in retail outlets.

As with one of its major rivals, Webkinz, Club Penguin has traditionally relied almost entirely on word-of-mouth advertising to increase the membership.