History and Development
As Merrifield later described the situation, they decided to build Club Penguin when they were unsuccessful in finding "something that had some social components but was safe, and not just marketed as safe" for their own children. Merrifield and Priebe approached their employer, David Krysko, with the idea of creating a spinoff company to develop the new product.
Prior to starting work on Club Penguin, Lance Priebe had been developing Flash web-based games in his spare time. As part of Rocketsnail Games, Priebe released Experimental Penguins in 2000, which featured gameplay similar to that which was incorporated into Club Penguin. Although Experimental Penguins went offline in 2001, it was used as the inspiration for Penguin Chat, which was released shortly after Experimental Penguin's removal. Thus, when Priebe, Merrifield and Krysko decided to go ahead with Club Penguin in 2003, they had Penguin Chat on which to base part of the design process. Penguin Chat's third version was released in April 2005, and was used to test the client and servers of Club Penguin. The original plan was to release in 2010, but since the team had decided to fast-track the project, the first version of Club Penguin went live on October 24, 2005.
Club Penguin started with 15,000 users, and by March that number had reached 1.4 million—a figure which almost doubled by September, when it hit 2.6 million. By the time Club Penguin was two years old, it had reached 3.9 million users. At the point when they were purchased by Disney, Club Penguin had 12 million accounts, of which 700,000 were paid subscribers, and were generating $40 million in annual revenue.
Although the owners had turned down lucrative advertising offers and venture capital investments in the past, in August 2007 they agreed to sell the company (both Club Penguin and the parent company) for the sum of $350.93 million. In addition, the owners were promised bonuses of up to $350 million if they were able to meet growth targets by 2009. In making the sale, Merrifield has stated that their main focus during negotiations was philosophical, and that the intent was to provide themselves with the needed infrastructure in order to continue to grow.
On March 11, 2008 Club Penguin released the Club Penguin Improvement Project. This project allowed players to be part of the testing of new servers put into use in Club Penguin on April 14, 2008. Players had a "clone" of their penguin made, to test these new servers for bugs and glitches. The testing was ended on April 4, 2008.
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