With Web 2.0 fever finally starting to wane, the investor community has been pumping some serious dollars into virtual worlds and MMOGs — about $345 million in 39 virtual worlds in the first six months of 2008. And the third quarter has started off with a bang, with veteran (it was started in 2003) virtual world/online community Gaia Online announcing that it has raised $11 million in Series C funding from Institutional Venture Partners. Gaia raised $12 million last year from DAG Ventures, Benchmark Capital and Redpoint Ventures; its funding now totals $32 million. Interestingly, none of the older investors participated in the latest round. The new money indicates that the San Jose, Calif.-based company might not be profitable just yet.
Last year, when Disney acquired Club Penguin for about $700 million, the conventional wisdom was that Gaia would be the next one to get snapped up. Since then, we’ve heard rumors that the company was talking to quite a few suitors.
The reason there has been an increased investor interest in virtual worlds is because the sector captures a highly lucrative younger demographic, notably teenagers. eMarketer expects the number of teen Internet users visiting virtual worlds to rise to 20 million by 2011 — from just 8.2 million in 2007. And unlike the demographic of the traditional gaming business, which is facing a crisis of attention, teens tend to be a more engaged audience, and are more likely to participate in virtual economies and newer forms of advertising.
Gaia’s attempts at commercialization have met with some resistance from its community — read the comments in response to one of our previous posts. Nevertheless, it still has a thriving community and continues to grow at a rapid clip.