Webkinz stays close to its offline roots

It’s probably because I am completely immersed in the online world that I am used to seeing online sites trying to drive customer acquisition and retention through offline activities. I did a double take when I saw Webkinz, the hugely popular toy sensation going the other way and using its online gaming/virtual world to drive purchase of its furry little stuffed pets and related knick knacks. For those of you who don’t know much about Webkinz, it’s a stuffed toy with an online avatar. In the highly addictive Webkinz world, you can feed, dress and exercise your ‘adopted’ pet. In addition, you can play games and earn Webkinz cash, which you can use to buy food, clothes, and even real estate for your pet.

But the only way you can get access to the virtual world is to buy one of the numerous furry critters and use the unique code that comes with each pet. Many kids as well as adults are hooked on the site, but there’s no option for those who want to just renew their acccounts at end of one year (when the account access ends), without buying yet one more of those stuffed critters.

Let’s be honest here, the Webkinz stuffed pets are cute, but they not all that interesting given the stiff competition from the other leading kids brands. If it wasn’t for the virtual world/online gaming, there’s really not much compelling about the Webkinz pets.

I think Ganz (the company that owns this virtual world phenomenon) has boxed itself into a corner because of its arrangement with the retailers who stock these furry critters. Its strategy isn’t all that surprising, given its traditional roots, which is gifts and stuffed pets. So here’s a hugely successful product idea that’s trapped by tradition. 

Ganz could drive pure profit by having an online renewal option for Webkinz by allowing those with an existing account to renew without having to buy another stuffed creature. Hopefully, Ganz will reconsider its strategy and let the site thrive on its own merit rather than remain shackled to its offline merchandise.

My first blog post on WordPress

Okay, here goes. My first post on WordPress. I have to admit I like the blogging interface much better than Typepad. I absolutely love that it lets me edit the permalink, I don’t remember having that option on Typepad.

I wonder if there’s a way to transfer my Technorati ranking to this new blog? Still need to look in to that. Need to hook up the blog with Feedburner but that will have to wait until later today. But for now, I am all set in my new home on WordPress.

Twitter and the conundrum of 'free' (social sites)

After a couple of highly frenetic work weeks and several crazy road trips later, I am finally back in the blogging scene.

Given the recent uproar over Twitter outages, the question begs to be asked (and answered), if you aren’t willing to pay for a service, should you be whining when it doesn’t deliver? What, if any, should your expectations be from a free service? Conversely, if you are a free site/platform, how do you justify additional investment in your company, if you don’t have any means of generating revenue?

This is a huge challenge for free social sites like Twitter. Good news is that you have millions of users, bad news is you have millions of users but no revenue. And if there’s no revenue, it’s heck of a lot more daunting to keep scaling to meet the needs of your burgeoning user base.

There’s where the venture funding helps, but sooner or later, Twitter (and free social sites like Facebook, Orkut, Friendster, and others) will have to figure out a way to make money. I think it’s quite dicey when the valuation of these social sites is based on freeloading users who don’t want to pay to use the site. Given that none of these sites like Twitter, Facebook have figured out a way to monetize this freeloading user base, the popular option seems to be advertising.

I have my own doubts about advertising as a sustainable revenue model for social sites. Especially, if the intent of any social site is to entertain and engage the user, driving them off the site with links to another site seems highly counterintuitive.

Therein lies the biggest challenge for these free sites, it’s all fine and dandy as long as the venture funds keep flowing in, all the site has to do is focus on getting more users (and of course, make sure the site doesn’t crash under all the traffic). Acquiring users for a free service is the easy part, but this story will get much more interesting when these free sites are forced to support themselves like some of the other ‘growed up’ social sites like LinkedIn.

Om Malik of GigaOM suggests charging power users like Robert Scoble, who according to Malik overwhelm the microblogging site. I think that’s a great idea, but how long do you think users will stick around if they have to pay for what they are used to getting for free?