Like Habbo, online worlds are becoming massive. © Sulake.

Community sites like MySpace are exploding on the Net and serve as attractive destinations for advertisers because they contain a captive teen audience. In the world of animation, immersive Web communities serve as mini-worlds online where people from all parts of the globe can talk to friends and make new ones. Places like Second Life allow users to live out fantasies in a virtual world that may be impossible in real life. Leading sites like Neopets and Habbo have millions of visitors monthly with top advertisers wanting to join the party. Newer sites like Urbaniacs and Club Penguin are popping up with fun and unique twists to online communities. The future in this entertainment sector looks limitless and I talked with some of the players to find out more about what drives their business, as well as where they think the industry is headed.

In the Habbo world, users can create their Habbo and visit the friends' rooms in the Habbo Hotel for free. A different hotel has been designed for various regions of the world. The in-game economy allows users to buy Habbo Coins to purchase virtual products like furniture for their rooms, as well as play mini-games. Most of Habbo company's profits come from the end users, however, advertising sales and sponsorship have grown in the past two years from around 5% of their total revenue to nearly 20%.

For its games and animated shorts, Habbo employs animators and game designers internally. However, with its recent deal with Lionsgate to produce a Habbo feature, the company has gone to outside animation companies to help with those productions. Teemu Huuhtanen, president of North America, for Habbo and parent company, Sulake, said that the company always knew that the unique Habbo brand would present licensing opportunities in various areas. However, Huuhtanen added that the move into offline animated content came from the users directly. Starting about three years prior, the company began noticing Habbo users creating self-produced Habbo-themed animated shorts and posting them on their fan sites, which are visited by other Habbo users.

Habbo's Teemu Huuhtanen says polling its users generates valuable data for advertisers.

Huuhtanen added, "We've known from the beginning that Habbo is owned by the user… So we knew that whatever we tried to do with animation needed to be approved by the community." From this idea, Habbo commissioned different Habbo shorts to be made with various storylines and styles, allowing users to vote on what they like and don't like. "We think this approach is really a unique one, but in my mind it's the only way to build something on top of the existing online community. [The users] need to pre-approve as much as the studio head at Lionsgate," adds Huuhtanen.

When it comes to building online communities, it seems one thing is universally true. Word of mouth is king. For Habbo, 75% to 80% of new users come from existing users inviting their friends to join. As Habbo grew, the company struck deals with major advertisers to cross-promote each other's brands offline and in the Habbo world, respectively. This allows advertisers like Nike to sell digital shoes or Coke and Pepsi to sell soda to Habbo users. But in keeping true to the Habbo world, the company makes sure that advertisers are the kinds of brand that their target demographic of teens want to see.

"It's actually pretty funny. Our users keep sending us ideas on different marketing campaigns that they would like to see inside Habbo. They send us so many different layouts, whether it's an iPod promotion or what have you. That's really a powerful tool for us when we can talk to our partners."

How users play Habbo differs across gender lines and location. Boys tend to play more games than girls. The company categorizes its users into five different segments -- traditionals, achievers, creatives, rebels and loners. Traditionals come to simply connect with friends. Achievers strive to have the most decked out rooms and collect the most virtual merchandise. Creatives come up with contests and competitions for other users to engage in. Rebels come to strike up debate on current issues. Loners don't come to meet new people, but mainly come to play games or hang out in rooms with a select group of friends. In the U.S. Habbo Hotel, achievers are the most common, while in Japan, loners rule.

In keeping the world fresh, it's often the users that create community activities on their own. As for company created activities, Habbo puts together celebrity visits where users get a chance to talk to different bands or movie stars. For instance, Habbo-versions of the band Gorillaz visited the virtual world for a half-hour Q&A with the users. In conjunction, the company ran a contest giving a lucky Habbo user the chance to have the band hang out in their private room for 15 minutes, making them the coolest Habbo around.

In light of a recent lawsuit issued by parents of underage girls being seduced by older men on MySpace, Huuhtanen made a special point of stating how Habbo is dedicated to safeguarding its young users from predatory adults. Because the core audience is just under 15, Huuhtanen said, "You really need to make the environment where teens spend their time really safe… You set up a site and a virtual world, but these communities take a lot of maintenance. We have hundreds of people working on the moderation and different safety issues. That's something that quite a few companies forget."