Who let the NeoPets out?

Meet the NeoPet, an addictive Web phenomenon spreading among children from Atlanta to Argentina. A cross between "The Sims," "Dungeons and Dragons" and that junior high exercise where students try to cart around eggs for a week without breaking them, NeoPets require frequent attention from their owners, who must feed the critters, educate them, and keep them out of harm's way.

Raising a NeoPet is a popular project. The 2-year-old, free site, originally created by British college students, has climbed to near the top of game site rankings in recent months--with people spending more time on the site than at major services such as America Online.

Because the company hasn't thrown a lot of money into advertising, visitors have learned about NeoPets mostly through word of mouth. What's more, executives at the Glendale, Calif.-based, privately held company say revenue is rising, a rare occurrence in an era when content is considered a dirty word.

"It's one of the most usage-intensive sites on the Web," Jupiter Media Metrix analyst Stacey Herron said. "People spend amazing, insane amounts of time on this site."

Virtual worlds have long been a hit with consumers, tracing their lineage back to such 1980s products as Activision's "Little Computer People" program for the Commodore 64. Since then, advances in computing power, artificial intelligence and the emergence of the Internet have turned a cottage industry into one of the hottest segments of the New Economy, led by online role-playing games such as Sony's "Everquest."

The appeal of such games has long spilled beyond the stereotypical gamer audience of pimple-faced, power-tripping computer geeks.

Virtual pets hit the big league in 1996, when Japanese toy maker Bandai released its Tamagotchi key chain. The toy was a huge hit with the 8-year-old crowd, which signed up by the millions to play parent to the demanding, beeping bots.

Since then, virtual pets have evolved into a bewildering menagerie of species that live out unremarkable digital lives on complex gadgets, such as Sony's Aibo robot dog, and in free PC downloads aimed at adults, such as Happy Hamster. In one of the more ambitious projects, a virtual fish network known as Daliworld aims to re-create the world's oceans on thousands of interconnected PCs.

Spreading the word
In this crowded field, NeoPets stands out as a commercial venture that has grown primarily by the recommendations of its users.

The site's prime target is Generation Y, or those under 20, a notoriously fickle bunch. Forty percent of the site's visitors are under 12, and 40 percent are between the ages of 13 and 17. The site is divided by age group and is constantly monitored by strict filtering software and real people.

Although those under 20 shell out only a small fraction of the money spent online, they make up a highly desirable demographic for advertisers because they're still developing loyalty to certain brands.

Plus, teens are likely to use the Web to gather information before they shop. According to a study by market research firm Datamonitor, 58 percent of online youths browsed for product information online before deciding to buy.

NeoPets said it has attracted more than 26 million pet owners so far and registers more than 50,000 new users each day.

Jupiter Media Metrix ranked NeoPets 15th among game sites in December, with 2.6 million unique visitors. The site placed substantially higher when judged by the amount of time those visitors spent there, clocking a total of 650 million user minutes for the month. That puts it third behind EA Online, publisher of the popular "Ultima Online" role-playing game, and MSN Gaming Zone. Yahoo Games ranked fourth, while America Online's game sites came in seventh.

For revenue, NeoPets relies on immersed advertising--or, as CEO Doug Dohring describes it, "sort of an advanced form of product placement." For example, owners can feed their pets brand-name food or watch a movie in the Spy Kids Theater. The object of one game was to prevent a beast's teeth from falling out by brushing with a new Crest toothbrush.

Dohring wouldn't reveal revenue but said estimates of $6 million for 2000 and between $12 million and $15 million for 2001 aren't too far off.

Still, NeoPets has drawn fire from none other than Ralph Nader, whose consumer group worries that children may be unable to discern between ads and noncommercial content. Dohring brushes aside such fears, saying NeoPets visitors would otherwise be watching television.

"We're pulling people more from television than from outdoor play," said Dohring, an automotive marketing executive who bought the site from its creators. "Interacting with computers and learning something about e-commerce or HTML...we think is a better utilization of time than sitting in front of TV."

A whole new world
To embark on a journey of NeoPet ownership, site visitors customize a critter by choosing among more than 40 creatures--ranging from the Kiko, a doe-eyed, M&M-shaped creature that needs to live near water, to the Buzz, a fast-moving insect with keen eyesight and aerobatic skills. People choose the creature's color, strength and even what it likes to do, which can vary from hunting for treasure to bullying others.

More than an annoying virtual animal that merely yaps at its owner, a NeoPet grows smarter when its keeper buys it a book or shrinks to a weak and withered state if it doesn't get enough food.

Indeed, the complexity of the NeoPets site is hard to fathom without a visit.

NeoPets requires owners to immerse themselves in the constantly changing land of the Neopia, a fantasy land where they can run a shop, enter contests, or play games and battle others to win points to feed their pet. Owners can choose to be greedy, friendly or boorish. The most altruistic of the bunch can donate points to a soup kitchen for needy NeoPets or adopt NeoPets that have been "carelessly abandoned." Those with a bone to pick can spar at the BattleDome. Those with a creative flair can enter poetry contests or send items to the site's newspaper, which garners 3,000 submissions per week.

Fifty-seven percent of the site's members are female.

Lee Rainie, director of the Pew Internet & American Life Project and a tracker of Web trends, said NeoPets is a natural fit for girls, who seek community and communication on the Web and are by far the most avid users of instant messaging.

"It makes sense for young girls because of the care-giving and tending," he said.

The site has added bloodless sparring in an attempt to attract more boys.

Amy, a proud owner of Pu_Yi the Fire Pteri, said she visits the site every day to train her pet, play games and chat with other pet owners.

"It's the best virtual pet site I've seen so far," she said.

An Atlanta junior high school student who goes by the name Colliedragon on the site said she spends about three hours a day looking after her three NeoPets. Colliedragon visits the site before and after school and even tends to her pets during breaks between classes by logging on from her school's computer lab.

"I think everyone should have a NeoPet," said Colliedragon, who signed her e-mail to CNET News.com "a happy Neopian."

Just the beginning
NeoPets' Dohring sees more in his future than a virtual pet shop. He said he's hoping to build a children's media empire--including an eventual foray into film and television--starting with the Web. If he succeeds, it would reverse current trends among traditional media companies, which usually develop Internet properties based on existing movie and TV characters.

Next month, the company will move offline via a deal with children's clothing store Limited Too, which will sell toys, jewelry and stickers based on NeoPets. NeoPets also has a deal with Viacom to license interactive games and publications based on the creatures. Dohring said he plans to constantly update interactive features, including introducing translation software so children around the globe can correspond with each other.

"I saw a media company emerging out of this, not just a Web site," Dohring said. "That's where we're heading."

Still, castles built on the fickle attention of children can quickly collapse in fairy dust.

Colliedragon, who's been a NeoPet owner for six months, said she's drawn to the site because it constantly changes and provides her with an escape. However, she'll pick her own live collie over her Aisha, Chia and Faerie Gelert any day of the week.

"NeoPets can talk and are more humanlike than real pets, but NeoPets can't love you," she said.