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Posted by SIM on April 6, 2007

Toy Maker Ganz Strikes Gold With Beanie Babies Of The Online Age
BY DAWN CALLEJA
April 06, 2007

First came Google. Then came MySpace, Facebook and Second Life — all created by hip young techies from California. But the biggest new Internet innovation comes from an unlikely place: a Toronto-based company best known for cheesy giftware and stuffed toys.

If you have a kid in elementary school, chances are you’ve heard of Webkinz — a line of plush toys made by Ganz Inc. What makes Webkinz possibly the most sought-after toy ever is that each one comes with a secret code that gives its owner access to the vast online Webkinz World. There, users can create an avatar, or online identity, for their pet and “adopt” it.

Ganz’s product is revolutionary: It’s the first real-world toy that’s essentially just a key to an interactive website. And it has likely created panic at toy companies the world over as they try to replicate Ganz’s success.

“They’ve taken some of the successful elements of Cabbage Patch Kids and Neopets [a virtual world where users play games and “raise” digital pets] to create something new that blurs the lines between physical toys and digital content,” says Anita Frazier, a toy analyst with NPD Group of New York.

“Toy manufacturers continually attempt to appeal to today’s children. What better way to engage them than by appealing to their interest in interactive, digital products?”

Susan McDonald knows all about Webkinz. Her two daughters — along with kids across North America — are fanatical about the toys, which come in roughly 40 models and retail for about $13. Ten-year-old Sarah has five. Emily, who is 6, bought her first, an elephant named Webster, a few months ago, after her best friend got one.

The girls spend about an hour a day in Webkinz World, playing games, caring for their pets and even chatting with friends. “They could probably go two hours, if it weren’t for homework, piano lessons and dance class,” says Ms. McDonald, who recently spent days scouring Toronto toy stores in search of Webkinz to reward her daughters for great report cards. Mastermind, a Toronto-based chain of 10 toy stores, can barely keep Webkinz on the shelves. Co-owner Jon Levy thought nothing would ever top Beanie Babies — what he calls “the Big Kahuna” of the toy business. “It was a once-in-an-industry phenomenon,” says Mr. Levy, who started Mastermind with his brother, Andy, in 1984.

Then along came Webkinz. “When we first got Webkinz in about two years ago, they started selling as well as bestsellers like Tamagotchi, and we thought, ‘Oh boy, isn’t this a nice ride,’ ” Mr. Levy says. “And then sales doubled. Then they double-doubled. Then they double-double-doubled. I was blown away.”

Webkinz.com had 2.85 million unique visitors in February and more than 72 million page views, according to Nielsen/NetRatings. (In comparison, MySpace had well over 50 million users and more than 25 billion page views.) Not bad for a company that relies on word-of-mouth advertising generated by elementary-school kids, and hundreds of websites dedicated to Webkinz news and rumours.

Ganz was started in 1950, when Samuel Ganz signed a distribution deal for a doll he had spotted in New York. He became a legend in the toy business, sourcing products from Asia decades before any of his competitors. The business is now run by Samuel’s grandson, Howard. (Much like Beanie Babies creator Ty Warner, he doesn’t speak to the media.) Mr. Ganz was strictly old-school until mid-2005, when it launched Webkinz. “It’s not a plush toy that as an afterthought got a website, or a website that made us think, maybe there should be a plush,” says the company’s communications director Susan McVeigh. “They were developed in tandem.”

Inside Webkinz World, each pet starts off with its own bedroom, plus some Kinzcash to spend at the W Shop, where users can buy food and clothing for their avatar, plus furniture, accessories, games, and craft and recipe books to decorate their room. There’s also a “safe” chat function that allows the site’s young visitors to talk to each other with a list of 900 or so canned phrases.

Visitors can build up Kinzcash by playing scores of educational games in the Webkinz arcade, answering trivia questions or even getting a job through the employment agency, as a hamburger cook, fence painter or assistant floor installer.

While the graphics are low-tech and often slow to load, the sheer depth of activities in Webkinz World keeps kids coming back — and pestering their parents to buy them more pets so they can expand their virtual brood. The last time Ganz divulged any numbers, some time last year, 1.8 million pets had been registered on the Webkinz site, putting sales of the toys at around $23-million. But Ms. McVeigh admits the virtual world has grown substantially since then.

There’s also a healthy trade in Webkinz online — eBay lists thousands of rare and discontinued models, some for more than $100. A dog and cat set recently sold for more than $1,500 (U.S.).

Ganz sells only to specialty retailers, so you won’t find Webkinz at Wal-Mart or Toys “R” Us. “We have an established network of retailers that our sales force deals with,” Ms. McVeigh says.

The product has won a slew of awards from parenting and toy groups in both Canada and the United States. The Canadian Toy Testing Council, a non-profit group with more than 1,000 young toy testers on its roster, named Webkinz one of the top 10 toys of 2006. If you believe Mr. Levy, Ganz has changed the toy industry forever. It’s just a matter of time, he says, before other companies start launching their own crossover toys with a cyber element. But Ganz is “the godfather of this,” Mr. Levy says. “They are visionaries.”

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