Teen Hangout Gaia Online Gets 11M in Venture Capital

Gaia Online, one of the world's fastest-growing online hangouts for teens, says it has attracted $11 million in a new round of venture funding led by Institutional Venture Partners (IVP).

"Social networks and virtual worlds are constantly evolving as users become more involved and embedded, and at Gaia Online we are focused on bringing 'Gaians' experiences they will not get anywhere else," said Gaia Online Chief Executive Craig Sherman. "With this capital, we are excited to continue to deliver on this mission, while growing and developing new site elements to support the rapidly increasing interest in Gaia Online."

Attractive Demographics

Gaia's announcement is the latest evidence that investors are betting big on virtual worlds. Venture-capital and media firms shelled out more than $345 million to 39 virtual worlds-related companies through the first six months of 2008, according to Virtual Worlds Management.

Investors think Gaia's growing audience of teenage users will attract companies looking for ad branding and virtual marketing opportunities. According to research firm eMarketer, 53 percent of the 34.3 million child and teen Internet users in the U.S. will be participating in virtual worlds on at least a monthly basis by 2011.

"Gaia Online is one of the most exciting companies that we have seen in the online social-community space," said IVP partner Norm Fogelsong. "We feel that Gaia Online is poised for explosive growth."

The online community has already provided MTV, Nike, Paramount Pictures, Sony, Toyota, Warner Bros, and Xbox with new ways to reach teens and young adults. Gaia Online has just announced a new partnership with Virtual Greats, which holds the multiplatform distribution rights for virtual goods associated with pop-culture icons such as Elvis Presley, Justin Timberlake, Paris Hilton, and Snoop Dogg.

"We're always looking for ways to create a deeper, more relevant engagement for our very active community," Sherman said. "Partnering with Virtual Greats enables us to bring our users' favorite real-life celebrities in world for a unique virtual experience."

Breadth of Activity

However, Gaia is more than a virtual Second Life wannabe. Each month more than five million unique users come to the online community to socialize, play games, and watch movies in the site's virtual cinema. "The breadth of activity available on the site and the level of engagement of the users are truly extraordinary," Fogelsong said.

The research group Hitwise reported last April that Gaia online had the highest average visit time among the social-networking Web sites. And the company hopes to further encourage 'Gaians' to extend their online visits through its launch of a massively multiplayer online game later this summer.

Gaia's latest cash infusion comes at a time when the online service is facing competition from a slew of social-networking rivals, including Linden Labs' Teen Second Life as well as Google's new 'Lively' virtual world.

"The creation of a virtual world by the most dominant presence on the Internet validates the concept and suggests it is here to stay," said Gartner analyst Steven Prentice. "Lively slots into the low end of the spectrum of virtual world offerings, between two-dimensional social-networking sites like Facebook and MySpace, and the teenager-oriented social-networking virtual worlds."

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Teen Hangout Gaia Online Gets 11M in Venture Capital