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The line between games and entertainment has been blurring for years. Deciding on a definition is a job for academics; getting something created and into the hands of consumers is the focus for business. The creators of Moshi Monsters, the amazing popular online entertainment site for kids under 13. GamesIndustry International caught up with CEO Michael Acton Smith of Mind Candy, creators of Moshi Monsters, to talk about the strategy that drove the game's success.

Moshi Monsters grew out of Smith's desire to build something for kids. 'I felt there was a huge opportunity to create amazing entertainment for kids,' said Smith. 'I'd seen how much they loved technology, and how comfortable they were with the web. I thought the Internet was going to be the next amazing canvas to create wonderful entertainment for kids, in the way Disney had done it for animated movies, and Henson had done it with TV, and Pixar have done it with digital movies.'

The question was what sort of product to build. 'I knew how much kids loved nurturing, whether it was Tamagotchi or Furby, or even the Pet Rock back in the 70's, I thought that would be a smart place to try and build something new' Smith explained. Mind Candy started development in 2007, and Moshi Monsters was the result of that effort.

Moshi Monsters was not, initially, a hit, as Smith tells the story. 'We launched Moshi Monsters in 2008, and it took a long time for them to take off. It was about a year and a half of not much going on. We were scratching our heads, and adding new features, just kind of wondering what we had to do. Eventually in the summer of 2009 it just took off like crazy and started adding one new signup every second, and now we're about 70 million registered users around the world.'

'In the UK, one in two children have adopted a Moshi Monster, and it's currently the number one toy brand in the UK market'

Michael Acton Smith

Mind Candy had the persistence to hang in there when Moshi Monsters wasn't catching on. A year and half is a long time to wait for a product to really become popular; many companies would have given up much earlier. 'One of the reasons why I love building online games or any kind of online entertainment is that you can look at the data,' Smith said. 'You can tweak and iterate and polish to try and find something that the audience actually wants, rather than what you think they want.'

What was it that caused Moshi Monsters to finally take off? 'It was basically a year and a half of experimenting and being very agile and trying different things, and I think that the key set of features were social features,' noted Smith. 'We realized that kids love to share and show off and communicate with their friends just as much as grown-ups do, and if we could build safe tools that would allow them to do that we would potentially build something huge. Those features really helped the game accelerate, and kids really enjoyed Moshi much more when they could be social.'

The revenue stream from Moshi Monsters initially came primarily from subscriptions. 'About half our revenue comes from digital subscriptions; parents pay about $6 a month for their children to get access to new parts of the world,' Smith said. Moshi Monsters, unlike many other online games, does not offer virtual goods for sale. 'We felt with the kid's space, particularly under 13s, it would be smarter to have a subscription service, which parents seem to feel more comfortable with,' Smith noted.

Subscriptions account for half of the revenue, and physical goods make up the rest. 'About two years ago we realized that, given how strong the characters were, and how rich the universe was, maybe we could expand it offline,' explained Smith. 'So we did a book deal with Penguin, then we made some trading cards, and a magazine, and have now signed about 130 different licensing deals. About a quarter of a billion dollars worth of Moshi Monsters products have been sold now over those last two years.'

Mind Candy recently closed a deal with McDonald's, and Moshi Monsters have been appearing in Happy Meals - a touchstone of popular culture success. 'We're very excited about that.' Smith said. 'It's taken a long time to negotiate. McDonald's is obviously a massive brand, and we think this is wonderful. Moshi Monsters is still a growing brand in the US, and this we believe will really help accelerate our growth. We hope kids love the Moshi toys they'll get with the Happy Meals.' Kids are actually getting physical toys, not just a code for something they can get online. 'There's a couple of elements to it,' Smith explained. 'There are physical toys that kids will get, which are different characters from the world, but they will also get a code that allows them a few day's membership within the Moshi world. There's a few puzzles and a few other little bits and bobs, but it's part digital and part offline.'

Moshi Monster Sign In

Why No More Moshi Monsters

'I think the biggest opportunity in the kid's space is the tablet'

Michael Acton Smith

Moshi Monsters Closing Down Why You Tube

Doing a kid's title, especially for kids under 13, brings special issues to the forefront. 'It's obviously a huge responsibility to run an entertainment company that's in the children's space, and we take that responsibility very seriously,' said Smith. 'We hired the very best head of safety and community that we could find. We have software that monitors all the messaging and social activity that goes on in the site, and secondly, human moderators. Everything on the site can be flagged so we can investigate. The way we describe it to parents is 'It's like a walled garden.' Parents know their children love the Web, but they don't want them to run freely on sites like Youtube or Facebook or elsewhere. On a site like Moshi they feel much more comfortable with it because it's deliberately designed to be non-threatening.'

Since Mind Candy began Moshi Monsters in the UK, it's only natural that's where the audience is largest. 'The UK is our biggest market, and the US is very close to it,' said Smith. 'I think we have about 20 million registered users in the US market, but the engagement levels aren't as high as they are in the UK, the paid subscription site is not as big. We're really focusing on 2013 to expand Moshi in the US, to let parents know about it. It hasn't become the phenomenon it has in the UK, where one in two children have adopted a Moshi Monster, and it's currently the number one toy brand in the UK market, ahead of Barbie, Star Wars, Lego, and a whole host of other major brands.'

Moshi Monsters Closing Down Why You Know

Other markets are also on Mind Candy's radar. 'We think the Far East is very important; we signed a deal with Gree recently, so that will help us grow in that part of the world,' Smith said. 'We recently launched a Spanish version of Moshi to help our growth in Latin America, and we'll be launching other territories in the future as well.'

Moshi Monsters Closing Down Why You Go

Mind Candy also sees the transition to mobile as an important area for the future. 'We are managing the shift from the desktop to tablet play, which is an enormously fast-growing area which kids absolutely love,' said Smith. 'We created a few smartphone apps, but I think the biggest opportunity in the kid's space is the tablet. I think that is going to be the dominant entertainment device for children over the next few years. Not just playing games and watching movies and listening to music, but educational as well. It's just so intuitive and magical and fun for children. As the price begins to come down, and Android devices come out with all sorts of different price points and sizes, the market is just going to continue to explode.'

Mind Candy has big plans for the future. 'We've got a lot of new games in development beyond Moshi Monsters, so we are hiring as quickly as we can ; we're staffing up our San Francisco office at the moment,' noted Smith. Kids will not be the only target for Mind Candy, Smith says. 'The way we are looking at it is family entertainment, so we will be building products for other audiences, but it will all be fun, family-friendly entertainment.'