Gaga for Gaia

From left, Gaia CEO Craig Sherman, with co-founders Derek Liu and Charles Park, who created the online-gaming and virtual website in 2003.

Image: Vicki Thompson

Casual game and virtual-world site Gaia Interactive believes it has found a solution to the challenge of serving tech-savvy young people online ads—make the ads an integrated part of the user experience.

The Milpitas, California, company, which is venture backed with $30 million from Benchmark Capital, Redpoint Ventures, Institutional Venture Partners, Time Warner, and Sony, aims at users age 13 to 25

CEO Craig Sherman said the site does about $1 million a month in user-generated digital-item sales. This accounts for 60 percent of the company’s revenue.

Yet a sizable portion of the items and activities available on the site originate with corporate sponsors—essentially paid advertising.

Nike, for example, ran a promotion in which users could purchase digital Nike sneakers that make their avatar run faster. In other cases, it means creating interactive environments. Toyota Motor ran a popular campaign that let users purchase customizable Scions that they could race on a special track.

Chris Davis, senior vice president of sales for Gaia, said that the most successful campaigns are the ones that involve multiple interactive elements.

Davis, formerly head of sales for the social-gaming site Neopets, said that’s an unusual level of commitment in this industry, but it pays dividends in terms of user engagement. Gaia Online has the highest average visit time of any social-networking site—34 minutes and 54 seconds, according to Experian Hitwise, a market research firm.

And while some analysts warn about the risks of marketing in the virtual-world space, Davis says, “agencies and marketers are demanding a lot more. There are very limited things you can do on most sites, and it seems most marketers want something that’s way beyond standard display media now. I feel we’re very well equipped to handle that demand.”

For more on Gaia's initiatives, click here for the full story from the Silicon Valley/San Jose Business Journal (subscription required).