Virtual worlds and big tobacco hold one strategy in common: hook 'em young. It's estimated some 20 million kids will congregate in virtual playgrounds by 2011. To capitalize on their addiction, a growing percentage of virtual architects are focusing on kiddie fare modeled after Webkinz and Club Penguin. Disney, Warner Bros., Viacom's Nickelodeon, as well as Lego, Mattel, and Hasbro are milking cartoon and toy franchises for the stuff of kids' virtual dreams. Disney's launching Pixie Hollow, a fairy-themed world, in time for the release of Tinker Bell this fall. Disney, we have the perfect beta tester for you.

David Puttnam, a member of Britain's House of Lords, said virtual worlds targeted at children are doing little more than to make them "think of themselves as not that much more than consumers," during his keynote at the Virtual Worlds Forum. Too many of them are backed by product-hawking companies like Viacom's Nickelodeon or Time Warner's Warner Bros. Instead of being fantasy playscapes that also instill an overwhelming urge to run out and buy Teletubbies plushies, they should be encouraging children to "exercise those same values and skills we wish to see them exercise in the real world." No more orgies in Club Penguin, then. We can top Puttnam's suggestion: How about encouraging them to stay in the real world and exercise, period?

If word on the playground is to be believed, Disney spent $350 million (or maybe twice that) on Club Penguin, a fad fading faster than hypercolor. Apparently children are fickle beasts, happy to glom onto the newest igloo-decorating simulator. Penguins have fallen out of favor, according to our preteen correspondents. "Do you use Club Penguin anymore?" asked one 8-year-old. The response: "No, it's too old school." At least they're learning to cynically identify fads when they're young.

How much would you pay for a viral-video site which some have charged with stealing clips? Depends on who you ask. eBaum's World has just sold for $15 million. Or is it $17 million? Or $67.5 million? HandHeld Entertainment, the San Francisco-based developer of the ZVUE portable media player, has agreed to shell out $15 million in cash and $2.5 million in stock for the Rochester, N.Y.-based website. The rest will come over the next three years, if eBaum's World meets traffic targets and other conditions. The conditional nature of the deal reflects the buyer's shaky finances — and also, a growing hesitancy to splash cash on websites with uncertain futures.

Forget Second Life. It turns out that kids, not adults, are the ones whose virtual worlds translate into real bucks. On Wednesday, Disney bought New Horizon Interactive's Club Penguin, a website where kids pretend to be penguins and decorate digital igloos. The price tag for putting mouse ears on the penguins? $350 million, and Disney's willing to double that if Club Penguin hits earnings goals in 2008 and 2009. Unlike the wasted budgets of corporate marketers setting up empty shops in Second Life, Disney's money seems well spent. Here's why.