A Canadian startup called Club Penguin attracted 25,000 kids in its first month to a virtual world where they could "dance," chat and play games -- all while being represented by a penguin avatar. Parents signed their kids up in droves, attracted by strict protocols that banned stalkers, swearing and even ads. Just two years later, Club Penguin boasted 700,000 paid subscribers and 12 million registered users, prompting Disney to pay $350 million for the company.

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