The kiddies, anecdotally, are migrating to the newest form of virtual world crack, WebKinz. No doubt this, too, will be a fleeting obsession. Eventually kids leave PlaySkool behind for more serious toys, like MTV's Virtual Laguna Beach. The larger problem is that no one is developing kid-friendly worlds that contain anything to promote long-term interest. Until they do, they'll flash in and out of vogue faster than playground taunts.

HandHeld is borrowing $24 million, largely to finance the eBaum's deal. That leaves it with $9 million — not enough to pay eBaum's the extra $15 million it's owed under the earnout deal. That means that eBaum's $67.5 million isn't just conditional on its traffic — it's conditional on HandHeld's ability to raise money.

No matter. The takeaway from this deal is that buyers, for a host of reasons, are paying for performance when buying interactive properties. Either they're shelling out modest amounts, as Discovery did for the TreeHugger green blog, or they're placing conditions even on the most promising acquisitions, as Disney did in holding back half of its $700 million payout for Club Penguin. That's a clear sign, that despite the blog-business hype, it's still a buyer's market.

Club Penguin eschews advertising; instead, it's supported by a base of 700,000 subscribers who pay $5.95 a month for the right to decorate an "igloo" — a penguin character's virtual home. (Anyone can play for free if they can pass up an igloo — but what parent would deny their child a toy everyone else has?) Traffic to the virtual world has increased 329 percent since June 2006. Linden Lab, the creator of Second Life, claimes to make money by issuing virtual currency and collecting property taxes on digital real estate, wins praise from economists enamored with the abstraction of its virtual economy. But Club Penguin, which plays on feelings of parental love, guilt, and competitiveness, ought to be a more worthy subject of study.

Club Penguin's founders explain that selling out will help fuel the site's global expansion, a Disney specialty. But it's also an acknowledgement of increasing competition.

Disney have to contend with Viacom, a familiar media competitor which owns Neopets as well as the growing Nickelodeon online empire. But there are also a growing contingent of free communities, like the kid-centric Whirled, soon to be launched by San Francisco online-game designer Three Rings. Whirled forgoes subscription fees, instead making money through virtual item purchases, a business model that has worked well for Korea's Cyworld. Club Penguin is collecting its six-buck allowance from parents for now. But what happens when the kids start begging for a new toy?