Zwinky is now expanding the service to their users pocketbooks, or rather those of their parents. The site is now letting users purchase batches of “Zbucks”, their virtual curency, instead of having to earn them. They join a growing group of other tween sites with paid virtual economies as well (Club Penguin, Habbo Hotel, Gaia). Users can purchase them using PayPal or credit card at a rate of about $10 for 2,000 Zbucks. With the Zbucks, users will be able to purchase their own avatar accessories or furnish their virtual rooms in Zwinktopia. Zwinky is not only making money from the Zbucks, but also through sponsorships and sales made through the virtual goods.

So far users have spent over 500 million free “Zbucks” on the site since launch. There’s no telling how strong the uptake of the new paid currency will be, but other services have shown a clear market for virtual goods. The passion around World of Warcraft drove a black market for virtual gold. SecondLife has also driven a paid virtual economy. While virtual goods seem hokey for outsiders, startups that create a meaningful environment find their customers willing to pay to save time earning currency or get at exclusive items.

Until today, IAC’s Zwinky was a site to make customized avatars, choosing from 10,000 different outfits, accesories and other items, and embed them onto other websites such as MySpace. Users could also become friends with other users and enage in basic social networking activities. See Stardoll as well in this space.

Most of the functionality at Zwinky is accessed via a non-mandatory browser toolbar that users install. Zwinky says that they have 20 million active toolbars that were used in March 2007. Part of Zwinky’s business model is to collect search advertising revenues from toolbar usage.

Today Zwinky will add a virtual world to the site called Zwinktopia – users can use their avatars to roam around the world, chat with other users and engage in activities to earn Zbucks, the virtual currency of Zwinktopia. Zbucks can be used to buy virtual clothing and other goods.

Zwinky is part of the Fun Webs group at IAC, which includes Smiley Central, Cursor Mania and other sites and generates over $100 million in annual revenues. The Fun Webs group is part of the Consumer Applications and Portals group (iWon and Excite are within this group) and is led by Scott Garell.

Zwinky alone has 4.7 million worldwide unique visitors in March (Comscore), far more than Second Life and the other competitors listed in the first paragraph above. If a reasonable number of them can be converted into exploring Zwinktopia, it will become the largest immersive world outside of the gaming sites like World of Warcraft. See Comscore comparision data below (U.S. only).

See GigaOm’s recent article on Gaia, which is probably closest to Zwinktopia in functionality.

Update: The company will be running the television ad promoting Zwinktopia embedded below on NBC on Monday.

http://video.google.com/googleplayer.swf?docId=-4628271642650138617&hl=en