Club Penguin, the children’s virtual world, has been acquired by Disney in a deal worth up to $700m (£344.5m).

The media giant will pay $350m upfront for the fast growing site - which had reportedly been a $500m target for Sony.

It’s easy to see why Disney would be interested in Club Penguin – having launched in 2005, the British Colombia-based company has experienced massive growth. Its traffic has grown by 329% over the past year, and the site now has around 12m users worldwide. It is one of the fastest growing online websites for children.

In addition, Club Penguin’s family-friendly approach – chats are monitored and conversations between members are filtered – fits in well with Disney’s company values.

Club Penguin doesn’t allow advertising on its site, and instead makes money by charging subscribers $5.99 per month. The site says it has 700,000 subscribers.

Club Penguin

Club Penguin users each have their own animated penguin avatars, which live in a virtual polar world. They can earn points by playing games together; using the money to buy clothes, accessories and furniture to put in their virtual igloos.

Club Penguin’s three founders, Lane Merrifield, Dave Krysko and Lance Priebe, will join Disney and remain in the management team, with the intention of using Disney’s resources to expand the site’s user base beyond the US, Canada and the UK.

Children’s virtual worlds are becoming big business - Webkinz, another such site, attracts around 4m users a month in the US, while Nickelodeon recently said it would increase its investment in online games for kids, with a focus on virtual worlds.