Sticker shock is a temporary malady. I say this because I, too, was left scratching my head after hearing that Disney (NYSE:DIS) will be paying as much as $700 million for Club Penguin. After all, the social-networking site for kids watches over just 700,000 premium subscribers who pay as much as $5.95 a month to live out a virtual life as an animated, waddling penguin.

$1,000 per fickle kid? That's a pretty steep ransom. Keep in mind that Sirius (NASDAQ:SIRI) is often tagged as overvalued because its 7.1 million subscribers are priced at roughly $750 apiece based on the satellite radio star's enterprise value. That's high, and Sirius members pay twice as much for their monthly programming fix.

However, then you hear Disney saying that the deal will add to earnings in the first year. Is Club Penguin a good deal, or is the family-entertainment giant trading at such a rich price-to-earnings multiple that nearly any purchase would help enhance earnings per share?

Don't bank on the latter. Disney is trading at 16 times fiscal 2008 Wall Street estimates. Because it is paying $350 million up front for Club Penguin -- the other half can kick in if certain financial incentives are met over the next two years -- adding to earnings means that Club Penguin is expected to earn at least $22 million in its first year.

In other words, Disney is saying that it's paying less than 16 times forward earnings for Club Penguin. You won't hear Disney say it as such. Right now, the company is mum about Club Penguin's financials, other than to say that it will add to Disney's bottom line and it's a high-margin business.

No kidding. During last night's conference call, company officials indicated that they're basing the projections on Club Penguin as it is now, without any of Disney's growth initiatives kicking in to potentially enhance results.

So go ahead and do the math. The site has 700,000 subscribers paying about $60 a year. That's an annual run rate of $42 million. The company also sells branded clothing, toys, and key chains, though that shouldn't amount to much. The site has 12 million registered users, but its ad-free environment limits the monetization power over freeloaders.

Are we really supposed to believe that Club Penguin is posting better than 40% in net profit margins? After tax?

Believe it.

You blew it again, Sony
Three months ago, the weblog TechCrunch wrote about Club Penguin's buyout chatter. It had Sony (NYSE:SNE) snapping up the site for "at least" $500 million. The article said that Club Penguin was projected to earn $35 million on $65 million in revenue in 2007.

So there you have the jaw-dropping margins. The higher top-line target comes from the heady growth at Club Penguin. This was a site that didn't even exist until 22 months ago. Recent growth has been explosive, especially on the premium subscriber side. There were 400,000 premium members when the year started. We're just seven months into 2007 and we're now looking at 700,000 kids handing over their allowances.

The $35 million profit cited in the blog entry is intriguing, though. Why would a booming site like Club Penguin sell itself for just 10 to 20 times earnings? Is it the allure of Disney or the footsteps behind it that are guiding the sale?

Footsteps in ballerina slippers
There are a lot of sites similar to Club Penguin sprouting this year, most of them aimed at young girls. Disney launched back in January and has amassed 2.5 million kids living it up in Tinker Bell's world. Mattel's (NYSE:MAT) Barbie has attracted 3 million registrations in two months at, without much of a marketing push. MGA launched a similar online experience for Bratz -- Be-Bratz -- on Wednesday. Even IAC/InterActiveCorp (NASDAQ:IACI) is in on the fun with Zwinktopia.

Throw in other established avatar-fueled communities such as Gaia Online, Habbo Hotel, and Viacom's (NYSE:VIA) Neopets, and the temptation to cash out before market share gets doled out in smaller slices is understandable.

Disney doesn't see the same risk. It already has plans to translate the site for foreign-language markets. The company also envisions opportunities with cable programming, theme park attractions, and video game development.

An analyst during the conference call suggested expanding the brand to other Disney characters like Club Mickey or Club Pooh, but here is where a bunch of MBAs shooting the breeze in a conference room could be dangerous.

Disney has to be careful here. Kids who have opted for Club Penguin over Disney's own Toontown Online, Virtual Magic Kingdom, Disney Fairies, or the upcoming virtual Pirates communities may have done so to escape the crass commercialization of a media giant.

Club Penguin is not Disney. "By remaining ad-free, we can provide our users a safe haven from marketing," says the company's guide for parents. The company also donates a good chunk of its profits to charity.

A lot of that will change. No, you'll never see virtual penguins lining up for Disneyland's Matterhorn or Animal Kingdom's Expedition Everest roller coasters. Rock n' Roller Coaster stars Aerosmith won't be belting out "Waddle This Way." However, just as Disney's Baby Einstein purchase six years ago eventually inspired the Little Einsteins cartoon series, Disney won't sit still with its latest acquisition.

It had just better be careful not to alienate the playful penguin population. Too much Disneyfication, and it risks hearing a chorus of "farewell and thanks for all the fish" from penguins migrating to better climates elsewhere. 

Waddle through these Disney classics:

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Longtime Fool contributor Rick Munarriz has seen too many animated feature films with penguins lately. He does own shares in Disney. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.