The free-to-join site subsequently became Habbo Hotel, named by its owner, Sulake, for the “rooms” its users can decorate and use as their home base, before more recently shedding the hotel to rebrand simply as Habbo to clarify its position as a go-to community for teens in 31 countries on six continents.

More than 90% of Habbo users are 13-18, with a roughly even gender split that’s slightly more male-skewing. Its teen users create avatars (dubbed Habbos) to interact with each other and with brand advertisers. They can hang out in public spaces, participate in virtual events, decorate their rooms and trade in virtual gifts, all of which may be branded.

For an example of how Habbo leverages its own brand and trust with teens to partner with other brands, look no further than last November’s launch of the biggest media sensation in recent teen history, The Twilight Saga: New Moon. Fans of Bella, Edward and the rest of the vampiric franchise could decorate their rooms with Twilight-themed virtual goods such as the Volturi crest.

In a similar vein, last year Habbo partnered with American Idol around sponsored in-game merchandising and customizable branded engagement. Sponsors could sign on for event signage, green rooms and virtual goods within the Habbo universe, pegged to Idol's eighth season launch.

Seventeen magazine also promoted its content through sponsoring a free virtual beauty salon to appeal to girls who found Habbo a cool place to socialize with their friends when school was out last summer.

Habbo also offers brands the opportunity to poll its members, such as its recent look at teen fashion consumption patterns. More than 60,000 users responded around the world, with a global ranking of Nike, Adidas and Puma as their top three fashion brands, with Lady Gaga the teens’ #1 fashion icon.

American girls listed their favorite brands as Adidas, H&M and Nike, while boys in the U.S. were split between Hollister and Aeropostale as their top brands, with American Eagle their #2 fashion brand.

How does Habbo know that teens connect with brands? A survey conducted in January polled more than 5,000 of its tween and teen users in the US, UK, Canada, Singapore and Australia to find out what they thought about branding in “their” digital hangout. Is it less cool than mom and dad picking them up from a party or friending them on Facebook?

Turns out the teens were more open to brands in Habbo than on Facebook or MySpace. Almost twice as many of them were willing to connect with brands in Habbo than on those social networks, and expressed willingness to associate with brands so long as they were deemed to be relevant and engaging.

Interestingly, 92% of the respondents were willing to take part in branded events and contests, with some 40% willing to produce content in tandem with these brand-related activities. Habbo says that’s almost double the amount of adults willing to engage in similar brand-related behavior. There was also a brand halo effect with 93% of the kids surveyed wearing virtual branded items “long” after a campaign had ended.

Phil Guest, EVP of global ad sales for Habbo, calls the community more of a mall environment than a schoolyard, in the sense that it’s a parent-free zone for kids to hang out and goof off with their friends.

That said, Guest says that Habbo is a safe place for its users and for brands to interact. Aware of parents and companies’ concerns about privacy and safety on social networks, particularly ones aimed at kids, he notes the series of controls and filters that empower users to create their own Habbo experience and block any users or situations that might make them uncomfortable.

It’s a brave new virtual world, to be sure, but one that kids are defining and figuring out ahead of their parents. The fact that brands can tag along and figure out the digital space too is cool with Habbo’s members, it seems, too.

Shirley Brady is Editor-in-Chief of brandchannel and Interbrand's Editorial Director.