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They could put small ads on the site, and ads in the non-paying accounts somehow (maybe back in the pm windows). They just can't get good advertising (from actually talking with companies) because of where they are located.
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Well, the only reason Neopets players click 'em is because they get paid to do so in Neopoints.
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Neopets is far from single player.. there is a battledome, and chats, and if you want to do anything, you have to interact with other people. (buying from users shops, trading items with users, using the auctions, etc)
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I've played it for a few months, yet I've never gained a friend from it or whatever. The names at the top of shop windows might as well not be there, because you don't care who you're buying from/selling to. There's no sense of community.
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I dunno, there's plenty of ways to make money from advertising. Obviously if neopets is able to buy all that stuff, pay staff, have merchandise, etc, then advertising can't be that measily.
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They probably don't have to pay as much for servers, either. Communicating via a website is far less bandwidth-intensive than a constant-connection game.