Celebrity Stock: Social Gaming Company Salad Labs is All About Buzz.

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And you thought the stock market was volatile.

Last week, when news broke that Jessica Simpson had given birth to a baby girl her “stock” on celebrity gossip social gaming site Pop Salad more than quadrupled to $200,000. But, alas, celebrity gossip is a volatile market. This week Simpson is trading for less than $5,000.

Pop Salad is the debut product of Seattle-based Salad Labs, an eight-person company founded in early 2011 with goal of creating a social gaming platform based on buzz. The whole purpose of the game is to buy low, when a celebrity isn’t getting a lot of press, and sell high, when he or she is suddenly in the news. “It’s a new way for users to reflect back on all the media they already take in,” says Salad Labs vice president of marketing Sasha Pasulka. The site also lets users build customized newsfeeds for any celebrities they’d like to follow, whether they own them or not.

After seeing the popularity of fantasy football games, Salad Labs co-founders Brad Coulter and Rhet Behler wanted to take that concept to a different market, namely women – who tend to spend more time on social media and gaming. While this game focuses on celebrities, the company says the technology can ultimately be used to create games revolving around other topics, such as politics, any number of sports, or even publicly traded companies. “We’re building the platform in such a way that we can release games in different verticals in a number of weeks,” says Pasulka.

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The company launched the beta version of Pop Salad in December and plans to start aggressively acquiring users this summer. Meanwhile, it’s in the process of raising $1.1 million in seed capital and looking to roll a political version of the game in conjunction with the Republican Convention in late August.

In the case of Pop Salad, the company trolls roughly 100 media outlets and blogs about every 15 minutes and assigns a value to celebrities based on buzz, with different weightings depending on the quality of the source and the celebrity’s prominence in the story. A cover story in People, for example, is worth more than a quick mention on Twitter.

“The highest prices on Pop Salad are driven by death, pregnancy, divorce, marriage and bikini pictures,” says Pasulka, a former software engineer for Northrop Grumman who started Evil Beet Gossip in 2006 and had more than 10 million unique visitors a month by the time she sold the site in 2010.

So while Prince William was recently a steal at about $1,000, his value will no doubt shoot up if Kate Middleton becomes pregnant. When Dick Clark passed away a couple weeks ago Ryan Seacrest’s worth increased eightfold. When Brad Pitt and Angelina Jolie announced their engagement, Jennifer Anniston’s stock went up too.

When users register with Pop Salad they’re given $100,000 in virtual currency, or “cheddar,” and the option to add three different celebrities to their “crew.” The best way for users to build their virtual net worth is to make shrewd buy and sell decisions. If they lose all their cheddar, want to buy celebrities out of their price range, or are looking to improve their virtual status, there’s always the option of turning their real-world dollars into virtual currency. Users can get $50,000 in cheddar for $20 or earn cheddar by taking a survey or shopping with the site’s partners. Those transactions are of course the backbone of Salad Labs’ business model.

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“Of people who play social games the vast majority spend nothing,” says Justin Smith founder of Inside Network, a San Francisco-based research firm that specializes in social networking and gaming. “A ‘whale’ is someone who spends more than $25 a month.” Still, those numbers – and for a product that essentially costs nothing once the game is developed – add up.

In fact, social games represent the largest segment of the U.S. virtual goods market, according Inside Network, which estimates that the market for virtual goods sold within social games will total $1.6 billion in 2012, up from $1.2 billion in 2011 and virtually nothing in five years ago. “Ultimately social games are a cheap form of entertainment,” says Smith, adding that the demographics of social gamers roughly mirror that of social networking.

They’re also addictive. So far, visitors to Pop Salad spend an average of 10 minutes on the site – versus about 5 minutes for TMZ.com and People.com. During the last month, 31% of users visited the site more than 100 times, while 84% of users visited daily.

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