Trending: How Moshi Monsters ate the world

Moshi Monsters started life as virtual characters on a children's website but now they're taking over the real world, thanks to toys, stickers – and now their own album

There's a good chance you don't know what Moshlings are, or that their ranks include a singer and member of the Moptop Tweenybops species called Dustbin Beaver. But if you're eight years old, or the pestered parent of a pre-teen, you'll know all of this, and that Moshi Monsters, a social-networking and gaming franchise for children, has become a virtual empire whose legions of Moshlings have colonised toy shops – and have now launched an assault on the music charts.

At the Oxford Street branch of HMV in London yesterday, hundreds of children dragged their parents to the release of Moshi Monsters: Music Rox!, the monsters' first album.

They brandished books, sticker albums and Moshling figures, hoping to get them signed by Zack Binspin, an actor in a furry suit (and, in Moshi world, a friend of Dustbin's), who performed his single "Moptop Tweenybop (My Hair's Too Long)".

The popularity of Moshi Monsters is startling. The franchise was founded in east London in 2007 by Michael Acton Smith, chief executive of Mind Candy. Today, in 150 countries, more than 60 million children, mostly aged between seven and 12, log on to the Moshi Monsters website. They play games, chat with each other, solve puzzles and buy merchandise.

The new album was available to pre-order on Amazon from 5 March and has remained in its top five since, beating Madonna in pre-sales in its first week. Figures collected by toy industry analysts, NPD, show the Moshi licence is second in sales only to Star Wars, ahead of the Hello Kitty and Thomas the Tank Engine franchises. Three of the five top-selling toys bear the Moshi name and sales in 2011 were worth £22m. Mind Candy is valued at £125m, while Acton Smith has been called "Walt Disney 2.0". But Moshi's dominance in toy shops is only part of the Moshi story.

Acton Smith, 37, made his name by co-founding Firebox.com, which sells novelty gifts including a shot-glass chess set. With his monsters, he has not only cracked an immeasurably lucrative pre-teen market, but has also bridged the gap between the online and offline worlds in a way that giants such as Disney have arguably failed to do. Moreover, Moshi has done this with the complicity of parents, who might ordinarily resist a social network designed for children. "Lots of web companies have learned that the teen market is not as lucrative as they'd thought," says Mike Butcher, the European editor of the technology news site, TechCrunch. "But school-age kids with access to their parents credit cards are, and Moshi has been very clever to exploit the franchise potential with toymakers, who have traditionally moved very slowly into the online world."

Peter Jenkins is chief executive of Toyology, a toy-industry news site, and father of two Moshling fans. "Moshi appeals to children because it lets them feel as if they are in control of their own environment," he says in a break from watching the animation The Pirates! at the cinema with his daughters. "It has brought together strands of licensing from toys and games to create a world kids become deeply enveloped in. And, as a parent, I have never had an issue with anything I've seen on the site." Moshi's only brush with controversay came last October. Lady Gaga won an injunction at the High Court to stop a Moshling called Lady Goo Goo releasing a track called "The Moshi Dance". Goo Goo, a parody of pop singer Gaga, was silenced and neither she nor Beaver (inspired by Justin Bieber) appears on the new album. A spokesperson for Mind Candy said discussions with Lady Gaga's lawyers were ongoing, adding: "The team thought it would be best to steer clear [of Goo Goo and Beaver] for the debut album."

Nancy Donaldson is 10 and loves Moshi Monsters. "I don't really know why, it's just a really big thing in my class," she says from her home in London. "I have lots of figures and nearly all of the cards and I go on the website about three times a week to do missions and chat to my friends." Nancy says she plans to suggest quietly that her dad, Nick, buys the new album. "We'll see," Nick says.