IMVU Inc., a 3D social network, has grown virally to 20 million registered users based on a unique feature: user-generated virtual goods.

Users of the service can buy clothing, accessories, virtual rooms and items to trick out these virtual rooms, as a supplement to avatar-based "chats" users can engage in.

The company enables users to create their own items and sell them to other users for IMVU Credits credits. People can purchase the credits from IMVU. The creators of the items, in turn, can exchange the credits from the items they sell for real dollars. There are now more than 1.5 million such items in IMVU's catalog.

Just now coming out of stealth after about four years, the Palo Alto, Calif.-based company, which targets young adults aged 18 to 24, raised $11 million in Series C funding led by Bridgescale Partners in April 2007. In October 2005, the company raised an $8 million Series B led by Menlo Ventures and Allegis Capital.

IMVU Credits now generates more than $1 million per month in revenue, and more than 90% of that comes from virtual credits, the balance coming from advertising. The company has not focused heavily on advertising yet, but it will eventually have deals such as branded promotions, said Cary Rosenzweig, chief executive of IMVU Credits.

The company is not yet profitable, but that is only because it has chosen to invest in new functionality, Rosenzweig said.

The service is designed to emphasize self expression. "It's just like in real life, you have fun saying, 'What am I going to wear today? How do I want express myself?'" Rosenzweig said.

There are a number of interest groups around areas such as anime, goth, Latino, moms, and gay and lesbian interests. The virtual rooms can be anything from a flying carpet to an underwater environment.

Virtual goods have become a popular way for social networks and virtual worlds to generate revenue without charging a monthly subscription fee. Companies such as Gaia Online and China's Tencent Holdings Ltd. are just two companies that have used this model.

IMVU Credits monitors the virtual and real economy on its service as a kind of virtual Ben Bernanke, Rosenzweig said.

"What we look for is signs of inflation, and pricing on items in the catalog," Rosenzweig said. "It's completely up to the creator what they want to charge. We don't control that. We also look at pricing on secondary markets for credits."

IMVU Credits can then control money flow into and out of the system as necessary.