Hybrid models of online games and toys are getting fashionable. Yesterday, Mind Candy announced that its Moshi Monsters online game characters are now moving into the real world in the form of toys.

Michael Smith, chief executive England-based Mind Candy, said in an interview that more than 32 million kids have registered to play Moshi Monsters since the company launched the online game in 2008.

Akin to Pokemon, Moshi Monsters are cute and collectible monsters that children can adopt as pets. They’re targeted at youngsters ages 7 to 12. The phenomenon has grown so big that Mind Candy decided to authorize a line of toys to be launched later this year.

Other hybrid online-toy companies include FunGoPlay, which was announced on Monday. Rovio, maker of the popular mobile game Angry Birds, has also launched a line of toys based on the bird and pig characters in its games. That’s good for branding, but it’s usually not a huge contributor to the bottom line. Eventually, though, the most popular franchises can be turned into TV shows or movies, which are more lucrative.

With Moshi Monsters, Mind Candy has had its hands full. But it’s actually the company’s second business effort. The first one was Perplex City, an alternate reality game that combined trading cards and online puzzles. It turned out to be a failure. So Mind Candy “pivoted,” (like Jason Calacanis talked about in shifting Mahalo into a new business) into a new business.

Check out our video interview with Smith, who attended the Digital Life Design conference in Munich.  

Disclosure: The Digital Life Design conference paid my way to Munich so I could moderate a panel. Our coverage of the conference remains objective and independent.