At today's Guardian Changing Media Summit, Lord Puttnam said sites such as Habbo Hotel and Second Life were responsible for bombarding children with brand messages that imparted "little social and educational value."
John Burns, senior director of e-commerce at Electronic Arts Europe, and Justin Boddington, CEO of Rivers Run Red, which owns virtual community site Second Life, defended the services, arguing that children and teens apply social skills learnt online in real life.
Timo Soininen, CEO of Sulake, which owns Habbo Hotel, said: "Visitors to Habbo Hotel earn kudos and friends as rewards for good behaviour."
They added that brands have to interact in a meaningful way to connect with consumers in virtual communities.
Advertising has become a key revenue growth area for services like Habbo, which allow brands to create dedicated areas on the site to attract kids. Guest 'appearances' are also common on Habbo. Last year's X-Factor winner Shane Ward has been among celebrities to feature on the site.
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