King, the maker of Candy Crush Saga, recently filed for an IPO in the U.S. for $500 million. According to the latest news, each share will be priced at $24 and is expected to sell between $21-$24. News of the IPO did not excite analysts. There have also been comparisons with Zynga (ZNGA +0.00%), a web gaming portal whose debut raised many expectations. Candy Crush Saga has 94 million daily users, and the hit game earns the company 78% of total revenue.
Candy Crush Saga is a game where aligning similar kinds of candy earns points and more lives to finish all 500 levels. Subsequent levels are periodically released by the company, which adds to the excitement of the game. The game is available for free download, and it is not necessary to pay to enjoy the game or to progress through it. Yet, players spend approximately $800,000 daily to buy lives or cheat codes.
Zynga versus King
When Zynga began trading, the share price had fallen below the opening price by the end of the first day. Currently, the company is valued at half its offering price, but its fortunes are changing. Under the leadership of Don Mattrick, and after the acquisition of a mobile game developer, Zynga has put itself in a place for a better future. Creating revenue through games is not easy, and game companies have had to innovate to earn.
In games like Farmville, players can start by getting help from friends, but eventually the time will come when you have no choice but to buy tractors. In Candy Crush Saga, you have to buy lives to complete a level and move onto the next. Zynga stayed a web-portal and missed out on the mobile gaming arena. Candy Crush Saga synced players' progress across Facebook (FB +0.40%), smartphones, and tablet devices, reaching out to users through multiple points. This was the key to the game's success, particularly vis-a-vis Zynga.
King is a strategic player. Its profits in 2013 stood at $1.9 billion. By December 2013, it had 225 million average monthly unique users. Even though Zynga has had more than 300 million average monthly users, it lost them to mobile gaming. By the fourth quarter of 2013, Zynga had only 112 million average monthly users and had severed its relationship with Facebook. On the other hand, King used social media to its advantage. Being available on mobiles and tablets also meant that people had more time to spend playing Candy Crush.
This business isn't a game
It is not possible to predict the future of the game. It is possible, however, that a more flashy game could change business for Candy Crush overnight. King ought to know that. But, the company's strategy has been to know the user, which is why the majority of Candy Crush players are women between the ages of 25-45. A typical mobile gaming company like Glu Mobile, with a best-seller such as Deer Hunter 2014, does not normally relate with this demographic.
King found success with Candy Crush by applying good business acumen to a sensitive market. Games have their trends, and with every new game there will be distractions. But, King knows that the path from creating a super hit game to generating revenue is not straight and easy.
Compared to the competition, King has an edge in the market. It not only concentrates on creating good games, but also tries to understand and know users. The company is already making money, so it should have a very positive opening in the market.
