Will Candy Crush Maker’s IPO Be Another Zynga?

Mobile-game-maker King Digital filed its IPO Tuesday. Can it keep players (like my mom) interested?

The other day, I was hanging with my mom, and I couldn’t pull her away from her phone. She was playing “Candy Crush Saga,” the popular mobile game that requires users to eliminate or arrange the candies on their screen in a Tetris-like logic challenge. She’s not alone. Her next-door neighbors play it. My cousins, who range in age, play it. My aunts play it. And they’re all addicted.

Candy Crush is one of several free games owned by King Digital Entertainment PLC, an Irish mobile-game creator that filed its initial public offering Tuesday. King Digital hopes to raise up to $500 million in its IPO.

Candy Crush has been a boon for the company; 93 million people played it more than a billion times daily in December, King reported. King’s revenue jumped from $164.4 million in 2012 to $1.88 billion in 2013. Keeping the share price up long-term may not be easy, according to the Wall Street Journal.

King Digital's mobile games, broken down by user, from its IPO filing.

King Digital’s mobile games, broken down by number of users, from its IPO filing.

Since King’s games are available for free, the company’s business model relies on users buying digital add-ons. Indeed, King wrote in its filing with the Securities and Exchange Commission that the company’s growth would depend on its ability to “develop new games and enhance our existing games in ways that improve the gaming experience … while encouraging the purchase of virtual items within our games.” My mom theorizes that it’s next-to-impossible to get past certain levels on the free  version of the game without buying some help (in the form of digital candy bars). 

“If you’re in a level that you can’t pass any other way, they say nine gold bars will help you to get five extra moves. Nine bars costs like a dollar,” she says, in the same voice she uses when she got a sweater on deep discount from Macy’s. “And sometimes it literally is only an extra move you need!” She’s on Level 158, and she thinks she might need to start shelling out to get past it. In its filing, King Digital said most of its players that reach the top levels do so without paying a cent.

Maybe those people are secret geniuses. Maybe most of us will never reach the top levels, no matter how many digital candies we buy. But it helps to keep people hoping. How much has my mom spent in total? ”I’m not at liberty to say,” she says, cackling. She promises she has spent less than $100 in the few months she’s been playing.

That doesn’t seem like much. But remember that she’s buying digital candy bars. And if every one of Candy Crush’s 93 million daily users spends that much — well, those bars could add up. But King Digital has to get its users to keep spending. It also may struggle to strike gold again with another game. Currently, most of its users play Candy Crush. A much smaller number play its other games, like “Pet Rescue Saga,” “Farm Heroes Saga” and “Bubble Witch Saga.”

One of its competitors, Zynga, had limited success when facing similar challenges. Zynga makes games like “FarmVille” and “Pioneer Trail” (formerly known as “FrontierVille”). It went public in 2011, and its share price has fallen nearly 50 percent since then, according to the WSJ. It has also posted losses for three years in a row.

In addition to the Zynga cloud hanging over its head, King needs to manage its rapid growth, scaling up its internal controls and IT infrastructure. Those responsibilities fall largely into the CFO’s lap, so King was wise to hire CFO Hope Cochran, the former finance chief at Clearwire Corp. and Evant Inc., in October 2013. But some members of its management team “do not have significant experience managing a large global business operation,” so they may have a hard time leading the company moving forward, King wrote in its IPO filing. 

King Digital will also have to prepare for what happens when its addicted, but fickle users find the next new game and ditch Candy Crush. Or when social pressures push them to move on. My mom, for instance, used to play the popular Zynga game “Words With Friends.” “I kept beating everybody so they don’t want to play with me anymore,” she says.

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