Candy Crush Madness: Worth $7.6 Billion?
In 2012, few had heard of King Digital Entertainment when they first launched their game Candy Crush Saga on Facebook. In November of that year, they released the mobile version of the same game, and with that they redefined what investors thought possible with Freemium apps. The app is free but allows in-game purchases, which the majority of users do not use, yet they still manage to generate massive revenues. While their upcoming IPO estimating their company worth at 7.6 Billion, one has to wonder if they are overestimating their value or not.
While few can argue with their recent success, it’s worth noting that, to date, it’s about all the success they have had. Candy Crush is far and away their biggest game out of a library of over 180 titles. Candy Crush has 144,000,000 active users, their next biggest game Farm Hero Saga has 20 million. Considering the state of the market for previous successes like Farmville, (whose creator, Zynga, is struggling to make a profit anymore) to call King’s current financial position unstable seems not only realistic, but likely.
Candy Crush Saga alone brings in around $818,000 every day (for comparison, another smash hit Angry Birds brings in $9,800 per day). Candy Crush Saga accounts for 78% of King’s 2013 earnings, and while the increase in revenue has been dramatic over the last two years, that puts a lot of their investor’s golden eggs into one multicolored basket. A basket which has declined in value over the most recent quarter.
What Makes it Addictive?
Judging by their margin of success over competitors, King has certainly done something right with Candy Crush. So what keeps people playing? Time.com considered the science and psychology and came up with some simple reasons: It makes you wait–wait for lives, wait to carry onto the next level. The game gives you positive rewards, it’s social (connected to Facebook where you can see and beat your friends scores) and you can play anywhere, anytime as it only requires one hand to play. Plus, there’s an objective. Each level comes with a storyline of its own and there are multiple levels to complete to reach the end. Is there something special at the end of the incredibly long journey? Probably not. There is, however, a sense of personal accomplishment. With over 500 levels completed, who wouldn’t be proud? Whether this was intentional or not, it certainly sets it apart from similar titles.
How Does it Generate Revenue?
Considering that 60% of the 144 million players never pay for in-game purchases to get ahead, the other 40% (57.6 million) account for all the revenue generated by the game, which as previously mentioned is the lion’s share of the entire company. At $818,000 per day, that equates to .001 cents per spending-user per day, which means even a large amount of inactivity from these users would not have a significant effect on their earnings. Since the purchases are centered around advancing through the increasingly difficult levels, as long as King continues to expand the in-game level ceiling, these users may continue to play, which makes them likely to continue to spend.
Since nothing in life is forever, it’s only a matter of time before Candy Crush’s popularity wanes to the point that it no longer carries the developer on its own. King may feel they are worth 7.6 billion today, but they’ll need to create other, equally successful content, content that thrives amidst the social media universe where they build their brand, if they expect to maintain that value when the current bubble bursts.
Camille McClane is a passionate writer who dedicates her time to researching and developing stories of various topics. Her favorite subject to focus on is emerging technology and online marketing strategies and its effects within business expansion. She hopes the readers of VentureBreak.com enjoy this article as much as she enjoyed writing it!