Candy Crush Maker Wants a Sweet IPO

Source: http://www.flickr.com/photos/karen_d/

Source: http://www.flickr.com/photos/karen_d/

The European game company responsible for the hugely popular Candy Crush Saga has filed for an IPO, according to its F-1 filing with the Securities and Exchange Commission seen on Tuesday. King Digital Entertainment PLC has filed for an IPO of $500 million on the New York Stock Exchange, where it would like to trade under the ticker “KING.” Credit Suisse, JPMorgan (NYSE:JPM), and Bank of America (NYSE:BAC) are listed as underwriters.

Candy Crush has proven to be the most popular of all free-to-play mobile games, which are replacing consumers’ appetites for more expensive, traditional video games played on a television via a gaming console. Mobile games cost little to nothing and are ideal for taking up small chunks of time in a typical day during activities like waiting in line or commuting on public transportation.

Candy Crush Saga alone has 93 million daily active users and 1085 million daily game plays, King says in the filing. The company’s profit has skyrocketed from $8 million in 2012 to $568 million in 2013. Earnings have also grown from $28 million in 2012 to $825 million in 2013.

Candy Crush has proven to be the most-downloaded and most-profitable free mobile game, according to data from AppAnnie cited in a Wall Street Journal report. Candy Crush has been highly successful on Apple’s (NASDAQ:AAPL) App Store, Google’s (NASDAQ:GOOG) Google Play store, and via Facebook (NASDAQ:FB). Given the quickly changing tastes of mobile gamers, King has to prove that it can continuously be successful even when the next Candy Crush competitor comes along. Mobile gamers don’t really have any loyalty towards a specific company and will simply choose whatever game is free, easy to use, and addicting.

The Wall Street Journal pointed out that King will also face comparisons to another publicly traded mobile gaming company, Zynga (NASDAQ:ZNGA). Zynga was the creator of the popular Farmville game for Facebook, but shares have fallen by more than half since the company’s IPO in 2011 and it hasn’t been able to replicate the success of Farmville, which saw its users poached by Candy Crush. King has to convince investors that the same won’t happen to it.

Creating a super-profitable free mobile game is more difficult than one might think. Gaming industry analyst Nicholas Lovell explained to the Wall Street Journal back in September why Candy Crush has become so popular and has been able to hold users’ attention for so long. The best mobile games have a core game that draws users in, a retention game that keeps them addicted enough to return to the game multiple times per day, and a game for what Lovell calls “superfans” who would call the game a hobby rather than just something to fill spare time. A successful mobile game will also have to properly leverage social media to encourage people whose social media friends play the game to try it out for themselves and keep coming back as the experience becomes a way to socialize.

Candy Crush has nailed all the aspects that Lovell says a successful mobile game needs, but now King has to convince investors that it can keep users addicted to Candy Crush and other King games even with increased competition and changing tastes.

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