Stay on Top of Enterprise Technology Trends
Get updates impacting your industry from our GigaOm Research Community
Way back in 2005, more than a year before Apple’s iPhone began to revolutionize the mobile industry, Electronic Arts acquired mobile game maker Jamdat Mobile for $680 million. A pure-play mobile developer, Jamdat had emerged as the top independent player in the field thanks largely to a slew of licensed games including Bejeweled and Tetris.
Nearly a decade later, it’s still unclear just how successful that acquisition was. EA certainly benefited in a big way from picking up Jamdat’s intellectual property, but the once-dominant publisher of console titles continues to struggle to expand its offerings to mobile. In retrospect, it appears that Jamdat’s strengths were its ability to ink mobile rights to high-profile franchises and garner space on carrier decks rather than actually creating great mobile games from the ground up.
A series of one-hit wonders
I was reminded of Jamdat this week when I read that King Digital Entertainment filed for an IPO this week that it hopes will raise $500 million. The developer of the amazingly popular game Candy Crush Saga, King generated a jaw-dropping $1.9 billion in revenues last year and $567 million in profit. Someone, somewhere, launches Candy Crush Saga more than 1 billion times a day, as Forbes noted, and the game sees 93 million players in an average day.
As impressive as those numbers are, though, a closer look illustrates just how risky an investment King is. GigaOm’s Lauren Hockenson reported that Candy Crush Saga was responsible for 78 percent of the company’s 2013 bookings, a term defined as the total amount users paid for virtual items and to enter skill tournaments. And the flagship game – which launched in November 2012 – may have peaked both in terms of revenue and booking during the third quarter of 2013, as Mashable noted. The only smash hit King has ever produced is likely past its prime.
And the possibility that King could become a one-hit wonder isn’t the only concern potential investors should have. ZDNet’s Larry Dignan wrote this week that the company’s strategy of building its own cloud computing services will prove difficult regardless of whether Candy Crush continues to grow. Scalability will be a challenge if King somehow manages to expand its gaming audience, Dignan writes, but the company is already investing heavily to keep pace with its users. And if that audience shrinks – which seems likely – it risks over spending on infrastructure.
Of course, these challenges aren’t exactly unique in the world of mobile gaming. Finland’s Supercell generated $464 million in pretax profits last year on only two titles, but whether the company can consistently churn out hits has yet to be determined. Rovio has made a mint from its Angry Birds franchise but its other titles have fallen flat, and ZeptoLab has had similar trouble trying to duplicate the success of Cut the Rope.
Lessons for developers and investors
All of this isn’t to say that game developers can’t learn a few things from the success of Candy Crush Saga: It couples pick-up-and-play simplicity with a high degree of difficulty, which has proven to be an addictive combination. It employees the freemium model that monetizes its most rabid users while still allowing more casual gamers to play free. It is integrated with Facebook in clever ways that encourage viral adoption. And it moves so slowly users can play it without becoming engrossed if they choose.
Those elements have become standard features for a successful, casual mobile game, and King has demonstrated with Candy Crush that it knows how to leverage them. Like nearly every other mobile game developer, though, it has yet to prove that it can do so consistently with multiple titles and franchises. I would be very hesitant to bet that it – or any of its competitors – can master the mobile gaming market any time soon.