It may seem odd to point to a company which just reported second quarter revenues of $594 million as a cautionary example but the latest stumble for King, the maker of Candy Crush, highlights the problem with building success on a single product.
While King had been making games for a decade before the sweet success of Candy Crush, its profits in 2012 were $7.8 million. That figure jumped to eighty times as much in 2013. Despite a suite of titles, it was Candy Crush that put a rocket under the company and powered its rush to an IPO.
King CEO Riccardo Zacconi says:
Non-Candy Crush games did not grow as much as we had expected and, as a result, did not offset the decline in Candy Crush
Late last week, the company bought Singapore-based Non-Stop Games for $100 million, acquiring the popular free-to-play online strategy game Heroes of Honour in the process. That move, along with the forthcoming Candy Crush Soda Saga, shows King is trying to get ahead of the decline but it may already be too late.
As Stuart Dredge, The Guardian’s ever-astute commentator on the world of apps, noted, summer 2014 for King looks a lot like summer 2012 did for Zynga, a previous casual gaming champion – a spike in revenues followed by a steady decline. When your customer base is as fickle as casual gamers, you’ll find yourself hostage to trends.
There are plenty of examples of companies who have fallen foul of a major hit outside of the app world. Harmonix, the developer behind Guitar Hero and Rock Band, rode the trend for far too long and was left with a mountain of plastic instruments and so much debt that Activision sold the company for $50. Ty never got beyond Beanie Babies and TiVo allowed itself to go from name-checked in hot TV shows to just one of many DVRs.
While King has tried valiantly not to be a company with a one product strategy, the sheer success of Candy Crush – which has accounted for up to 80% of its profits – has pushed it there by default.
The perils of going public
By going public, King has placed itself under extreme pressure that wasn’t present as it developed Candy Crush. It now needs to show consistent results and growing profits. Getting the next hit will be a lot harder.
The lesson for people building products without a Candy Crush-style mega-hit on their hands is still valuable: get ahead of your audience.
When a product starts to take off, it’s time to think about the next move. If you don’t, your customers are likely to get there without you. King has the cash to buy its way out of trouble but for most companies, especially startups, that’s just not an option.