King Digital Entertainment hasn’t had a stellar initial public offering, starting out its first trading at $22.50 a share and then dropping within a few hours to $19.90 a share, down more than 11 percent.
But Riccardo Zacconi, the chief executive of King, isn’t crushed. The maker of the monster mobile social gaming hit Candy Crush Saga is now valued at $6 billion on the New York Stock Exchange, and Zacconi’s own stake in the company is worth around $600 million. The company, which is incorporated in Ireland and has its headquarters in London, raised $326 million for itself in the offering, and it’s one of the biggest players in the multibillion dollar mobile gaming industry.
Analysts and investors have been worried about whether King is a one-hit wonder, and the publisher has argued in its own filing that it has a methodical approach to game development and access to more than 180 game intellectual properties. Still, investors are a bit spooked and may be recalling memories of Zynga’s weak IPO back in 2011.
But Zacconi has been at this for more than a decade, and Candy Crush Saga still has more than 97 million players. It reported $568 million in profits on $1.89 billion in revenues in 2013. That gives Zacconi plenty of resources to build or buy the next big hit.
We caught up with Zacconi after trading started today. Here’s an edited transcript of our interview.
GamesBeat: Investors are a bit worried about King. What can you say about your own confidence?
Zacconi: I wouldn’t be here if I was not confident. The company has a great future. We are selling a very small amount of stock. We have been around for a long time. This is not unusual from what I have learned. I am super-confident.
GamesBeat: You have a lot of new investors. How would you describe your strategy to people who don’t know about King?
Zacconi: Our strategy is to build a portfolio of games, to build a network of players. It’s not about finding another megahit like Candy Crush. That is not what we have been doing for 11 years.
We are building a community of players. What we found out since 2011 is that we can match the art and the science. Games is a hit-driven business. You know the company for a long time. The only thing you can do is launch a lot of games. That’s what we do on the King tournament platform. We launch two a month on the tournament network. We have been doing that for 11 years, and that is where we surface new hit games. We have a lot of very strong games in all the categories of casual. We are repurposing these games for social networks and mobile by adding new levels and taking away the time competition. They play in a seamless way across all platforms.
How do we know the strategy is working out? We are continuously growing our user base. We are doing this by retaining the players in the portfolio of games. Candy Crush has been around now almost exactly two years. It is a terrific game to grow the network. There are two trends. The percentage of players playing in more than one game are growing. The first cohorts of players that joined us in Facebook in April 2011 have now played on average 5.8 King games each.
If you look at other proof points, we have today three top ten grossing games on iOS, Android, and Facebook. We also have the top three games by reach. The top grossing list is very stable. You get in there and stay there. Of the three new entrants on the list last year, two were King games. On Android, there were three new entrants on the top grossing lists. Two were King games.
GamesBeat: It seems like King can outspend others on advertising. Some feel that strategy can’t last forever.
Zacconi: I don’t think advertising is the only component. You have to be aware of several things. You have to be good at the art of making games. That is coming out with new ways of playing, not copying what is good today. We do that on our tournament platform. We have the craft to make strong games for the platforms with a scalable technology. That is key. You can have the best marketing in the world, but by itself, it doesn’t work. You have to have a large network of players. The users we are getting today are not coming from our marketing spend. We spend more than half a million dollars every quarter. We are one of the largest spenders on mobile networks and on Facebook. You have to look at it all together. Not just one component. That is where we have a unique position.
GamesBeat: Do you have some good details showing that your growth is sustainable?
Zacconi: What are we working on now? Leveraging the network we have built with Candy Crush to build our portfolio. The No. 1 target for us is the retention of players. The number of players in our network is constantly growing. Look at monthly uniques. Daily actives. The numbers are growing. We monetize them over time. It’s coming around. We have three top-grossing games. We launched Farm Heroes Saga on mobile in January. It became a top-grossing game in 11 days on Android and is a matter of weeks it has more than 20 million daily active users.
GamesBeat: Farm Heroes Saga seems to have a pattern that’s similar to Candy Crush Saga.
Zacconi: It is faster, actually. Ours is a long-term strategy.