‘Candy Crush’ has turned sour, so is it game over for King Digital?

 

Outlook With the CNBC set on one side and blue-coated traders rushing around, the floor of the New York Stock Exchange is used to being a hive of activity.

But when King Digital floated back in March, the London tech firm managed to find a way to grab the attention of the NYSE’s workers. To celebrate the start of trading after raising $500m (£300m), it decided to bring along a number of poor souls dressed as characters from its hit Candy Crush Saga game, as well as some of its other, less well-known titles.

The result? The rather surreal sight of a carrot helping to ring the opening bell, and hard-bitten Manhattan traders high-fiving boiled sweets.

Well, there’s not much high-fiving going on at King at the moment. On Tuesday night it announced figures for the second-quarter revealing gross bookings – ie how much users spend in-game while playing – had dropped nearly $30m from the previous three months to $611.1m.

The problem? Candy Crush – the title that has been labelled the crack cocaine of smartphone games, and which accounts for roughly 60 per cent of King’s total revenues – had “declined more than we had expected”, according to chief executive Riccardo Zacconi, and its other titles hadn’t stepped up to make the difference.

Who could have seen this coming? Quite a lot of people, to be honest. There was no shortage of warnings that King was floating on the basis of one hit game, and that this game wasn’t enough to justify a valuation of $6bn.

There was also the obvious comparison to be made with fellow games developer Zynga, which launched its own $7bn float at the end of 2011 off the back of the success of FarmVille and Words with Friends (remember those?) but currently trades at less than 30 per cent of that.

For its part, King claims it has a formula to follow up Candy Crush with other hits, pointing out that other games contributed 41 per cent of gross bookings in the second quarter, up from 33 per cent in the previous three months.

Whether you believe that’s enough depends partly on whether you think creating a hit game is an art or a science. Candy Crush certainly is a perfectly formulated exercise in keeping you playing and, most importantly, persuading you that a small financial outlay in-game is worth it.

But, as the results show, there is only so long you can keep people playing the same game, no matter how much you tweak it, and there is no obvious successor.

The market is certainly showing what it thinks. King’s five months on the stock exchange has already had their fair share of drama, with the shares dropping more  than 15 per cent on their debut before last month moving – albeit briefly – above the $22.5 float price for the first time.

That seems a long while ago now. Yesterday the shares fell by as much as a quarter, touching new all-time lows during trading by dropping below $14.

Whether King can bounce back depends on what it can pull out of the hat, but there are some worrying implications for the UK tech scene.

Generally accepted wisdom is that investors in the UK don’t “get” tech in the way that the Americans do, which is why so many of our entrepreneurs in the sector head across the Atlantic.

There are some signs that this is changing, but only some. For those in the UK who worry about a tech bubble, King’s slump will serve as a vindication of their caution.

That’s unfair. Look at the less headline-grabbing, but rather more consistent, performance of Markit. Like King, the financial data giant created in a Hertfordshire barn chose Wall Street rather than the City for its listing.

The $4.28bn June float saw its shares debut at $24, and they have never dipped below that (it’s currently trading a bit above $25) and its valuation is now above King’s.

The hope for the UK has to be that it will not be too long until these types of companies feel confident about, and inspire confidence in, investors here. Let’s hope King’s crash doesn’t signal game over for that ambition.

PROMOTED VIDEO
Arts and Entertainment
musicBand's first new record for 20 years has some tough acts to follow
News
peopleAt least it's for a worthwhile cause
Voices
A new app has been launched that enables people to have a cuddle from a stranger
voicesMaybe the new app will make it more normal to reach out to strangers
News
Liam Payne has attacked the media for reporting his tweet of support to Willie Robertson and the subsequent backlash from fans
peopleBut One Direction star insists he is not homophobic
Life and Style
healthFor Pure-O OCD sufferers this is a reality they live in
Life and Style
Sexual health charities have campaigned for the kits to be regulated
healthAmerican woman who did tells parents there is 'nothing to be afraid of'
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Quantitative Risk Manager

Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...

Day In a Page

A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments