Though only mentioned twice in King's 108,000-word filing with the SEC, there's one name that haunts the prospect of the company's IPO: Zynga.
As soon as King's filing hit SEC.gov, journalists and analysts were angling to draw a comparison with the maker of FarmVille, whose fortunes had reversed dramatically since Zynga went public in late 2011.
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Zynga provides a reasonable parallel with King. In addition to being one of a handful of recognizable names in the mobile gaming segment, the company had pursued a similar mission: To create an assembly line of hit games.
In Zynga's case, it was all about the data. At the company's height, Ken Rudin, a Zynga VP told The Wall Street Journal that it was an "analytics company masquerading as a games company." Zynga used that information to tweak its games and make them stickier, more compelling and better overall.
King has a similar MO. As Brian Blau, an analyst with Gartner Group, notes, King takes a slightly different approach: The company uses its website to test features of its games, which are sometimes disguised as other games to throw competitors off the scent. King uses that information to also try to create titles that will overcome the odds and become hits.
In an industry in which a lone Vietnamese developer can appear from nowhere to produce a massively successful mobile game, attempting to Moneyball titles like this might seem like folly. The odds are daunting. There are now more than 1 million apps in Apple's App Store, meaning your new game has something less than a one in a million chance of success. By contrast, there were only around 150 movies released in the United States in 2013.
So game over? Not necessarily. Zynga's fall from grace had more to do with mismanagement than a flawed business model. King is also not the one-hit wonder that it is often portrayed as.
As Blau notes, up until fairly recently, Zynga had an amazing run of successful titles, including Mafia Wars, CityVille, Words With Friends and, of course, FarmVille. The company's real problems were institutional — it was accused of stealing games from others, it stiffed its own employees on stock options, it cultivated a hostile work environment. In Blau's view, this — not Zyna's vaunted data mining — was the reason Zynga ran aground. "They had a very large string of successes — more so than most" Blau says. "But Zynga had management issues."
King, meanwhile, had a not-quite-profitable, decade-old business that was gathering steam until Candy Crush came along. In 2011, King's revenues were $64 million. In 2012, they jumped to $164 million. In 2013, thanks to Candy Crush, revenues jumped to $1.88 billion. As a result, the King of 2014 is a totally different company, one that, among other things, threw around $376.9 million for sales and marketing in 2013.
Neither the marketing money nor King's testing method ensure success. They do, however, make it more likely that a new King game will do better than a random one. That makes a big difference. Among the App Store's top 10 apps of 2013, there was just one game — Plague Inc. — that didn't come from a developer that pumped out dozens of other games.
So it's fine if King never releases a game as popular as Candy Crush Saga again. If the company can post a few modest successes and not mismanage its business the way Zynga did, at the very least it can ride the Candy Crush gravy train for a few more years.
That strategy might appear desperate. Actually, it's smart. If King is clever, it will counter the Zynga comparison with another one: Rovio. After all, as eMarketer Senior Analyst Paul Verna points out, that company posted $2.4 billion in revenues in 2012 thanks largely to Angry Birds.
"If you asked me five years ago if [Rovio] would be able to sustain their growth, I would have doubted it," says Verna. "But they've really milked it."
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