UK-based King, the creator of “Candy Crush Saga,” has filed for an IPO in the United States. Expected valuation tops $5 billion. King is the second most important mobile app company of Europe, trailing only Finland’s Supercell in monthly revenue. This could mean that European tech industry has been able to create two $5 billion-plus companies in the same niche — something that has not happened in a while. Europe’s strength used to lie in creating mobile infrastructure and business software companies. Now the continent’s future lies in selling virtual lollipop blasters.
The Supercell-King duo has been recently dominating global mobile app charts, eclipsing American app vendors. Both have two games in the top-10 iPhone and iPad sales charts in most important Western app markets.
The likely trigger for King’s IPO was the better than expected success of its most recent game, “Pet Rescue Saga.” This app came under some criticism for being too derivative of “Candy Crush Saga” when it recently debuted, but it has turned out to be surprisingly lucrative for a knock-off. “Pet Rescue Saga” is a top-10 revenue generating iPhone app in 33 countries at the moment. It has clung to positions 6 or 7 in the U.S. iPhone revenue charts in recent weeks; “Candy Crush Saga” remained the top-grossing app in America during September.
King’s weakness has been its inability to penetrate Asian markets effectively. Whereas Supercell’s “Clash of Clans” is the No.6 iPhone app in Japan based on revenues, “Candy Crush Saga” lingers at No.17. In China, “Clash” is No.3 and “Candy” is No.47. Globally, both apps are monster blockbusters — they have consistently been top-5 grossers in 90-100 countries over the past summer and autumn.
King has chosen its timing well. Japan’s red-hot mobile app market has recently seen the valuation of GungHo soar after its summer slump and Colopl’s market cap is now topping $2 billion, purely on app success in its domestic market. The bad aftertaste left by the Zynga disaster has been washed away by the remarkable revenue growth delivered by the world’s three app giants of the moment: Supercell, King and GungHo. All three are now close to $100 million monthly revenue run rate. But GungHo is highly dependent on Japanese market, deriving perhaps 80% of its global revenues from its backyard.
The remarkable longevity of “Candy Crush Saga” combined with the solid success of “Pet Rescue Saga” has enabled King to prove that it is not a one-trick pony. And the company is wasting no time to capitalize on having back-to-back hits. Supercell is widely expected to choose a riskier strategy and launch a third game over the coming winter instead of rushing to cash in on the success of “Clash of Clans” and “Hay Day.”
King’s IPO valuation is going to give Supercell’s valuation a kind of floor. If the next Supercell game turns out to be a hit of even “Pet Rescue Saga” magnitude, the three consecutive blockbusters would give it a shot at a substantially higher valuation. A flop would make the company seem mortal.