King’s key resource is their astonishing player base, which they know and manages extremely well. The massive audience is used not only to generate monstrous revenues but to also launch new games extremely efficiently by relying almost purely on cross promotion. If King chooses to employ in-game ads once again, it could stand to make even more outrageous revenues in the near future. Overall, King is running an excellent cash cow business with ever-green Sagas like Candy Crush, Farm Heroes and Pet Rescue.

But there are challenges that keep on mounting every quarter. While the company’s revenues are still growing, its installs have declined due to lack of success in launching new monster hits during the past couple of years. At the same time, King is facing ever fiercer competition within the casual games segment as their competitors are not only fast-following Saga games but also innovating on gameplay and monetization features. There’s a risk that if this trend continues for the next few years, King will start playing catchup with its competitors instead of staying ahead of the competition like they’ve done successfully for years now. 

Revenues

During the last 365 days, King has steadily grown its gross revenues, reaching an all-time peak in May of 2017. Overall, the past year has been much like the years before it in that King is making more and more money pretty much every consecutive month.

Looking at the sources of King’s revenue, over three-quarters of it came from three titles: Candy Crush Saga, Candy Crush Soda Saga and Candy Crush Jelly Saga. When you break it down even further, about 46 percent of King’s revenue comes from the evergreen Candy Crush Saga, 26 percent from the first spin-off, Soda Saga, and 6 percent from the second spin-off Jelly Saga.

Being revenue reliant on a single franchise or even a single game is very common for mobile. For example, the most lucrative single mobile games company Supercell generate about 85% of their revenue with Clash of Clans and Clash Royale. But unlike Supercell, which has only four live games, King has well over a dozen games in live operations with a majority of the games contributing merely 1% to net revenue.

It is important to notice, Supercell generates more revenue off Clash Royale, which is the Clash of Clans spin-off, while King generates significantly less revenue off their major franchise iterations. It is also important to notice that Clash Royale was able to create a different genre instead of competing with Clash of Clans and cannibalizing it.

When looking purely at revenue contribution, King is failing to improve their franchise games from one iteration to another from the performance perspective. In fact, Bubble Witch Saga 2 is the only game that performed better than its predecessor, though the cycle was restored when Bubble Witch Saga 3 performed worse than the prequel.

From the product point of view, there’s no meaningful change between all three of the Candy Crush games and even the soft launched fourth iteration Candy Crush Friends Saga offers pretty much the same game and will likely contribute even less to the bottom line that the previous iteration while arguably cannibalizing previous three Candy Crush games.

In fact, King risks cannibalizing previous games of each franchise with a new iteration. Though King has been using cannibalization effectively as a growth strategy where it has further saturated the puzzle games market and thus harmed competitors with similar games but only a fraction of users in their network.

Overall, King continues to be the mobile cash cow for Activision generating ever increasing amounts of massive revenue. The only chinks in King’s armor are how reliant the company is on the Candy Crush franchise and how unsuccessful the company has been in innovating and meaningfully improving their games. This has caused them to lose ground to companies like Playrix, Jam City, Peak Games and Rovio. In other words, despite dozens of new releases and multiple hits, King hasn’t shipped a single game that can come even close to the success of Candy Crush Saga, which launched on mobile in late 2012.

Installs

While on the revenue side King has been overachieving year after year, things look less peachy when we look at the installs during the last 365 days. While the number of installs is still incredibly high, well over 20M a month, the monthly installs are roughly third less than they were a year ago. This drastic decline of installs was softened by the launch of Bubble Witch Saga 3 in December of 2017, but as the cross promotion from other King’s games into Bubble Witch Saga 3 tapered off, the installs continued to decline.

The reason for declining installs is a combination of two factors:

King has launched fewer games each year. The key reason why the installs skyrocket every time King launches a new game is due to cross promotion from other King games. It is important to notice that even though installs spike with a new launch for up to three months, a number of actual new players in King’s network doesn’t actually grow as much as the installs would suggest because the installs are coming from players playing other King’s games.

The new games haven’t been able to justify high marketing spend or long lasting cross-promotion from King’s biggest titles. The biggest install contributing titles during the last 365 days have been Bubble Witch Saga 3 and Farm Heroes Super Saga, bringing around 20 percent of all the installs during the past 365 days. Yet the combined revenue contribution of these two titles is only 7 percent of overall revenue. New games are monetizing worse than the old ones, which means there’s no point in driving players from old games to the new ones. The traffic should, and likely is, vice versa.

Strengths & Opportunities

1. Network
2. Analytics
3. Ad Revenue
4. Activision IPs
5. New Smash Hit

King’s key strength is that they have the biggest player base on mobile and that they’re effective at cross promoting players from one title to another. This leads to two major competencies they have. Firstly, King has significantly lower costs at launching and growing new games simply because they don’t have to invest into marketing as much as their competitors. Secondly, the LTV (lifetime value) of a player in King’s game is much higher since a typical player plays more than one King game. Higher LTV allows them to successfully acquire new players into their network and generate more revenue from them compared to companies with more limited portfolios.

King also knows their players extremely well, not only because the majority is Facebook connected, but also because of their top-notch analytics. Dynamically tuned, or personalized as the company likes to call it, games mean that your Candy Crush level is either easy, hard or impossible to complete based on how actively you’ve been playing the game. This allows retaining players who are about to leave by offering them an easier level or to monetize player who is very engaged by letting them almost complete levels and then upselling additional turns.

Because King has such a massive global audience and because they know their audience extremely well, they’re set up to collect monster revenues from in-game ads – if they choose to do so again. Their turn-based puzzle games fit perfectly with video ad format and their data would ideally make sure that they don’t cannibalize monetization with ads.

Finally, King is set to leverage its parent company’s IPs to break into new gaming segments without breaking the bank on user acquisition. King has kicked off development of a mobile Call of Duty in their Stockholm studio and I’m sure it’s not the last IP they will use, especially if Call of Duty proves to be a success. Skylanders would be an amazing fit with King’s network and expertise.

As stated before, King has a cost advantage in launching and growing new titles due to their massive network of players. And while King has failed to launch successful titles outside the classic puzzle genre they still very much possess the resources and talent to deliver another billion dollar smash hit in the future. Shuffle Cats, Paradise Bay, Farm Adventure, Legend of Solgard, Hero and several other titles are all different games than the traditional dozens of puzzle titles King is known for. None of these attempted shots at the goal have landed yet. But the positive thing here is that King is taking shots outside of their comfort zone and it’s only a matter of time before they start scoring.
 

Weaknesses & Threats

1. Lack of new Saga smash hits
2. Competitors catching up
3. Failure to expand into new categories
4. Cross promotion from Saga games
5. In-game Ads can backfire

As stated before, King has most likely the biggest player base on mobile. But that advantage is shrinking as they have been unsuccessful at launching new smash hit saga games - granted that King’s failure would be considered as a success in a smaller company. Royal Boulevard Saga, Luna Light Saga, SkyBright Saga and Pepper Panic Saga are among the recent Saga games that were killed in soft launch. And even those that passed soft launch and were launched globally, like Shuffle Cats and AlphaBetty Saga can be considered as flops at best given King’s or Activision’s standards. During the same time period, Playrix launched Fishdom and Gardenscapes, puzzle games which were able to capture top grossing positions and take market share from King, with their evolved designs. (read more how Playrix is evolving the puzzle game design)

King has also struggled in expanding into new categories. Paradise Bay, a farming simulation game targeted at the broad mobile female audience, was launched in mid-2015 and it failed to sustain in the top grossing charts. While the game wasn’t a flop, it wasn’t the game that would open a new category for King. In fact, what Paradise Bay showed was that players who enjoy puzzle games tend not to cross over to other types of games as well as they transfer to other puzzle games. In other words, while King has its massive network, which they use successfully to launch new puzzle games, they are unable to leverage this network to the same extent when cross promoting Saga players into games in different categories.

Expanding into mid-core has been even more of a struggle for King. Rise of Tyrants was canceled after over a year in soft-launch while an another mid-core title Hero is struggling in soft for over a year now. King also closed their only pure mid-core studio, the Singapore based Nonstop Games, which punctuated their struggle to enter this new category. King’s difficulty in developing a successful mid-core game raises concerns about the Call of Duty game currently in development. It is also important to notice that this is not the first Call of Duty mobile title and that the previous one, Call of Duty Heroes, is largely regarded as a failure.

Finally, even though King stands to gain from implementing in-game ads again into their games, it’s not that straightforward of a deal. King’s players are their core finite resource that has dwindled during last year as the installs have dropped, the CPIs have gone up and the competition has toughened. Problem is that most of the in-game ads are for other games. In other words, King will be selling their users and potentially expediting the decline of their user base for short-term gain. If done too aggressively, in-game ads can backfire, causing King to lose players at more rapid speed and allowing their competitors to catch up even faster.
 

King is still the king

King is not in trouble but there are some dark clouds on the horizon. The failure to enter new categories is troublesome as both simulation and mid-core games the company has worked on proved to be unsuccessful after years of efforts. King hasn’t also launched a smash saga hit since 2014 when it released Candy Soda Saga and has instead of being content in releasing a string of 'ok' performing iteration titles. Lack of new super successful releases has impacted the installs, which have steadily decreased year on year.

At the same time, the company is making more and more revenue every year. Its old franchises are booming and King is finally getting its hands on the precious Activision IPs with Call of Duty already in works. Not to mention the potential of ad monetization, which King can implement at any moment and significantly increase their revenues.

King’s core competence is their analytics and ability to personalize puzzle games to different player cohorts. This has enabled the company to grow into its massive proportion and dominate the market. While King is expert at making, launching and running puzzle games, they have been unsuccessful at making other types of games, which implies to problems in its rapidly growing organization rather than lack of talent. With ever increasing competition in the puzzle games with companies like Rovio, Gram Games, Jam City and Playrix eating away King’s market share they will eventually have to successfully expand into new categories or watch their player base decline.

King has all the talent, tools and resources to succeed. Success creates content, which eventually leads to decline. In my opinion, King needs to take a page out of EA's playbook and employ hungry satellite studios to create new category defining hits.