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Candy Crush: So Popular It's Killing King's IPO?

The Exchange
New online obsession gives gamers same kind of rush as real candy.

Candy Crush Saga is probably the world’s most addictive video game but shares in its publisher, King, don’t seem to hold the same attraction for investors.

After reportedly filing for an initial public offering in the United States valuing the company at  $5 billion, King is now said to be delaying the deal amid concerns its big hit will end up being its only hit.

There’s no debating Candy Crush Saga is an insane money machine. The game, played mostly on mobile phones, has been downloaded more than 500 million times, counts 282 million active players per month and takes in an estimated $901,505 per day.

Burned too many times

But the problem for investors is fairly straightforward. They have been burned too many times by one hit wonders and may be skeptical that Candy Crush Saga will remain a font of endless money long enough to support the company’s desired $5 billion value. Some psychologists and gaming experts say Candy Crush will burn out sooner rather than later, as the game relies in part on frustrating players into paying for new levels.

The most obvious parallel is Zynga (ZNGA), which went public at $11 a share in December 2011. But a series of disappointments and missteps pummeled the shares, which now trade at about $4, off 64% from the IPO. In the end, far too much of the Zynga’s success relied on Facebook (FB) users managing their virtual herds on FarmVille. When Facebook changed its rules, Zynga was sunk.

“Right now investors view King as a one-product company,” says Dan Miller-Smith, CEO of Syndicate Pro, which tracks the IPO market. "The Candy Crush series has been so successful that investors must question whether it is repeatable."

King declined to comment.

In several ways, the company appears to have a far stronger business model than Zynga, especially since it's not dependent on one big company to distribute its apps.

But the line of burnout, one-hit wonder companies stretches as far as the eye can see, from the Groupon (GRPN) discount coupon to Crocs (CROX) oddly colorful clogs to the amazing boom of bagel shop IPOs in the 1990s. Not helping matters, most video game publishers have struggled to show consistent growth lately as well.

Some have staying power

But there also plenty of hit-making shops that have proved they have staying power, such as filmmaker Pixar, now part of Walt Disney (DIS), or Steve Jobs's other baby, Apple (AAPL).
So King has a fairly simple path to prove it’s not going to crater as soon as its candy crushing hoards move on – publish a few more hits with the same stratospheric growth in players and easy money.

The company certainly has a system in place to uncover new addictive treasures. King offers dozens of games for free play on its website. Games that prove popular on the Web get bumped up to social networks such as Facebook. And the winners there get rolled as full-fledged mobile apps.

“All games have a natural lifespan. It’s been extremely fun to see how long it has gone on,” King game designer Tommy Palm told Venturebeat recently. “Casual games have great lifespans; we have a never-ending energy in coming up with new boosters and new levels.”

Already, a couple of new King offerings, Papa Pear and Farm King, look like strong contenders. Tired of smashing annoying candies? Then switch to bouncing fruits, nuts and chili peppers. If enough people do this, they could be unlocking a lot more than another game level for King.