There is a lot of excitement surrounding King’s announcement, but also a fair share of wariness.
That’s because King’s Cinderella story isn’t unique.
Remember the dramatic tale of Zynga Inc. (Nasdaq: ZNGA)?
The online gaming giant made the massively popular Facebook-based FarmVille game and acquired several makers of other hit games.
In 2011, it priced its IPO at $10 a share, making it the biggest Internet IPO since Google’s (Nasdaq: GOOG) back in 2004. By early 2012, Zynga was worth $11.5 billion.
Indeed, Zynga looked to be going nowhere but up.
Then the house of cards came crashing down.
Zynga's relationship with Facebook soured, which vastly increased Zynga's marketing costs.
It acquired OMGPOP, maker of one of the hottest mobile app games DrawSomething, for $180 million. Shortly thereafter, the game became...well, less than hot.
Zynga execs started cashing out and a talent exodus began.
The list goes on and on for what was a disastrous few months for Zynga.
Zynga is still alive and chugging along, but its stock price has fallen around 70% since going public. It was forced to drastically downsize. Now all that momentum has been lost.
In the wake of Zynga's largely failed run, King's potential IPO will be a huge market test for the online gaming industry.
Online gaming is a billion dollar industry, and mobile gaming is at an all-time high.
Sales are projected to be more than $9.9 billion this year alone, up 13.5% from 2012, according to market research firm PwC.
But still, the majority of top online gaming companies don't appear to be going public.
It begs the question, how does King plan to avoid Zynga's fate?
Most analysts say the main cause of Zynga's downfall was a failure to smoothly mirror the market shift from social gaming to mobile gaming.
King, on the other hand, already has a well-established foot on the mobile gaming platform.
Not only that, it also has a dedicated population of gamers going directly to its own website King.com.
Such platform diversity makes King more "hit proof" than Zynga ever was.
And where King's use of platforms is more diverse, its production of games is actually more focused than Zynga's - it sticks to "arcade style" games, and it knows them very well.
Some say Zynga's business model spread the company too thin because it attempted to branch out and develop or acquire games in different hot genres.
King has also been around a lot longer than Zynga.
It's been developing casual arcade games for more than 10 years.
That has given King more market-testing data, a tried-and-true business model, and seasoned veterans within the company.
All-in-all, King appears not to have the shortcomings of Zynga. It possesses the framework for a more stable run at a successful IPO.
When King does decide to move forward with the IPO, look for online gaming companies to tune in. If King does well, some other top dogs will surely follow.
- Money Morning:
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- Money Morning:
Is Zynga (Nasdaq:ZNGA) Doomed Without Facebook?
- The Wall Street Journal:
Maker of 'Candy Crush Saga' Plans IPO
- Business Insider:
The Complete Timeline of Zynga's Disastrous 2012
- Tech Crunch:
The Case For and Against Candy Crush-Maker King's Possible IPO