MAY 23, 2013 • Recent DFC reports have looked in depth at the size of the mobile and social game markets. These include The Market for Browser and Social Network Games and The Global Market for Games and Entertainment Applications on Smartphones and Tablets. These emerging markets have seen plenty of investment but established players have generally struggled to find success in these areas. A notable exception is U.K. based King, a company that has been around since 2003. Recently the company has had great success with Candy Crush Saga. It is important to understand that King comes from a very specific background that plays into much of the attraction around mobile and social games, the ability to compete and interact with other users. For many years, King has been a leader in skill games, an area where users often put real world money at stake. King has used its expertise in skill games to find broader success on social and mobile platforms.
Skill games is a category that often causes some confusion. As wagers by players on the outcome are often at stake, many consider these accessible card and puzzle games to be gambling. Yet because many laws and regulators worldwide define gambling as games of chance, skill games get a pass. In this profile, DFC takes a closer look at the category, and its most successful example, King.
Skill games are defined as content where winning is based primarily on mental skill or dexterity, not chance. Chance can be involved, but it should not be the deciding factor. By this measure, chess is a complete game of skill, whereas backgammon is mostly a game of skill with a measure of chance in the role of the dice. In the latter case, the element of chance is seen as outweighed by the element of player strategy
All the skill-based gaming sites work pretty much the same. Users create an account and then deposit money into that account. The user can then compete in tournaments and head-to-head game play where each user pays an entry fee that is generally between $0.25 and $1 but ranging up as far as $10. The entry fees from the users are pooled and the winner gets the money minus a commission of around 15-35% paid to the site operator. The money is drawn from each user’s account.
For nearly a decade King has been the leader in skill games. The company was originally founded with $500,000 in the United Kingdom by Riccardo Zacconi and Toby Rowland during 2003 as Midasplayer.com to create casual skill games for the Yahoo.com portal that would capitalize on the latter’s user base. The two had used their share of the proceeds from the sale of uDate.com to get Midasplayer off the ground. Here is how Midasplayer described itself in those early days:
Midasplayer is Europe’s first and largest platform for skill games. The registration is free and players receive play money to practice. Players get excited about our great games very quickly and then pay money into their accounts to participate at tournaments, interact with other players and win real money. New customers who are good players and have the characteristics to become a star, are offered a 50% bonus or more of their deposit. Midasplayer customers play against each other and not against Midasplayer and Midasplayer only receives a share of the winnings. Because of this attractive business model we can keep the Midasplayer website simple and free of ads and other disruptions. We can afford to develop games of the highest quality, and we have neither spyware nor adware in our downloads. Customers very quickly embrace the games on our site. Some of our most popular games include Midas Miner, Jungle Bubble, Solitaire and Pyramid. Why don’t you try our games on www.Midasplayer.com? You will very quickly realize how good they are.
While first in Europe, what is now King was not the first online skill games operator. That distinction lies with PureSkill.com that was in development by the same parent company behind Priceline.com during the year 2000. By the next year, the Walt Disney Co. had gotten involved and invested millions in the site, which had by this time been renamed Skillgames.com. In a May, 2001 article, Advertising Age described the venture as follows:
The Skillgames site will charge players to participate in graphic puzzles, word games, trivia games and sports games. It will offer prizes up to $1 million dollars. Players can also incur losses in the hundreds of dollars, and the site has been likened to online gambling.
That last association with gambling stuck with the growing number of mainstream media reports driven by the high profile Disney investment. This publicity also corresponded with growing Congressional scrutiny of online gambling. Despite Skillgames and Disney executive’s attempts to explain how games of skill did not qualify as gambling, the family-friendly Disney eventually got cold feet and withdrew its investment. Skillgames had been in open beta during this period, with a full launch scheduled later in the year. By July, however, Skillgames surprised users by closing their accounts, refunding their account balances to user credit cards, and mailing checks for any outstanding winnings. Skillgames said this was necessary to prepare for the 2nd stage beta launch with planned upgrades and game enhancements. Players were never invited back as promised, and Skillgames was shut down late in the year.
The truth of the matter is that those behind the Skillgames venture were correct, unlike pure gambling, skill-based gaming is currently legal in most states because the winner is determined not by luck, but instead by their skill at playing a specific game. As they were flying more under the radar, two other skill sites, Skilljam.com and WorldWinner.com also went online in 2000, and did not incur the same level of public/political scrutiny as Skillgames had.
Most of the major casual game portals such as Yahoo!Games, Pogo.com and MSN Gaming Zone of the era desired to build a more lucrative revenue model around skill games wagering, but were still concerned about the possible pitfalls of operating such transactions solely in-house. The portals therefore chose to allow smaller start-up companies operate the skill-based gaming area of their sites. By 2002 both MSN and Yahoo had integrated Skilljam.com and WorldWinner.com into their portals. Midasplayer was formed in 2003 to take advantage of the same opportunity. According to Zacconi, at that time in Europe, portals were paying for sticky content for their pages. The thesis was to have a product that not only would they not have to pay for, but they could make money with.
Major Portals and Their Skill Gaming Partners: Circa 2006
| Yahoo | King.com previously WorldWinner) |
| Yahoo Europe | King.com |
| Real | Fun Technologies |
| Pogo | WorldWinner |
| AOL Games | Fun Technologies |
| AOL Europe | King.com |
| MSN Zone | Fun Technologies |
| MSN Europe | King.com |
| Miniclip.com | GameTrust |
| Lycos Gamesville | WorldWinner |
| T Online (German) | King.com |
| UGO.com | Arkadium |
| Disney’s Go.com | Fun Technologies |
Starting with 10 games, and after a rocky first year, the venture took off in Europe and became profitable by 2005. That year the skill-based game market had three main players: King.com, Fun Technologies, and World Winner. Fun Technologies is publicly listed on the London and Toronto Stock Exchanges. Liberty Media, a large conglomerate, purchased a 51% stake in Fun Technologies for about $144 million. As can be seen from the accompanying table, the most highly trafficked casual game and gaming sites were split between Fun Technologies, which has more North American properties and King.com which has more of a European presence. With the acquisition of WorldWinner, Skilljam has a very large North American traffic base. The sites listed in the table above are merely the more highly trafficked sites, each company also has many smaller distribution outlets as well.
At this stage, one major challenge faced by all of these skill games providers was the initial reluctance of users to compete against other users whose skill levels they do not know. This is a problem with online gaming in general, but it truly becomes magnified when money is at stake. To even the playing field, all the major players have created systems that try and match players based on skill level. For instance, SkillJam ranked users for each game, creating four ranks: Beginner, Novice, Intermediate and JamMaster. Most tournaments match players of similar rankings. King’s matching system works slightly differently. It always matches a player with someone near them in rank but allows each player to choose how narrow they want their competitive range to be. If a player chooses a high range, there is a higher chance they will get someone much better or worse than them in skill level.
Breaking Away
Being first to market in Europe had its advantages for Midasplayer, which goes a long way to explain how quickly the company attained a leadership position in revenue. Another factor was the wherewithal to create quality quick-hit titles in general, yet also titles that appealed specifically to different European markets. By January of 2005 the company had hit the milestone of 15 million games played, and £1.98 million ($3 million) in prizes awarded.
“European markets are the hardest ones to do because of the different languages and currencies, so we thought we’d do them first and then go for the U.S.,” Rowland told The Independent in 2006. That strategy begat a version of Germany’s favorite card game, Skat. Midasplayer’s version became so popular there that Germany became the company’s biggest market. By comparison, players in the U.K. were more focused on puzzle and word games.
Another factor driving Midasplayer’s fortunes was that it was attracting large numbers of women 25 years old and up – so much so that 70% of site’s users being female. The site employed the same savvy targeted game design philosophy for the 2006 World Cup competition. Certain that many women would care little about the sporting event, Midasplayer produced the Handbag World Cup game that ran during the tournament in which players designed their own handbags. The company even geared its poker titles toward women, whom Rowland said flocked to the titles because they enjoyed the mental stimulation and tiny 35p (53 cents) stakes.
“There was nothing of this kind existing in Europe, and we thought the U.S. sites weren’t very good,” Rowland continued in his Independent interview. “It’s a games site, but it’s also a place where people talk to each other and make friends. They instant-message each other and have photographs of themselves and their dogs on the site.”
Both Midasplayer and Fun Technologies allowed users to create a customized avatar and profile page that displays achievements and provides messaging abilities. If that sounds something like a social network, that distinction was also realized by Midasplayer’s management team. But first the company needed to expand operations outside Europe, which required additional capital. In September of 2005, Apax Partners and Index Ventures invested €34 million (£23.3 & $35.3 million), taking a healthy minority stake in Midasplayer, reported to be 30%. Part of the investment went into the company to expand from Europe into the U.S., and part went to the original founders and shareholders.
“We focus on providing players with the most compelling skill gaming experience available online. That is why the Midasplayer games community generates more activity and revenue per user than other forms of online casual gaming. Our partners make a lot of money with us and we are accessing ever- larger distribution opportunities,” Zacconi said at the time.
Our view at the time was that the evidence suggested that the market for skill gaming was under $30 million for 2005. As the chart shows it takes a lot of games played to generate any significant revenue. Despite Liberty Media’s purchase price and the $300 million valuation it implied for Fun Technology, the revenues being generated by skill-based gaming was still small. As Skilljam was part of a publicly listed company, we know they had revenue of £4.2 million ($7.5 million) in revenue for 2005, and posted a £3.1 million ($5.5 million) loss. We also know that WorldWinner had 2005 revenue of $10.7 million dollars and posted a small $660,000 loss. At the end of 2005, Midasplayer had experienced a lot of growth and was paying out about $6 million a month to players, which could generate monthly revenues of $2 million. As the company later disclosed, between 2004 and 2006 revenue grew from £1.6 million pounds ($2.4 million) to more than £13 million ($19.7 million). Revenue in 2005 was £7.2 million ($10.8 million). So as two of the largest players in the market had a combined $18.2 million in revenue and neither generated profit, it makes sense that the company saw its opportunity to expand.
With a base of hundreds of thousands of paying European users playing competitively for small stakes, Midasplayer had its eyes on global expansion. Part of that ambition necessitated a rebranding. In December of 2005 the skill games side of the business took on the name King.com. The new name was a reference to the site’s ranking system where users were rated from Peasant to King in accordance to their skill level in games. Midasplayer was not retired, however. From then on that name denoted King.com’s parent, which also set up a separate full-on gambling site called Royalgames.com in 2007. That latter was run by a separate operating company set up in Malta with a different board of directors, and licensed by the Lotteries and Gaming Authority there. In 2011, Midasplayer contracted with Spielo International to run Royal Games’ casino business out of Gibraltar on Spielo’s software platform.
The first items on King.com expansion agenda for 2006 were substantial platform improvements that included a re-engineering of the King.com multiplayer lobby system plus and an overall site update. Another change was a commitment to host new live tournaments featuring celebrities from the media, sports, and game worlds. Other new features that arrived during the year included:
• Matches against non-registered members set up by an email invitation.
• Users creating their own personal blog, with photos and the ability for other users to comment on posts.
• Jewels for each completed game award to players whether they win or lose. The Jewels unlock more levels in games, as well as free pay for new accessories for player avatars.
• Players got the option to send Gifts for other members.
In January of 2006 King.com hosted 40 million tournaments, with 84,000 paying customers logging on. During peak hours an average of 35,000 people played at the same time. By December, the site was hosting 60 million tournaments per month, and had 13 million registered users in 10 countries.
That kind of growth helped King.com ink a slew of licensing deals with major television content providers for high-rated game shows including Big Brother (Europe), Who Wants to be a Millionaire (Europe), Deal or No Deal (U.S.), and American Idol (U.S.). For American Idol, the company spent $250,000 to create its game – quite rich by King.com standards where three-person development teams were the norm – that featured play mechanics very similar to Konami’s Dance Dance Revolution. Most of these licenses saw their release during 2007. In July of that year, King.com signed a worldwide syndication agreement with Real Networks making the former the exclusive provider of skill games for Real’s global audience of more than 40 million monthly unique game players at RealArcade.com, GameHouse.com and Zylom.com. Real, in turn, became the exclusive provider of online and downloadable casual games for King.com’s worldwide audience. All told King.com was running more than 50 titles during this period, and 80 million tournaments per month were being hosted.
King.com also started getting noticed in 2007. The firm was awarded the UK Media Momentum award for No. 1 Fastest Growing company in 2007, and was the No. 5 Fastest Growing Company in 2008, receiving a special Judge’s Nomination in that year. King.com was also ranked No. 13 in the Sunday Times TechTrack list (UK fastest-growing tech companies) in 2008, and in November 2008, was ranked No. 5 in Library House’s list of Europe’s 100 ‘Hottest’ technology start-ups.
By the start of 2008 King.com had reached the milestone of 190 million monthly gameplays across over 100 games. In June of 2008, co-founder Toby Rowland, who had been heavily involved in building growth in the United States, the development of King.com’s advertising business, and IP licensing, resigned as co-chief executive. No reason was provided for his departure, although Rowland remained on the board. Moving forward, Zacconi became the public face of the enterprise. By August of 2008, King.com inked a new deal to become the exclusive provider of skill games on Lifetime cable channel’s myLifetime.com. Easing into 2009 King.com had reached 350 million monthly gameplays per month.
Social & Mobile Ambitions
During 2008, King.com had also began executing on an ambitious cross-platform strategy to expand onto Facebook and iOS devices. The first releases in this cross-platform strategy came on July 14, 2009. Two titles, Kalorie King (adventure) and Mars Lives (strategy) were launched on Facebook, and Amazon Survival (puzzle) for the iPhone. A week later, King.com released 20 JavaME games for feature phones including Midas Miner, GoGo21, Jungle Bubble and Word Battle.
To reach consumers on Facebook King.com used two apps, FunFlow and MyGames, which provided a selection of available titles. The company also went onto publish standalone games like Miner Speed (a Bejeweled clone) and Puzzle Saga. Yet the company was staying quiet about its initial foray into mobile and social networks. Staying mum on these new platforms through 2010 while results were analyzed, King.com grew its core business to more than 200 games in 10 languages, and 27 million unique players per month. It took until February 2011 for the company to finally announce its next steps on Facebook.
Renaming it MyGame portal app to King.com, the skill games publisher released 26 titles to Facebook – including Aztec Dropall and Golf Solitaire – as well as support for its tournament system and virtual good sales. Other features included daily game challenges to win achievements, global leaderboard rankings, competition with friends, and King.com’s coin currency system. To play in tournaments, users must buy King Coins with Facebook currency. These King Coins can also be applied to buying virtual gifts or to upgrades of their avatars. Players who win in tournaments are paid out in King Coins, not Facebook currency.
By May King.com announced that it had jumped 33 places (according to AppData) in less than 30 days to reside in Facebook’s Top 10 game developers list (by DAU). King.com said the strong showing was being driven by Bubble Saga and Puzzle Saga, both of which were experiencing strong user growth.
Five months later King.com had gone from Top 10 Facebook game developer to simply Top 10 Facebook developer with 1 billion gameplays per month. In terms of players, the company was drawing 17.6 million monthly active users on the social network. Bubble Saga and Bubble Witch Saga (which launched in September) together were generating more than 600 million gameplays per month on Facebook by themselves. To test how well it could manage cross-platform synchronization on the same game, King.com released Bubble Saga on the Kindle Fire in April 2012. This tablet version of the game marked the first of the company’s titles to be fully synchronized with its Facebook twin in gameplay, scores, progress, virtual goods and social interaction.
King.com also opened several new offices during this period. In the United States, the company set up shop in downtown San Francisco to coordinate all North American business development initiatives for the company. The new bulwark was set up in Bucharest, Romania. That office was charged with converting King.com’s most popular games to iPhone and Android, as well as serving as headquarters for mobile game development operations. To further beef up its mobile development resources, King.com just acquired Stockholm-based developer Fabrication Games to help its expansion onto Android and iOS. King.com’s other offices were located in Barcelona, Hamburg, London, Malta, Milan, and Stockholm.
Although its rise on Facebook stole most of the show in 2011, King.com was also taking strong steps elsewhere. In the second half of 2011 King.com extended its partnership with Yahoo to reach Spanish-speaking consumers in Latin America through Yahoo! Juegos. The full portfolio of King.com’s games is now available on Yahoo’s sites in Argentina, Chile, Colombia, Mexico, Peru, Venezuela, and Yahoo! en Espanol in the U.S. By the end of 2011, King.com was handling 1.5 billion gameplays in a month worldwide.
In April, King.com took further steps on mobile when Miner Speed was released on iOS. The title was already available via browser and Facebook, with 50 million plays per month. King.com used the introduction to tout its new focus on a cross-platform model.
“Mobile is the next big strategic area for us, principally because we see a huge opportunity there. With casual games, if you think of snackable consumption, mobile is the ideal platform,” Zacconi told Games Industry International in an interview. “We believe also in differentiation, and how we want to differentiate is to have fully synchronized game play, so that we have a truly seamless experience. We think that the player should focus on the game, and when we launch the game we want this game to be available everywhere. If you put the hat on of the player, he wants to be able to play on his computer, but when he goes on his iPad or iPhone he wants to be able to continue playing from where he stopped. If I buy some items that help me in the gameplay on my computer, I want to have them also on my iPhone and my tablet. That’s what we’re working on.”
King.com could harbor such ambitions since the company operated from a very lean development model. It’s three-person creative teams were expected to have a completed title in three months. Each new game would be tested on King.com. Each successful title was then built out with additional levels and content, then slated for release on Facebook. Those titles that did well on Facebook would then be candidates for mobile release.
King.com also actively looked for ways to encourage players to play on multiple platforms. To help entice more mobile users into more of this device swapping, first-time users installing the free Miner Speed iOS app are prompted to sign on with Facebook Connect. If they do, they unlock boosts in both the Facebook game and the mobile game, and 25,000 free Coins within each version. So players who find Miner Speed first via mobile receive double the free currency compared to an existing user signing into Miner Speed through Facebook or King.com for the first time. The biggest wrinkle is that while the King.com coins are useable on every platform version of the game no matter where they are purchased, separate wallets must be maintained for each of the platforms. So on King.com’s site coins are purchased there, on Facebook coins are bought with Facebook Credits, and on iOS through iTunes.
According to King.com, as consumers have access to games on multiple devices the rates of engagement and monetization go up. Monetization is definitely a growth area as 70% of King.com users complete games with no payments.
Although King.com has indeed experimented with HTML5 early on, it found the best quality results remained with coding games in Flash for Facebook, and natively for iOS and Android. While it might seem difficult to sync up features and data with different development engines, every King.com game shares the same exact platform code regardless of the development engine employed.
Three months after its iOS release, Miner Speed became King.com’s first title for Android smartphones and tablets. In the case of Bubble Witch Saga, however, which became an immediate hit on Facebook after its September 2011 release, the iOS version was released in July of 2012, and the Android app of the game did not arrive until December. Candy Crush Saga fared better. The game launched on Facebook in April 2012, followed by the iOS release in November, and on Android a month later. King.com was getting a handle on synchronizing its games across mobile platforms.
Muscling the Competition Aside
Bubble Witch Saga had been an enormous hit on Facebook, reaching up 6.6 million daily active users (AppData) in May of 2012. The title was so popular it catapulted King.com past Electronic Arts and Wooga to become the second most popular game developer on the social network after Zynga. The only thing that dented the game’s momentum was the release of Candy Crush Saga in April. The latter quickly built up steam to cross 6 million daily active users itself – becoming the third most popular game on Facebook.
But what really changed the game for King.com was the mobile releases of Candy Crush Saga. The iOS version quickly became the No. 1 game title on the platform, as well as the top grossing game app on Android. The game leveraged Facebook’s social channels across the web and mobile, which had a turbocharging effect on the title’s popularity on Facebook. Candy Crush Saga was driven to the top of all games on Facebook with more than 50 million monthly active users, and knocked Zynga out of the No. 1 spot in daily active users (9.7 million) for the first time since the middle of 2009.
Pleased with how well its mobile releases were boosting fortune across all platforms, in February 2013 King.com announced its intent to bring localized versions of Candy Crush Saga and Bubble Witch Saga to iOS and Android users in South Korea and Japan. Candy Crush Saga had already become the No. 1 app (game or otherwise) on Facebook, and King.com had noted that the English version of the title had no problem drawing users in Asia. For example, Candy Crush Saga was drawing 1 million daily active users in Hong Kong prior to a localized Facebook version was released for that market. The data was showing that Asia was a good bet for smartphone versions of the Saga games.
The smash success on Facebook and mobile phones led the company to rethink its branding. The web site-based games continued to do very well with 10 million users, yet King.com no longer adequately expressed the cross-platform model the company was pursuing. To mark its 10th anniversary in the skill games business, Midasplayer dropped the .com off the name and rebranded the operation as King.
In quick succession King added two new Saga titles to its Facebook stable. Papa Pear Saga, a Japanese Pachinko-like title derived from an existing web title, was released in March. A month later Farm Heroes Saga arrived. The latest Saga game uses the same Bejeweled-style game mechanics as Candy Crush Saga but substituting fruits and vegetables.
As of May, 2013, King was literally sitting on the top of the world. The company announced that it had more than 70 million daily players across all platforms, and had three Top 10 Facebook games: Candy Crush Saga (15.5 million DAU), Pet Rescue Saga (6 million DAU) and Farm Heroes Saga (4.8 million DAU). All told, King’s games were totaling 21 billion gameplays per month across mobile, social and online.
In Candy Crush Saga King has produced a milestone that points to the company’s future. The title has all of King’s traditional virtues: accessibility, attractive graphics, quick to pick up and put down, social involvement, PvP competition, monetary rewards, new levels added regularly, with glitch-free quality. What has served King very well is that the emphasis on skilled play has led their creative teams down a path where the game is addictive to play and beat.
One of the big changes that comes with Candy Crush Saga is that in making the jump to Facebook and mobile, King broadened its appeal to a larger audience of casual consumers in a big way. While virtual item monetization has not been a big money maker for King in the past, that scenario is changing. King changed its formula somewhat in Candy Crush Saga to make purchasing extra lives to keep progress from being erased an almost necessary option for players. To test whether they went too far, King dialed back this mechanic somewhat in the nearly identical Farm Heroes Saga so that users would not need to spend so much to keep their progress going. But the arrival of the newer titled has not seemed to impact Candy Crush Saga’s fortunes. Consumers might actually enjoy the extra challenge of staying alive… for now.
Such success brings endless speculation regarding when an IPO will take place. On that question Zacconi and company remain coy. After watching Facebook and Zynga struggle with going public, King might be better off staying as it is.
