EEarlier this month, Irish interactive entertainment company King Digital Entertainment announced its plan to pursue an initial public offering (IPO).  Unlike Facebook, Twitter or LinkedIn, King is not a household name.  However, the millions of users rendered powerless by the sweet enticement of its crowning achievement “Candy Crash Saga” recognize all too well the orange backed yellow King logo.  King has other games in its repertory, “Papa Pear” for one.  Heard of it?  No?  Thought not.

In order to pursue an IPO, a company must first release previously private information.  King’s filings revealed a bunch of interesting statistics.  The staggering data begs the question, is “Candy Crush” the Michael to King Digital’s Jackson Five?

The data King disclosed can be used to learn a ton about “Candy Crush”:

For the month of December 2013

• King (all games) Daily Average Users (DAU): 128 million
• “Candy Crush” Daily Average Users: 93 million
• “Candy Crush” accounts for 73% of DAUs.

• King game plays per day: 1.2 billion
• “Candy Crush” game plays per day: 1.1 billion
• “Candy Crush” accounts for 90% of game plays per day.  This is an important statistic; “Candy Crush” basically makes up King’s entire business.

Key takeaway: “Candy Crush” users play an average of 12 times per day (1.1 billion divided by 93 million).  Given the likelihood that many users play only once or twice, it stands to reason that some diehards land north of 20 crush attempts per day.

If each turn takes around 2.5 minutes that means users spend an average of 30 minutes a day playing “Candy Crush.”  How else might a Candy Crusher spend those valuable 30 minutes?

A quick 30-minute run burns something close to 500 calories and helps a person maintain a certain level of fitness.  Sure, many people play mobile games during commutes, at work or in other instances when exercise isn’t particularly feasible.  To them, their conscience should say, “Read a book!”  Reading 30 minutes a day at a rate of a page a minute means finishing a book every one to two weeks.  That’s like 30 books a year.  Somehow that seems better than matching pieces of colored candy, no matter how frequently that freaky little girl says “Splendid days.”

Now for the all-important question: How much is “Candy Crush” worth?

King disclosures for calendar year 2013:

• King Unique Payers (the number of people who actually spend money on virtual goods and extensions): 39.6 million
• Assuming the ratio of game plays (90%) is a good proxy for what portion of King Unique Payers comes from “Candy Crush,” then the megahit saw 35.8 million individuals cough up their hard earned cash on what’s effectively a free game
• King (all games) player spend: $1.98 billion
• Assuming the same 90% ratio, “Candy Crush” players spent $1.79 billion
• 35.8 million unique payers spending $1.79 billion means the average “Candy Crush” payer spent $50 in 2013
• King converts 42% of its player spending to profit
• Assuming a similar conversion rate for “Candy Crush”, the game generated $745 million of profit

Which means…
Investors in the stock market generally value companies by looking at profits generated.  High growth online companies like King trade at a high multiple of profit relative to most companies in the market.  As an example, Zynga is currently worth 35x its profit (compare that to Starbucks which is worth 14x its profit.)  Using the Zynga multiple, “Candy Crush” is worth $26 billion.  The company recently valued its private stock at $9.4 billion (so if “Candy Crush” makes up 90% of King’s value that equates to $8.1 billion – clearly this transaction should be nicknamed the Candy Crush IPO).  The real value lies somewhere between $8 billion and $26 billion – an astonishing figure anywhere in that range.  To put that in perspective, here are some values for some well known assets – Manchester United: around $4 billion; New York Yankees: around $2.5 billion; and Electronic Arts: around $9 billion. So next time you fire up “Candy Crush” on your smartphone or tablet, understand that you have helped make a bunch of people in Ireland very wealthy.

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