Candy Crush

[imoldernu]

As an investing challenged dummy, I am honestly puzzled... no... mystified! at the stock values of IPO's like Candy Crush, that appears to be coming in at between seven and eight billion dollars. Can there be a revenue flow to justify this? Is advertising value an infinite number?
The question is not meant to be only for Candy Crush, but for many, if not most, of the social media based businesses.

Not a rhetorical question... Seriously... What's the rationale?

 

[panacea]

I don't pretend to understand this. Advertisers are apparently willing to pay ridiculous amounts of money based on the number of users of these apps... and although I've never played Candy Crush or most of these types of games, there are a gazillion people that do. What seems especially odd is that the players seems so addicted to the games I can't imagine they are spending any time looking at the ads. Or maybe that's just the way I'm wired... to ignore ads.

 

[NYEXPAT]

IIRC They made $580 Million last year mostly on user upgrades?

 

[Ready]

It has been a highly profitable company. They produce hundreds of games, but the majority of revenue comes from one game - Candy Crush. While it has done very well, something better will come along at some point. I think this company may be a one hit wonder. That's my best guess, so I'm going to stick with it and stay far away.

 

[Meadbh]

It has been a highly profitable company. They produce hundreds of games, but the majority of revenue comes from one game - Candy Crush. While it has done very well, something better will come along at some point. I think this company may be a one hit wonder. That's my best guess, so I'm going to stick with it and stay far away.

Bloomberg agrees with you.

King IPO Discount Shows One-Hit Wonder Worry for ‘Candy Crush’ - Bloomberg

The company made a profit of $30 million last year, but the odds are against a repeat of its Candy Crush success. That is, it's a fad.

 

[Katsmeow]

I don't pretend to understand this. Advertisers are apparently willing to pay ridiculous amounts of money based on the number of users of these apps... and although I've never played Candy Crush or most of these types of games, there are a gazillion people that do. What seems especially odd is that the players seems so addicted to the games I can't imagine they are spending any time looking at the ads. Or maybe that's just the way I'm wired... to ignore ads.

You don't understand how this works. It is like a lot of free to play games. That is, the basic game can be played entirely free. But, it is much slower to play and far more difficult to play on a free basis.

I've played Candy Crush and it is fun. And, at first, it is very easy. But there comes a point where you get stuck and it can be very difficult to get past a level without paying real money to buy more moves or upgrades that make it easier to win.

Now, there are some games that I don't mind spending real money on (Hearthstone) while there are others I really want to play free (Candy Crush). So I've been stuck on a particular level for a couple of months. I will likely either give up the game entirely (I haven't played in weeks) or will have to cough up some money to buy upgrades so I can move on.

Now I don't like Candy Crush enough to want to spend much real money on it. But, lots of people od like it enough to spend real money on it.

 

[panacea]

Really?? I knew many of these games have pay versions or upgrades that you have to pay for but I honestly didn't think there were many people that forked over money for that. I had no idea that's where much of the revenues come from! I'm living in a different world I guess.

 

[audreyh1]

I just see a bunch of bright loud colors when I see the ads for Candy Crush. Kinda reminds me of a casino.......

 

[Fermion]

I am still waiting for a virtual reality world as in Caprica (or Snowcrash). For gaming but also for doing your shopping visually...put on goggles and walk into stores, trying on outfits.

Facebook just spent 2B on a goggle company but who knows which one will be the big winner.

 

[aja8888]

Really?? I knew many of these games have pay versions or upgrades that you have to pay for but I honestly didn't think there were many people that forked over money for that. I had no idea that's where much of the revenues come from! I'm living in a different world I guess.

The pay games on Facebook (Zynga owned) generated tons of cash for both Facebook and Zynga. These are the Farmville stuff, etc. I know of people who spent tons of money via credit cards on this crap.

 

[imoldernu]

I didn't do a good job on the "headline". I had hoped for this to be a general discussion. I picked Candy Crush because of it's high profile as of today.

What I should have centered on was this:

The question is not meant to be only for Candy Crush, but for many, if not most, of the social media based businesses.

The underlying part of "social media" as a business model... that I don't understand, is whether the staying power of social connectivity is real, or a passing fad... albeit a 5 or ten year fad.

I look at my 5 year old neice, and wonder if her life over the next 10 years will involve a 24/7 connection to a social grid... and compare that to my childhood, which was limited to two blocks in the early years, and the nearby community of the schools in the later years.

Right or wrong, Facebook/Email/Online gaming/Texting appears to me to be the current social structure in which a young person develops and maintains his/her ego, and persona. The basic question is... CAN IT LAST?

Will everyone eventually be spending their lives being connected to everyone else, via technology? OR... (My belief only) will this fade, as did the CB rsdio craze in the 1980's. Is gaming here to stay? Will it replace the social interaction that clubs, groups and neighborhood used as a glue for building communities?

Sooo... back to the initial thoughts about the economic stability of the social media as a sustainable business model. Will reality be replaced by "virtuality"?

Sooo... 5years... 10 years from now, social technology a major market player?

http://www.marketwatch.com/story/an-investment-app-for-social-media-stocks-2014-03-03

 

[aja8888]

Remember My Space...it faded and probably other similar first attempts did too.

But with the inter-connectivity and ease of use of devices today (smart phones, computers, tablets) I would suspect it (social media) will continue to be a form of personal communications and a way to "belong" to a group (like this forum) for a long time to come.

Now old farts like me don't participate much in Facebook as I have other things to do with my time and don't care if Sally had tuna fish for lunch today, but I do have a Facebook account, although rarely used. But DIL lives on the darn thing, from what I can tell, and so does her 70 year old mother.

I have no Twitter account and don't wish to get one.

 

[sengsational]

The basic question is... CAN IT LAST?

Will everyone eventually be spending their lives being connected to everyone else, via technology? OR... (My belief only) will this fade, as did the CB rsdio craze in the 1980's. Is gaming here to stay? Will it replace the social interaction that clubs, groups and neighborhood used as a glue for building communities?

It will last, but the form will change and evolve, just as CB radio lost its luster as people were able to use cell phones instead*. Technology-based games are already displacing face-to-face games, and I see that trend continuing.

The reason why the valuations are so high, IMHO, is because it doesn't take much...just a few cents from each user on average, multiplied by the gigantic user base, and you get a really big number. Will most of them be around in ten years? Probably not (myspace / facebook example). But something else will come along.

* A little googling turned up this:

The boom in CB radio continued throughout the 1980's and into the 1990's. It would often be so busy that it was difficult to find a clear channel to use! However by the advent of the 21st Century the popularity was falling off due to cheaper mobile phones, text messaging and internet communication.

In the boom years CB tended to be mainly used by people just wanting to chat, make new radio friends and have fun. This type of pastime has now found a new home on internet chat rooms, instant message software and e-mail, not to mention free Voice Over IP telephony.

 

[Katsmeow]

I look at my 5 year old neice, and wonder if her life over the next 10 years will involve a 24/7 connection to a social grid... and compare that to my childhood, which was limited to two blocks in the early years, and the nearby community of the schools in the later years.

Right or wrong, Facebook/Email/Online gaming/Texting appears to me to be the current social structure in which a young person develops and maintains his/her ego, and persona. The basic question is... CAN IT LAST?

Will everyone eventually be spending their lives being connected to everyone else, via technology? OR... (My belief only) will this fade, as did the CB rsdio craze in the 1980's. Is gaming here to stay? Will it replace the social interaction that clubs, groups and neighborhood used as a glue for building communities?

Yes, it will stay. It will change, though, as new things happen.

I also think that gaming particularly online gaming will be huge. I've been playing a lot of Hearthstone lately. This is a free to play online card game put out by Blizzard (who puts out World of Warcraft). While it is free to play if you play seriously you have to put money into buying more cards.
Some people say they would never pay to play a game online, but I would suggest that this is, well, an old way of looking at things. Many of the people who say that would spend plenty of money on their hobbies. The thing is that online gaming is moving from being a solitary thing to being very social. Sometime go to Twitch.tv and watch some of live streams of people playing games. Many of the people that you are watching during streaming are professional players. What they do for a living is play that game and stream their playing for the public. There are even professional teams.

For many older people all of that may not sound like anything real. But, my son for example (who is 19) can name the main players and follows gaming and watches streams just as closely as any football fan follows his/her favorite team.

 

[Meadbh]

The pay games on Facebook (Zynga owned) generated tons of cash for both Facebook and Zynga. These are the Farmville stuff, etc. I know of people who spent tons of money via credit cards on this crap.

Zynga also has Words with Friends, which is a well designed adult game derived from Scrabble. I am hooked on it. Occasionally I will spend $.99 for some added features.

 

[Walt34]

I look at my 5 year old neice, and wonder if her life over the next 10 years will involve a 24/7 connection to a social grid... and compare that to my childhood, which was limited to two blocks in the early years, and the nearby community of the schools in the later years.

I've wondered about that too, but I think it is just a change that is happening that enables people to connect faster/easier, much as the telephone did in the 20th century over writing paper letters with a pen in the 19th.

As to the market valuation of the company, well, it's an alternative to Las Vegas. You can lose all your money right from the comfort of your soon-to-be-foreclosed-on home.

 

[wmc1000]

No facebook acct for me, nor twitter or any other - but i also don't have cable or a smartphone - my DW does have a FB acct so she can keep up with the kids and some of her friends however!

 

[photoguy]

Some people say they would never pay to play a game online, but I would suggest that this is, well, an old way of looking at things. Many of the people who say that would spend plenty of money on their hobbies. The thing is that online gaming is moving from being a solitary thing to being very social. Sometime go to Twitch.tv and watch some of live streams of people playing games. Many of the people that you are watching during streaming are professional players. What they do for a living is play that game and stream their playing for the public. There are even professional teams.

I grew up as part of gen-x and probably spent more than my fair share of time playing video games. I think I'm probably too much of a gaming snob but the distinction I would draw is whether the game is "pay-to-win". I.e. can you spend real money dollars to basically win the game (Candy Crush sounds like it falls into this category). On the other hand, something like Blizzard's world of warcraft (with 12M subscribers at it's peak) is a paid online game but it's not pay-to-win (with a few rare exceptions). Everyone has to pay a set amount per month (about $10) but the game isn't designed so that if you pay more to the developer, you can complete more objectives.

I'm happy to pay for online games but I have an extremely strong bias against pay-to-win -- I feel like it tends to lead to poor game design and I feel like the developer is nickel and diming me. I far prefer games where you pay a fixed amount to play.

For many older people all of that may not sound like anything real. But, my son for example (who is 19) can name the main players and follows gaming and watches streams just as closely as any football fan follows his/her favorite team.

I'm guessing the vast majority of "pro" gaming players are in games which are not pay-to-win.

 

[Fermion]

No facebook acct for me, nor twitter or any other - but i also don't have cable or a smartphone - my DW does have a FB acct so she can keep up with the kids and some of her friends however!

Cool! There are at least two sane people in the world! (I don't have a failbook or twatter account either)

 

[Katsmeow]

I'm guessing the vast majority of "pro" gaming players are in games which are not pay-to-win.

I think it is a fine line. I do play World of Warcraft and I agree it is not pay to win. You pay a fixed monthly fee. There are things you can buy, but they are cosmetic really and don't give an in game play advantage.

For Hearthstone and similar games I think it is more of a gray line and it is really a matter of paying cash versus paying time. Hearthstone is a card game and so the cards you have are very important. You can get every card in the game free without paying a dime. But, that takes a substantial investment of time. Or you can buy packs of cards which makes it easier to do well if you have good cards. You can buy packs of cards using in game currency (basically obtained through playing) or through using real money. I don't personally consider that pay to win any more that is paying to win when someone buys physical cards to play MTG.

 

[imoldernu]

Step aside Candy Crush...
Along comes Oculus... the new Virtual Reality device that Mark Zukerberg thinks is a great buy at a paltry 2Billion, even though there may be no product for another few years.

Zuckerberg paints a surprising future for Oculus VR: 'The most social platform ever' | VentureBeat | Business | by Christina Farr

I just worry that I'll be seeing a car coming in the other direction, with the driver wearing one of these..

 

[aja8888]

Zuckerberg:..... “there aren’t many things that have the potential to be the next big computing platform,” he added. “Oculus has the potential to be the most social platform ever. Immersive, virtual and augmented reality will be part of people’s daily lives.”


As Bloomberg’s Brad Stone points out, there’s actually nothing less social than blotting out everything around you with a pair of darkened glasses. Indeed, Oculus VR is best known among gamers, who use it to immerse themselves into a virtual simulation of a game world.


So who do you believe?

 

[photoguy]

For Hearthstone and similar games I think it is more of a gray line and it is really a matter of paying cash versus paying time. Hearthstone is a card game and so the cards you have are very important. You can get every card in the game free without paying a dime. But, that takes a substantial investment of time. Or you can buy packs of cards which makes it easier to do well if you have good cards. You can buy packs of cards using in game currency (basically obtained through playing) or through using real money. I don't personally consider that pay to win any more that is paying to win when someone buys physical cards to play MTG.

You make a good a point about the cash vs playing time issue. Diablo 3 had a real money auction house (you can buy or sell virtual items for $) and I was interested in this as an economic experiment (blizzard took a cut of sales). But the game kinda sucked (hard to balance advancement vs rewards vs ability to get gear on AH) and I lost interest. I think Blizzard eventually decided to shut it down due to impact on game play.

I never heard of Hearthstone but my wife likes card games so I'll point her toward that.

 

[imoldernu]

Thought you might enjoy this comment from Money Watch...

Sophisticated investing personified?

Virtually Buying Everything: Shares of Facebook Inc. (Nasdaq: FB) slid by more than 5% after the company announced plans to purchase Oculus VR Inc., a maker of virtual-reality glasses and systems. Some investors got so hung up on the $2 billion deal that they started purchasing shares of another company sharing the same name. Shares of Oculus VisionTech Inc. (Nasdaq: OCLS), a medical products manufacturer, surged by more than 6%, forcing the company to issue a press release today that they are not the same firm purchased by Facebook.

 

[imoldernu]

Tech Momentum
discussion on MSNBC today about trends in Tech Stocks. Likely stimulated by the drop in King and Candy Crush value, but the broader view about longer term profitablity and sustainability of many Tech based, not just game or internet but biotech and many more emerging technologies including Tesla.
Likely temporary, but the Nasdaq is down 5% in the past 2 weeks.

... and by the way... another discussion about big investors leaking info on the purchase of Tech Stocks.

Also... Microsoft Office for Ipad... a test of willingness to pay big $$$ for Apps when freebies are already available.