Zynga Inc (NASDAQ:ZNGA) and King Digital Entertainment PLC (NYSE:KING) are two big social gaming firms, and both are hugely dependent on Apple Inc. (NASDAQ:AAPL) for business. The iPhone maker offers opportunities to its top developers like Glu Mobile, that makes 64% of revenue from Apple, and Zynga also make huge revenues by developing Apps for the App Store.
New iPhone not helping Candy Crush
Almost 73% of King Digital Entertainment’s revenue for the fourth quarter came from mobile gaming. The major problem identified with King is that even after the launch of new iPhone 5S5S, the revenues were in downtrend, according to a report from Gurufocus.
Continued from part one... Q1 hedge fund letters, conference, scoops etc Abrams and his team want to understand the fundamental economics of every opportunity because, "It is easy to tell what has been, and it is easy to tell what is today, but the biggest deal for the investor is to . . . SORRY! Read More
Candy Crush is a hugely popular game from King and is very addictive too. The game generates nearly 80% of the total revenue of the company and this makes King hugely dependent on it. The IPO valuation of Zynga was lower than the King’s IPO valuation of $7.6 billion, and this price does not seem justified as the company has just one hit in its kitty. The company’s revenues have been seen dropping sequentially for quite some time now, which is an indicator of declining popularity of Candy Crush, which may prove severely bad for King.
It was expected that the revenue and bookings of King will get a boost with the launch of iPhone 5c and 5s, but unfortunately this did not happen. In the fourth quarter, a substantial fall was noted in the revenues and bookings of King, which puts a huge question mark on the benefit to the company by new iPhone models getting launched.
While the game downloads are on a decline since later 2013, a small hike was seen in March as a result of the over hyped IPO, but that didn’t sustain for long and eventually the number downloads kept declining.
Zynga better than King
Zynga’s FarmVille 2 did generate many likes, but declined in the later days just like Candy Crush. Though the game maker managed to outperform the consensus estimates with its earnings for two continuous quarters, the declining DAUs are still to be dealt with. From March 2013 till date, the DAUs for the most popular Zynga game, FarmVille 2, have declined to half and are reported at only 4 million.
King’s huge dependency on Candy Crush makes it a bad buy, but Zynga is a comparatively better buy because the company has acquired NaturalMotion and also adopted new technology that can massively support company’s turnaround efforts, according to the report.