In the ever-growing tech market, innovators are looking to create new products and strategies each day, all hoping their idea makes it big. Ever since the release of Apple’s iPhone, the market for apps has been one that many have jumped into. From social media apps such as Facebook and Twitter, to restaurant finders and music players, there is opportunity for anyone to come up with an idea that will be downloaded by millions. One industry that has found its place in the app market, and has dominated the top grossing charts, is video games.
There has always been online gaming and even mobile gaming with handheld devices such as the PSP or Nintendo DS, but never before had casual mobile gaming become so popular until the release of the iPhone. The market is booming for video games. “Consumers spent $34 billion on downloadable video games last year…[with] $16 billion on mobile apps….” That is quite the chunk of change right there. It’s no wonder that companies and individuals are taking advantage of this market.
One of the driving forces of this success has been the “free-to-play” model for pricing. The concept is that the apps themselves are free to download, but additional add-ons within the game cost you actual money. Some examples include power-ups, advancing levels, or buying in-game “money.” It is a basic model for hooking the consumer so that they will spend more and more. One might even say that consumers spend even more through this model than they would if the app had only a one-time purchase cost. The option to buy multiple things within the game and enhance the experience is enticing, and works incredibly well.
King, the company that brought all of us hours upon hours of fun and frustration with their game Candy Crush Saga, is one such company that utilizes the free-to-play pricing model. One big key for the success of the strategy, however, is popularity. King had only 5% of its users purchase something within the game. Fortunately, they were averaging 408 million monthly users in December. That’s roughly 20 million people who are purchasing in-game items. As I am sure you can deduce on your own, King is doing pretty well for itself. So well, in fact, the company decided to go public this past week. “It initially priced its public offering at $22.50 on Tuesday at a valuation of around $7.1 billion.”
The major concern surrounding King is whether it will be able to sustain their revenue stream. With only one major hit many wonder if the company is safe to bet on in the market. “The company claims to have the industry’s most rigorous testing model for new games, and two of its other apps, Pet Rescue Saga and Farm Heroes Saga, have also been successful.” While self-confidence is good, it will take a lot more for King to continue bringing in such hefty profits. Their utilization of the “free-to-play” model has been the driving factor of their success, but time will tell us all if they can stay atop the market.