Two news items of interest today (besides Tesla’s earnings which I will cover in a separate post). The first is King Digital Entertainment (KING? – Symbol to be confirmed), better known for the popular online game Candy Crush Saga, announced yesterday plans to issue a $500M IPO – with valuation guestimates of $5-$7B. This announcement actually helped raise shares of Zynga (ZNGA) to a near 1-year high but also brings the many comparisons and painful memories of the company that was a 1-hit wonder in the app game world. Candy Crush Saga falls pretty much along those lines – as the company’s Form F-1 filing indicates, Candy Crush has 93M daily average users and 1.1B daily game plays vs. its next most popular game at 15M and 129M. However, comparisons with Zynga can stop here as surprisingly Candy Crush and fellow apps generated nearly $2B in revenue in 2013! I personally enjoy playing the game on the commute to work (despite my belief that the game is purely random) – but can’t fathom how so many of its users making in-game purchases. I’m sure the company will price itself relative to Zynga (which IPOed at $7B) – but the company will have to show it can spit out more than a one-hit wonder for this investor to show any interest.
The second news of the day occurred after hours as Facebook (FB) announced a $19B ($4B cash + $12B FB shares + $3B Restricted FB shares) purchase of instant message app WhatsApp. In the accompanying slides with the press release, Facebook indicated uptake in the WhatsApp app was faster in the first 4 years of operation than any other social media. With over 450 million monthly active users (70% on a given day), and growing more than 1 million per day, it looks like a ridiculous evaluation for 900M eyeballs especially considering the little revenue it brings in. At least the price per eyeball seems consistent as Facebook purchased Instagram for $1B which only had 30M users at the time. ($1B/30M = $33.33 vs. $16B/450M = $42.22). This will certainly up the price for anyone who wants to acquire SnapChat (which rejected Facebook’s $3B offer). Also makes me think that if Blackberry (BBRY) had focused on their messaging services earlier, they might have received a nice offer if they had the user base. Only time will tell to see how well WhatsApp integrates into Facebook’s master plan.