Activision Blizzard’s announced acquisition of King Digital Entertainment, best known as the creators of Candy Crush, would have raised a few eyebrows on Tuesday. For some, $5.9 billion would seem pretty steep for a company best known for virtualizing ‘three-in-a-row’, and it is undoubtedly a high price when put into context of other recent major acquisitions – taking Facebook as an example, they paid just $1.1 billion for Instagram in 2012, and $2 billion to acquire Oculus VR last year. However, for many it will be seen as a particularly savvy move by a company already leading the way in the PC and console gaming sector with Call of Duty and World of Warcraft franchises.

Firstly, sticking with the financials, the current valuation represents around a $1 billion discount from their IPO price of around $7 billion in March of last year.

The Mobile Foothold

It is the mobile foothold that King offers which suggests that Activision has made a sensible move. Data from our CrossMedia link panel in the UK, where we continuously track Android & iOS mobile devices, illustrates the strength of King in the mobile space. Focusing on Android smartphones; Candy Crush Saga was the 20th most used app in September 2015, played by just under one in ten smartphone owners, and is closely followed by the sequel, Candy Crush Soda Saga in 24th place. In fact King dominates mobile gaming owning the 3 most played Android gaming apps, and 5 of the top 10.

Not only do they lead the way in audience reach, but their games also encourage an extremely high level of engagement. The average Candy Crush Soda Saga player went on the app over 27 times in September, just short of once a day, and played for over 3 hours. To put that into context that’s almost as much time as people spend on Facebook.

This engagement also fosters a willingness to spend money. Unlike the console world, where the majority of money is made up front with the initial purchase (though downloadable content is growing), King’s titles are free to download and instead they make their revenue through a steady flow of in-app purchases throughout the lifespan of the game, which can be anything up to 4 years. Three King games were in the top 10 grossing games on both Apple’s App Store and Google Play Store in the US in Q2 2015[1].

While Activision Blizzard have made a foray into the mobile world, particularly with spinoffs of their best-selling PC/console titles, they lie some way further down the rankings and have not fostered the same levels of engagement. This lies in stark contrast with their performance in PC and console gaming where, according to GfK Chart-Track data, since 2008 and the establishment of Activision after the Vivendi merger, the company has accounted for 13.5% of all console and PC games revenue in the UK. Over that same period, their Call of Duty franchise has accumulated the most revenue of any games brand (£908m).

The acquisition provides Activision Blizzard access to both the largest network of mobile gamers through their current free-to-play titles, and the skills and expertise to develop and grow the reach of their hit console titles on mobile, and make them available any place, any time.

Expanding their market

The importance of mobile gaming is already well documented with revenue suggested to hit over $30 billion this year, and surpass that of console games[2]. This growth is not expected to slow, with predictions of a further $10 billion to be added in the next 2 years. Nearly half of our panelists engaged with a game in September, making it the 9th most engaged with category on smartphones, and reports suggest that the number of individuals gaming increasing, and the time spent playing mobile games is entering into multiple hours per day.

Lastly, don’t ignore the immense data asset that King represents. With 340 million average monthly unique users, and many of these signing in via Facebook, they undoubtedly hold a huge amount of data around their users. So far this has largely been used to market across the King app franchise, but could now be utilized to up sell to major console titles.

If Activision Blizzard can get its ducks (or more appropriately candies) in a row, then $5.9 billion could represent a very astute piece of business.

For more information contact Michael Grogan at michael.grogan@gfk.com.

[1] http://investor.king.com/investors/news/financial-releases/Press-Release-Details/2015/King-Reports-Second-Quarter-2015-Results/default.aspx

[2] http://venturebeat.com/2014/10/22/mobile-games-will-overtake-console-revenues-in-2015/