Games Industry Pioneers; Riccardo Zacconi

Riccardo Zacconi is the Co-Founder and former CEO of King Digital Entertainment, one of the biggest, most successful, and innovative mobile game companies in the world.Under Zacconi’s leadership, King created one of the most popular games ever to appear on mobile devices, Candy Crush Saga. The company has grown its monthly active users year on year, hitting 271 million in Q2 2020, driven largely by its popular match-three puzzle franchise. Candy Crush is one of the most profitable and enduringly popular smartphone apps of all time. The puzzle game and its various spin-offs have stayed in the top 10 highest grossing games in the world for more than five years and continues to be extremely popular among gamers around the world. King itself has been the subject of a $5bn IPO and a $6bn trade sale to Activision Blizzard and is recognised to be one of the biggest and most successful mobile games companies in the world.

So how did King become such a dominant player in the mobile games sector?

King and Riccardo Zacconi’s story is very much intertwined. Riccardo grew up in Italy, and after completing his degree in Economics, began his career in management consulting at LEK and BCG before transitioning into the internet industry at the start of the dotcom boom. In 1999, he joined his first ever internet venture, the Swedish online startup Spray.

Zacconi became Managing Director of Spray, a Yahoo-like online portal that was riding the dot-com boom. Initially the business was witnessing success, “by the end of the year, we grew from about 20 to 800 people. So it was incredibly fast growth, and it was a real tech bubble kind of story,”. However, the company wasn’t profitable enough to survive in the long term and was sold to Lycos in 2000. Unfortunately Riccardo’s first digital venture was not successful, yet it didn’t prevent him from pursuing a new business venture.

In 2001 he moved to the investor Benchmark Capital as its entrepreneur in residence, tasked with generating new business ideas. “I came up with 50 ideas. And one of these ideas was to do online dating. I killed the other 49. This was the idea which was the best.” Zacconi had seen the success of Match.com in the US and wanted to launch a subscription dating site in Europe. He approached Mel Morris, founder of website uDate, with the idea that Benchmark would invest in Morris’s company. Luckily for Zacconi, Mel refused the offer, because the company was very profitable, and instead offered Zacconi the opportunity to join the company and manage the business in Europe. Zacconi could not refuse such offer and took the job. uDate was soon sold to Match.com owner USA Interactive for a reported $150 million in stock. Zacconi did fairly well, making about £350,000 from the sale.

After his first digital success, Riccardo was hungry for a new challenge. In 2003 he co-founded King, then known as Midasplayer. One of his co-founders was Toby Rowland, uDate’s former Marketing Director, and the others were former colleagues from Spray – Sebastian Knutsson, Patrik Stymne, Thomas Hartwig and Lars Markgren. After the dot-com crash, raising money for the new venture was difficult, so the founders had to invest their own money. In this tough period Riccardo even had to live on a friend’s couch for two years, but it didn’t stop him from building King into the games giant it is today.

The company had a huge boost when Morris agreed to invest in the company to develop more than 200 games. “The initial idea was to organize competitions where people would compete against others for free or for a small fee. And there would be one level only in a game. And the person who would complete this one level with the highest score would win the tournament.” The company ran its games on Yahoo and AOL to start with, testing them out on the platforms to see which games became popular, and by 2005 it had enough money to buy the domain name King.com from an English teacher named Peter King — and rebranded itself the same year. “We made him an offer and we paid him I think something like $200,000 or $300,000 at the time, which was an incredible amount of money considering the money we had — but we thought it was a great URL.” During this period of time, King was making skill-based games, with low cash stakes wagered on the outcome. It was closer to an online gambling business than a normal games developer.

In 2007, Facebook opened up its platform to games developers, and King assigned six or seven people, out of 100 staff to experiment on the platform. Soon making Facebook games would become the key focus of the company. In 2009 King’s rival Zynga launched a Facebook game, which became incredibly popular, called Farmville. And at the same time Facebook started to grow massively. King didn’t find instant success making games for Facebook. It was a very stressful year for Zacconi as he had to manage the expectations of investors and the board as well as employees.

One of the key innovations that helped King to succeed was its development of the “saga” concept that would underpin many of its future hit games.

A saga is made up of short, one- to two-minute levels, and players can track their progress on a map. Whilst King made accessible casual games, the saga elements added depth to the game, giving users a strong sense of progression, and massively enhancing the longevity of the games. Another of King’s advantages was that they published their games on their own site before launching them on Facebook or mobile. This gave them valuable data on which games were popular and where they should focus their resources. One such game that proved incredibly popular on King.com was Candy Crush. The idea of a “match three” game wasn’t new – Popcap had enjoyed a lot of success with their match three game Bejewelled – but Candy Crush would take the genre to the next level. Theming the game around candy was a masterstroke, and the saga elements added depth to the title.

Two big changes were occurring in the games industry; the rise of free-to-play business models and the rise of mobile gaming. Facebook and mobile games had a new monetisation dynamic – relying on revenues coming from in-game purchases and to a much lesser extent advertising revenues. Around 2010, mobile games started to take off, with consumers increasingly using smartphones. Previously consumers had to buy a games console or high end PC to play games; now they could play high quality games on the devices in their pocket. This massively increased the audience for games, and consumers could easily download games from mobile app stores around the world. That the games were free to download meant that mobile games had far bigger user bases than was normal in the industry to that point. Mobile games companies had direct relationships with their consumers; they weren’t selling product through retailers, but marketing them directly to the consumer.

King got into mobile games early, and with Candy Crush Saga had built a powerful game; simple to pick up, yet difficult to master and appealing to a very broad audience. Female players have long been a key focus for King, and many of their players were not traditional gamers. Candy Crush was cleverly designed to encourage viral growth and in-app purchases; players had five lives, and if they ran out of lives they could either wait for more lives, ask a friend for one, or buy more lives for 99c.

Candy Crush Saga was launched on mobile in 2012 and on Facebook later that year. The game was a huge hit, notching up more than 500 million downloads and establishing itself as one of the most popular games and top grossing mobile apps in the world. King had designed the game to be accessible across multiple platforms, which meant that players could jump into the game seamlessly between their desktops and mobile devices. And it was this cross-platform strategy that fuelled the game’s success.  “The users went up like a rocket. We had a board meeting in October of 2012 where we defined the plan, and the budget for the entire following year, 2013. And by the end of November, we had already achieved the entire plan for the following year.” Zacconi recalls.

Many founder CEOs try to manage too much directly themselves, but Zacconi built a strong, senior team around with, with key hires such as COO Stephane Kurgan and CMO Alex Dale. Zacconi wasn’t a micromanager, and this helped to make him a very successful CEO. King also had the advantage of the huge revenues and player base that Candy Crush was generating – enabling them to cross-market new games to their existing player base and spend huge sums on advertising their games to the mass market. It was hard for smaller companies with much smaller revenues and existing player bases, to compete.

Having cemented itself as one of the biggest mobile games companies in the world, on March 26, 2014, King went public, pricing at $22.50 a share. But its stock fell more than 15% on its first day, hitting an intraday low of $18.25 and closing at $19. Zacconi said this was due to market concerns about the company’s potential. “The IPO was not a very easy one. We went out at a valuation of over $7 billion. But the stock price went down. There was a massive question from the markets in terms of will the game still be there in a few years from now? Is it a one hit wonder that is going to disappear after a few years?”

That wouldn’t be the case. A year later, a gaming giant Activision Blizzard announced it would acquire King for $18 in cash per share, valuing the company at $5.9 billion, which was a premium of 16% on King’s closing price that day. Candy Crush Saga would become part of Activision Blizzard’s stable of titles, including Call of Duty and Overwatch. In 2021, Candy Crush Saga remains one of the top 10 grossing apps on mobile.

However, not everyone was cashing in on King’s sweet initial public offering. At least two individuals associated with the Candy Crush-maker’s early development were missing out on potential billions because of their decisions to sell their shares in 2011, before Candy Crush took off. Co-Founder and former Co-CEO Toby Rowland as well as early investor and former board member Klaus Hommels each sold more than 40 million shares back to the company at a price under 8 cents a share. With King’s expecting shares to price the IPO as high as $24 a share, those stakes would have been potentially worth about $1 billion each. When asked regarding his decision to sell his shares in 2011, Rowland joked: “Oh well, I’d probably have blown it on wine, women and a vanity space program.” Had Rowland kept his shares, he would have been King.com’s largest individual shareholder with a stake bigger than those of Riccardo Zacconi and Melvyn Morris.

After the successful acquisition done by Activision Blizzard, in May 2019, it was announced that Zacconi would step down as CEO of King, handing the role over to Humam Sakhnini, who had become its President in January that year. After 16 years of leadership, Zacconi added: “It’s been an incredible ride, one that I would never have dreamt of when we started.”

For such a successful – and wealthy – entrepreneur, Zacconi remains very humble and his story with King is not one of instant success – it took lots of pivoting and craft over many years to build it into the gaming giant it is today. Today, Zacconi is investing in technology businesses through his investment vehicle Sweet Capital.

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