The Brave Ones

Riccardo Zacconi: Hitting the sweet spot

Riccardo Zacconi:
Hitting the sweet spot
Riccardo Zacconi is the co-founder of King, the company behind “Candy Crush Saga” that was sold for $5.9 billion in 2016. He gives CNBC the inside story of the game that has hit the sweet spot for millions around the world.
No way out

iccardo Zacconi’s business nearly went bankrupt in 2003. The dot-com bubble had burst, Zacconi had put all of his money into start-up gaming company Midasplayer, and he and his co-founders had spent the year trying and failing to find investment. It was just before Christmas and they needed to find the money before the holidays, or they would have to shut the company down.

Zacconi had put around half a million dollars into the business, made from the sale of dating website uDate to and he had attempted to reduce all personal costs to zero by selling his possessions and staying with a friend.

He and his co-founders had put their money into Midasplayer at the start of 2003. “Then I put the rest of my money in August of 2003. And we were basically both feet in the venture, in the boat. So, we had to navigate. There was no option out,” Zacconi told CNBC’s “The Brave Ones.”

Then one investor gave Midasplayer a lifeline: Zacconi’s former boss Mel Morris, the founder of uDate. But for Morris to make the cash available, his trustees had to give permission and there was no sign of the paperwork coming through.

It got to Christmas Eve and Zacconi thought he would have to abandon the business.

“I had a flight booked in the evening to fly back to Italy. And the signed papers with the financing had still not arrived. So, we would’ve had to sign to shut down the company that day,” Zacconi said.

“And I will never forget. I was physically on the floor, sitting on the floor with my co-founder. We were really destroyed. And suddenly, we heard that a fax was coming through. And in the middle of the fax, the fax machine broke down. So we bought a new fax machine. The contract was signed. And so, we could continue,” he added.

The business was saved, and eventually went on to become one of the world’s most successful gaming companies, with “Candy Crush Saga” making $258 million in the third quarter of 2019 alone according to data from consultancy Sensor Tower. But its near-bankruptcy was the first of many struggles the company would have to go through before making “Candy Crush Saga” work on a massive scale.

Number crush

“Candy Crush Saga” was launched by King in November 2012, and by November 2017 it, plus “Candy Crush Soda Saga” and “Candy Crush Jelly Saga” had been downloaded 2.73 billion times.

King had revenues of $2.1 billion in the fiscal year which ended September 2015, and in November that same year Activision Blizzard announced it would acquire King for $5.9 billion, in an effort to reach mobile gamers. Co-founder Zacconi owned 9.9% of King, meaning his stake was worth about $584 million.

That $5.9 billion price tag is higher than the sums paid for Marvel and Lucasfilm, which Disney bought for around $4 billion each.

King’s games, which also include “Bubble Witch Saga,” “Farm Heroes Saga” and “Pet Rescue Saga,” had 247 million monthly active users (MAU) as of the third quarter 2019, down from 262 million a year prior according to Activision Blizzard’s latest results statement.

"I always had in myself the need to become an entrepreneur and to have my own thing.”
Riccardo Zacconi
Nothing is impossible

acconi could have become a dentist. Born in 1967 and raised in Rome, Italy, he spent time at his father’s dental practice after high school.

“After 10 days, I told him, ‘Look, thank you so much. It’s a great opportunity. And it’s a shame. But I prefer to do something else.’ The only problem is that I had no idea what the something else would be,” Zacconi told CNBC’s “The Brave Ones.”

He had always been curious, a trait he learned from his father. “I always had in myself the need to become an entrepreneur and to have my own thing. And I got this from him. Because he always said that for him, the key thing was to be his own master and not to have to report to others,” Zacconi said.

His mother was an artist who escaped the Hungarian Revolution. “She escaped from Hungary in 1956 with literally nothing, only a toothbrush. And they managed to rebuild their existence from nothing. And so, what I learned from her were fundamentally two things. The first one is, you never give up. And the second one is, actually you can live well … without much,” he said.

Zacconi studied economics at Luiss University in Rome, because he had “no idea” what he wanted to do as a career. “I was trying to keep all my options open and I thought economics would give me the opportunity to do so,” he said. Researching his thesis on how economic principles can be applied to accounting he headed to Germany to study the theories of the economist Eugen Schmalenbach.

"I would say to all my students … if you have a task … no matter if you like it or not, you have to do it.”
Giovanni Fiori, professor, Luiss University

Being in Germany proved fruitful as he was approached by management consultancy firm LEK, which led to a role at Boston Consulting Group (BCG) and then to a job at online portal Spray Network. At Spray, he met the executives who would later become his King co-founders.

“My life is … a series of points of chance, which built the next point. And so, my first point of chance was when I went to Germany, I went into consulting … I just wanted to stay in Germany for a year and a half. I ended up staying in Germany for 10 years. And in ’99 I got Spray, and, again, another point of chance,” he told CNBC.

Zacconi has credited Luiss University professor Giovanni Fiori for assigning the thesis topic that took him to Germany in the first place. “He told everyone that one of the reasons (for) his success was the thesis that he did with me,” Fiori said of a university event Zacconi spoke at.

Dedication, no matter what the topic, is “a lesson for everyone,” Fiori said. “I would say to all my students: Guys, if you have a task, if you have a job to do, no matter if you like it or not, you have to do it.”

During his time as a management consultant, Zacconi learned that “nothing is impossible.”

“You start a project with a question, which is often a completely new area for you, something you have never done before. And you need to report to the board about this topic,” he stated.

“And you have a limited period of time. And at the end, you know that there’s a presentation date to present these results. And there is always a presentation. So, you learn after a while that you will always get it done,” he said.

At BCG, which he joined in 1993, he was taught to think beyond the obvious. “That’s something which has been always very valuable for my entire career, my entire life. So you can reduce the risk, or reduce the cost, or increase the opportunities just by thinking about the opportunities and the risks … two steps ahead,” he told CNBC.

Antonella Mei-Pochtler, a senior advisor at BCG and Zacconi’s former colleague, said they worked well together because they had a passion for consumer goods. “(We had an) understanding (of) what really moves people, and for creativity and for strong analytics,” she told CNBC.

"It’s only a matter of time that we need to crack Facebook, or we will be out of business.”
Riccardo Zacconi
Becoming King

n 1999, Zacconi became managing director of Swedish company Spray Network, a Yahoo-like online portal that was riding the dot-com boom.

“By the end of the year, we grew from about 20 to 800 people. So it was an incredibly fast growth, and it was a real tech bubble kind of story,” he said. But the company wasn’t profitable enough to survive long term and was sold to Lycos in 2000.

“We spent $100 million in a relatively short period of time. And we ended up selling the business, unfortunately in shares, and not in cash. Those are the things you learn over time. And the shares became worthless. So, it was a great experience. But from a pure money point of view, I didn’t make any money,” Zacconi recalled.

He moved to Benchmark Capital in 2001 as its entrepreneur in residence, tasked with generating new business ideas. “I came in 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. And this idea came because when we were (at) Spray … one of the many products we developed was online dating,” Zacconi told CNBC.

Zacconi had seen the success of in the U.S. and wanted to launch a subscription dating site in Europe (SprayDate had been free to use). So, he approached Mel Morris, founder of website uDate, with the idea that Benchmark would invest in Morris’s company.

“But he refused the offer, because the company was very profitable, and made me instead an offer to join, to build (uDate in) Europe,” Zacconi said. He took the job and uDate was soon sold to owner USA Interactive (now InterActiveCorp) for a reported $150 million in stock. Zacconi cashed in, making about £350,000 ($449,000) from the sale, he told CNBC.

"Riccardo … just lived (on) a friend’s couch. That was his home for two years … it was a tough period for all of us.”
Sebastian Knutsson, co-founder, King

In 2003, he co-founded King, then known as Midasplayer, with some of the money from the uDate sale. One of his co-founders was Toby Rowland, uDate’s former marketing director, and the others were former Spray colleagues Sebastian Knutsson, Patrik Stymne, Thomas Hartwig and Lars Markgren.

Knutsson was chief creative officer, Hartwig took on the role of vice president of engineering, Stymne was chief systems architect and Markgren was managing director.

But raising money was difficult. “I think we all came out of the dot-com crash, sort of scrapping around a bit … starting a new company. We knew it would be hard to raise money, so we all had to use the money we had,” Knutsson told CNBC. “I know Riccardo sort of essentially just lived on a friend’s couch. That was his home for two years, almost. So that was a tough period for all of us, I think.”

After finally securing funding from Morris on Christmas Eve 2003, Midasplayer went on 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,” Zacconi said.

The company ran its games on Yahoo and AOL to start with, testing them out on the platforms to see what became popular, and by 2005 it had enough money to buy the domain name 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.”

In 2007, Facebook opened up to games developers, and King assigned six or seven people, out of around 100 staff, to experiment on the platform. But it took more than two years to crack Facebook.

"When we were trying to understand how to crack Facebook, we essentially started six different projects in parallel. We felt that we had to innovate pretty quickly.”
Sebastian Knutsson

“2009 is the year when (King’s rival) Zynga launched a game, which became incredibly popular, called ‘Farmville’. And that’s the year where Facebook also started growing massively. And so, between April of 2009 and a year later, Facebook impacted one of our biggest partners, Yahoo in an incredible way. We were the key partner of Yahoo and games,” he said.

Zacconi described that period as “the most stressful time in my life,” as he had to manage the expectations of investors and the board as well as employees.

“For both managing the shareholders, the board, and for managing the team, the best thing is transparency. The people are not stupid. You need to tell them how things are, and not to tell them a beautiful story of how things could be and that everything is actually running fine,” Zacconi said.

He would show people a drawing of two characters under a sun umbrella on the beach, then zoom out to show that the couple were sitting in an hourglass timer, with the sand running out underneath them.

“Still we are profitable. Still we are okay, because we have loyal players who will stick with us,” Zacconi would tell them. “But we’re losing players and the revenues are slowly going down, and it’s only a matter of time that we need to crack Facebook, or we will be out of business,” he said.

Zacconi split King into two, assigning half the company to experimenting on Facebook. That group was further divided into several teams, each working on new ideas for games on the site.

“When we were trying to understand how to crack Facebook, we essentially started six different projects in parallel. We felt that we had to innovate pretty quickly,” Knutsson explained.

“We essentially had one really big dud that we just closed immediately after launching. We had a few mediocre games that we were quite happy with. But the last of the six was our first saga, the ‘Bubble Saga’. And that really took off. And from that moment on, we decided to focus and do more sagas on Facebook.”

A saga is made up of short, one- to two-minute levels, and players can track their progress on a map.

"The IPO was not a very easy one. We went out at a valuation of over $7 billion. But the stock price went down.”
Riccardo Zacconi
Sweet dreams

nutsson invented the idea for “Candy Crush Saga” in the bathtub. Zacconi had challenged him to come up with “the best match-three game ever,” and he wanted to base it on items that were readily available.

“Most of the games before had had jewels, or precious metals, but not things you see in everyday life. And I felt … let’s base it on candy. Something people naturally are attracted to. They look pretty. They’re edible. And it’s something that everybody sees. And it really made the game stand out in the market,” Knutsson told CNBC.

The game itself is easy to start, Zacconi said, but difficult to master. “You have to match three candies of the same type. And then they disappear from the field. And they create a score. And there are many, many levels. To achieve a level, you have to achieve a minimum score. And you can play also with your friends,” he said.

“Candy Crush Saga” is free to play, and gamers are assigned five lives. If someone doesn’t manage to get through a level, they lose one life, and once they’ve lost all five, players have to either wait 20 minutes for the game to restart, or pay 99 cents.

“Candy Crush Saga” was launched online at the start of 2012 and on Facebook later that year. But after rival Zynga launched a competing game on Facebook, it hit King hard. “For the first time, we saw our users going down and our revenues going down,” Zacconi told CNBC.

It wasn’t until King launched “Candy Crush Saga” on mobile, that the number of users soared. 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 fueled the game’s success.

“We launched the game in November 2012. And by the end of the month, the game … skyrocketed. I never experienced anything like that my whole life,” Zacconi added.

“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.”

In its first year, “Candy Crush Saga” was downloaded more than half a billion times on Facebook, iOS and Android, and it was reportedly making more than $600,000 a day via in-app purchases. It then had a few hundred levels. Now, that figure is more than 5,000.

And it also reached a new type of gamer, according to Mei-Pochtler at BCG. “Everybody thinks about gamers as guys who are in front of a screen. And I really loved that he thought about girls in front of a mobile phone or a smartphone. And it has to do very much with his empathy for people,” she said.

"We went not only through the good times and also through really bad times. And we learned that … you need to be patient and you need to trust the founder.”
Riccardo Zacconi

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.

“Once you are public, you (have to) report on quarterly results. But, nevertheless we actually worked on long-term games, developing games which would be innovative … which takes more time. And we did the IPO. The IPO was not a very easy one. We went out at a valuation of over $7 billion. But the stock price went down,” he said.

“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?”

It appears not. On November 3, 2015, 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.” Zacconi continued as King’s CEO, with Knutsson remaining chief creative officer and Stephane Kurgan its chief operating officer, a role he took up in 2011.

If you have a passion, if you have a desire, the only risk in life is not to try to pursue it.”
Riccardo Zacconi

The same year, Zacconi, Knutsson, Markgren, Hartwig and Stymne launched angel investment fund Sweet Capital, together with entrepreneur Christian Dorffer. Its typical investment is between $500,000 and $1.5 million, for which it takes equity of between 5% and 20%, according to a Fortune report.

“It’s just bringing all the experience we’ve had over these past 20 years to the founders, not just capital. Sort of, ‘How do you grow a business? How do you build a team that strong? How do you go across multiple countries, and face the cultural differences of those markets?’” Knutsson told CNBC.

Zacconi explained that Sweet Capital is their money, not third-party money, and they invest in companies in the mobile consumer space when they believe they can help the founders.

“We went not only through the good times and also through really bad times. And we learned that … you need to be patient and you need to trust the founder,” he said.

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. Zacconi is now the company’s chair, and earned around $19.8 million in 2018, including bonuses and stock option awards.

And his attitude to risk in general?

“If you have a passion, if you have a desire, the only risk in life is not to try to pursue it.”



Writer: Lucy Handley

Design and code: Marlon Lindo

Editors: Matt Clinch

Executive producer, The Brave Ones: Betsy Alexander

Producer, The Brave Ones: Kelly Lin

Images: CNBC, and Getty Images