Not Even Kim Kardashian Can Break the App Store
Reality TV star Kim Kardashian is famous for posting pictures online that draw so much traffic that they can “break the Internet.” An app that let players pretend to be friends with Kardashian published two years ago by Glu Mobile at first seemed to have the same kind of irresistible popularity.
But mobile gaming is a volatile and trend-driven market, and yesterday’s hits are usually overtaken by the next big thing. Pokemon Go is huge right now, but check back in six months and it may be almost forgotten.
Glu and its shareholders learned that lesson the hard way.
The Kardashian game, Kim Kardashian: Hollywood, lets players try to become famous in Tinseltown while getting advice from a virtual version of Kardashian, the person perhaps most famous for simply being famous.
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A free download, the app makes its money with in-game sales of “koins,” which can be used to improve a player’s social standing. Early success led to outlandish predictions of a $200 million payday in just six months, sending Glu Mobile’s stock as high as $7.60 a share. Gameplay quickly tailed off, however. By the end of 2014, the game had fallen out of the top 100 downloads in the U.S. Apple App store and Glu’s share price was under $4.
This year, except for a brief mid-February spike when rumors of a divorce from Kanye West had Kardashian back atop the headlines, the app has rarely been in the top 250, according to App Annie, and Glu’s share price currently sits at $2.19. The Kardashian game’s total bookings, which includes the cut Glu must pay to app store owners like Apple, fell to under $8 million in the second quarter, less than one-fifth what it brought in at the height of the game’s popularity.
Such is the difficult reality facing Glu CEO Niccolo de Masi, who followed up the initial Kardashian success by signing up a host of other celebrities including Britney Spears, whose app flopped, and Nicki Minaj, whose game has yet to arrive.
“If other Glu celebrity-based games did not encounter the same success, it might be linked to the scope of the intellectual property itself,” says App Annie vice president Fabien Pierre-Nicolas. “Kim Kardashian provides a full dynamic universe for her fans with the Kardashian family, on par with a mega intellectual property like the Marvel Cinematic Universe or Star Wars. It’s all about finding those other celebrities with the same aura.”
de Masi acknowledged as much on a call with analysts on Tuesday night after the company reported second quarter results. “We have not seen that level of, call it, cultural–sort of phenomenon from anything we’ve launched through Gordon Ramsay, although that doesn’t necessarily mean that they haven’t been good workers and good partners for us,” he said.
He also shared some bad news with shareholders. With revenue sliding from existing games and most new titles failing to break through the app store clutter, Glu will change its strategy resulting in lower expected revenue and larger losses for the rest of the year. Total bookings for the year are now expected to be $195 million to $202 million, reduced from an earlier forecast of $215 million to $235 million. Even at $202 million, that would reflect a 17% drop from 2015.
With Glu shares already down over 40% since late February, the stock lost only another 4% on Wednesday.
Glu’s new strategy will be to launch fewer new titles and only after spending more time and resources to ensure they will have better staying power, particularly by adding social features to promote the development of communities of game players, he said. The publisher will also go back to the top handful of its existing titles, including Kardashian’s game and even older games like Deer Hunter, to bolster those same kinds of features. The goal is to create “evergreen” hits with steady revenue.
“We believe we can through a mixture of the evergreen focus as well as cost-cutting underway, it gives you a lot of breathing room when it comes to perfecting fewer, bigger, better titles that we think will have real chances of punching through the charts,” de Masi told analysts.
For more about Kardashian’s sisters’ app, watch:
It could work, given the powerful pull of nostalgia demonstrated by the popularity of Pokemon Go, says App Annie’s Pierre-Nicolas.
“Ultimately, it’s really about the quality of execution on the product and marketing side,” he says. “Glu Mobile has demonstrated over and over they can deliver hit games.”
Shareholders could use a few new hits right about now.