Shares in Rovio Entertainment, the makers of Angry Birds, fell by more than 45% on Thursday after the company missed fourth-quarter sales expectations and warned revenue would be flat or lower in 2018.
Rovio blamed increased marketing costs and other investments for the gloomier outlook. In November, the company also saw its shares fall by more than 20% in one day after reporting disappointing third-quarter earnings.
It had warned it would need to spend more money to seek out and hook new users for its games. But Thursday's revenue shortfalls were a surprise.
The company forecast an operating margin at 9-11% in 2018 versus 10.6% in 2017 and said it expected sales of €260-300m versus €297m last year.
However, these figures were below analysts' forecasts of a margin of 14.5% and sales of €336m, according to Thomson Reuters data.
User-acquisition investment in the fourth quarter more than doubled, to €15.9m ($19.5m) from €7.7m last year. That represented 24% of games-segment revenue, compared with 16.5% in the year-earlier period.
Revenue grew 17% from the year-ago period. Sales totalled €73.9m, compared with €63.2m a year ago.
Aaron Kaartinen, analyst at Finnish asset manager FIM, told Reuters: "The costs for new users are at a threshold, that's too high for second-tier games. What Rovio is trying, increasing sales by spending on marketing, the equation just doesn't work. Their games don't have enough natural traction among players."
Rovio's game titles include "Angry Birds 2," "Angry Birds Blast", "Angry Birds Friends" and "Battle Bay."