Why millions are gung-ho for this gaming companyJanuary 27, 2014: 5:00 AM ET
With Puzzle & Dragons, GungHo Online Entertainment has a monster Japanese hit.
FORTUNE -- Few know about it stateside, but in Japan, you'd be hard-pressed to find someone who hasn't heard of Puzzle & Dragons.
Part puzzler, part dungeon crawler, part monster-collecting adventure, GungHo Online Entertainment launched the mobile game in 2012, and it now claims over 20 million users -- roughly 1/6 of the Japanese population -- who have downloaded the free-to-play game and bought into its ecosystem of virtual goods. Puzzle & Dragons' success has, in turn, sent GungHo's own fortunes soaring: The company has generated $700 million-plus in profit on revenues of over $1.2 billion so far during its fiscal year, ending this month. Its stock spiked a whopping 775% in 2013.
Gamers have CEO Kazuki Morishita largely to thank. Before GungHo, Morishita worked as a manzai artist, a comedian specializing in a traditional style of Japanese stand-up comedy, for little over two years. "I genuinely enjoy entertaining people -- I get a thrill out of it," explains Morishita, who argues being a comedian actually bears some commonalities with developing games. "Game companies should entertain their fans and users. It can never just be about the business-to-business aspects of the industry."
When he joined GungHo in 2002, it was still an Internet auction software developer. But Morishita, who grew up pouring hours into traditional console games like Super Mario Bros., saw more business potential in online gaming even then, before contemporary broadband speeds were common in his country. He helped draft a 10-year company plan, which included developing games like Ragnarok Online. The Norse mythology-inspired multiplayer role-playing game, released for the PC in 2002, has 80 million registered users in 70 countries, and spawned several successful sequels.
Still, it's Puzzle & Dragons' virtual overnight success that has made GungHo the veritable Rovio of Japan. Puzzle & Dragons Z, a spin-off for Nintendo's 3DS handheld, topped Japanese software sales charts during its first two weeks on sale after it launched in December, selling 800,000-plus copies. According to Morishita, GungHo has at least 10 more games in development, although he declined to give specifics. Says Morishita simply: "Whatever they [gamers] experience the first time they pick up a GungHo game will leave a lasting impression."