Clash Royale's Fake Comeback? The UA Pop-and-Drop Debate

[music] Let's get into the next topic which is um Supercell CEO releases his annual blog post from Ilka. Take it away Mishka.
Yeah, before we start on this I want to object to the idea that we should be covering this at this length. I just want to object to that. I think his letter this was a good one. I'll give him that. But I'm not quite sure how contemporary Supercell is these days in terms of overall mobile market. So,
it felt outdated to me.
Let me ease people in because I don't know if everybody has read it. It does circulate a lot, but how many people read it because it is a long one. It's like a deconstruction blog post from 2012. It's a long ass one. Anyway, in Supercell's two 2025 CEO letter, Ilkapon, the CEO, the founder frames the year as a near record, which is another way of saying the revenue declined by 4%. This was driven mostly by historic

rebound year for Clash Royale while admitting new hit launches remain brutally hard. [snorts] The couple of takeaways from here on a high level, the headline winners was of course Clash Royale. Insane re-aceleration, the re-engaged players doubled. The new players grew by 500% which he attributes to long runway of progression simplification, sentiment recovery, and then a spark moment that caught the fire. Plus a new mode, merge tactics. I don't know how many played it. I played it. It wasn't that good. Repurposed from the cancelled Clash Mini. At the same time, he notes Royale is already sliding off the peak. It has actually slid.
How Okay, stop. Stop. Stop. Stop. How could he not mention UA? It was like downloads and revenue was locked step, right? This is not some like organic rediscovery of Squadbusters because of some new features. Dude, they found UA. They hired a new UA.
Can we just wait before I tell you you're wrong? Cuz I looked very healthy.

Their IBIDA was a billion dollars. Actually,
that's That's you could just sell right at the data that there's no way that this was not supported by a huge UA push. Not to mention I you hear it from people that they were spending insane money of UA. So already this is complete right? In my view,
we have a full deconstruction on their marketing. Just go on deconstructorf fun.com/blog. You will see that on class marketing.
Why isn't it mentioned in the letter? This is what I'm This is what bothers me. Why isn't it not mentioned in the letter? Because [clears throat] they're obiscating right?
He's a PR letter. This is a shareholder PR letter. LIKE YOU
this is not like waking up on a on a Sunday in December and be like you know what I really want to kind of like internalize what happened this year and write a blog post like of course not
continue Eric. No, you can't walk away. Do you think they're spending on negative UA?
Of course they're spending money. If your LTV goes up, of course you should spend more money on marketing. What is profitably the quote? If they're buying

profitably, then what what are we shooting them on for?
NO, NO, BECAUSE HE DOESN'T MENTION IT. HE DOESN'T MENTION IT INTENTIONALLY, RIGHT? It was a UA driven uptick. That's it. The same thing as last time. Last year, it was all UA driven.
But the only thing that lets you spend more on UA is if the game improves and working in it. Yes.
Yes. Exactly.
The game always worked.
No, no, no. They have been laying the foundation with crucial new features, evolutions. They totally nailed.
Okay, I'll maybe I'll I'll capitulate on that. But the fact that they couldn't maintain the audience doesn't mean they invented something that actually was good for retention and continued monetization.
I think that's the most damning piece. I think that's the most damning piece.
Pop and drop right?
Yeah, I agree. That I think is the scintillating argument here is that this happened to Brawl Star, this happened in Clash Royale, and are they just going to do the same thing with Clash of Clans next year where they just
single big beats and then it like falls off a cliff? The fact that he omits the fact that they must have spent hundreds and hundreds of millions of dollars on UA to get here is testimony to the fact

that he is completely bullshitting.
Tell me why Iba does and I shouldn't look at that as
I think they've maintained IBIDA, right? They've maintained profitability, right? They pulled back from UA on Brawl Stars and just put it on Squadbusters, you know, like
so they found the next best product that they could spend profitable marketing dollars on. That's your criticism. And they were able to maintain IBIDA,
correct? That's That's the slam dunk. I mean, I don't think that's
I think he's just [laughter] I think let me uh referee this. I I think Cres's point is that in nowhere in the explanation of why it was successful does he mention that they they also increased their marketing. And so if if to be fair, he should have said not [clears throat] only did we have a product, we had marketing.
Yeah. You have to understand that in Supercell's PR, they always talk about how big is their organic traffic. like it's 80% and that kind of stuff. That's kind of key for the messaging. So, he can come out and say, "Hey, actually, we again found a way to spend more

profitably and grow this game." It always has to be about organic traffic. And of course, that means that they were not very Yeah, they're not kings of attribution either. We actually had this public conversation on LinkedIn when the head of Brawl Star was saying basically I think it was like 80% is organic traffic for Brawl Stars during the year. And then mate was also asking like how do you attribute those and basically they don't attribute creators they don't attribute influence they don't attribute like event.
Yeah. Exactly. So if you don't attribute your hundreds of millions of dollars spent on [laughter] these YouTube videos that are coming everywhere and that army of creators then yeah sure that's organic. You can put in a TV ad with Lil Wayne and say when if that would have worked that would have been organic traffic by the way.
Yeah that's okay. All right. All right. So that's how now that we've refereed that, continue on with your review.
All right, so the headline loss. So Clash of Royale was the win. What was the loss? The loss was the game that we deemed would not work and soured our

relationship with Supercell, which is Squadbusters. And it did become the first game ever killed after a big ass global launch, despite the $75 million in downloads, despite the $und00 million in spend because post-launch retention behavior didn't match even large betas. So they stated the lessons big beta still don't predict global. They understated meta long-term retention. They were really short numbers looking in the beginning and they built too big of a marketing push before the vision was deeply validated. Okay. Then we talk about the industry thesis. So this was kind of like the big thing that I was posting about is that the mobile games are coasting with approximately 3% annual growth over 5 years per new zoo. And he was saying that the west is falling behind and that the new billiondollar hits are not coming from the west but they're coming more from the east because only two out of 22 games that made 1 billion were launched

by western companies. That's Scopi and Turkey also put in as a western companies. It's you know I don't know which side of the strafe they are but anyways and then uh what they'll do so of course all these blog posts are also sort of like internal letters. So what Supercell is doing in the future is they're going to double down on investment in new games innovation. They're going to reorganize into separate I think they did this already but he talked about the live games versus new games or and this is something that he's been talking about forever is how they're going to run new games like startups with tighter budget constraints and profit participation. So revenue sharing and while all of this is leveraging Supercell Launchpad essentially it becomes a big employer branding piece of why you the builder the startup person the whoever who wants to build the new great game should actually not set up a company but join Supercell the launchpad and build it within Supercell. Phil, what were your takeaways? I I saw you were very positive on Slack. You were defending

this is I think I think this is his probably his best letter in half a decade. It was the most direct and decisive I think he's ever been. They continue to talk about squad busters. And unlike last time, I thought this was a very clear postmortem on the game. They showed some real data. They had 30% D7. They also mentioned that a billion dollars is the bar. They mentioned they didn't test their meta as much as they should have. They talked about the partners being really excited about the game. It's everything we wrote in the squad busters one month later. Like this whole letter this whole letter
was a love letter to Eric Crest and a deconstructor of fun, [laughter] right? It it was I mean I mean when I was going through the industry thesis that I had, I actually thought there was actually in quotes and it should have been as Eric Crest says on Twig, but he says growth must come from new platforms and new audiences. There's too much overoptimization culture. I mean
I mean maybe the PR team is listening. But that's exactly we've been talking about on this podcast. you know, we got squadbusters wrong, specifically me. But in that one month later, we ended up getting a lot of the reasons they were confident and I was confident

accurately. I would say the thing that I thought was most interesting was the key line where he says, "I've rarely seen great products emerge from teams with unlimited budgets and endless runways." So, he's actually laying down some teeth. He's talking about profit sharing, right? Because this is the thing I always see CEOs do is they want to recreate this this garage culture. They want to recreate this startup. their fondest memories, but they never create the same set of incentives they need to make that happen, which was was equity and money. This is what makes these founders leave is they don't have the incentives. And so, okay, we're going to introduce profit sharing. If you remember, we've been following some of these Chinese companies, which are offering shares in the individual games. They're spinning up individual companies for the games. So, this is a run at this. The other thing he says is limited runway. You can't have an unlimited runway to make these things with unlimited budgets. Here's the thing where it starts to become territory, Mr. Okay. What about your own internal initiatives applying the same bar to? Is this only for the AI labs? Where the is North America estas North America? You know, what

about all these games that have been in soft launch forever? You know, is the boat game going to get the axe? Like, where is the runway for the internal initiatives? Or do you get a separate bar if you're not a part of the Finnish HQ? The last thing I'll say is this clearly wasn't a letter written by someone who's trying to become the world's least powerful CEO. Who is the one that determines a game should be worth a billion dollars? who is the one that determines profit sharing in limited runway. That is not consistent with the culture he's been preaching because what you have a principal agent problem and you need to have a principal determined the set of incentives the agents are going to run on or else the incentives will change and that's what happens when you have a larger organization. You have to step up and be a stronger leader and I wish he would just come out and admit this.
Yeah, I I love it. I did not know that people did not know that there are external PR companies involved when these are written. When I first said it on a podcast, I got messages from Supercell. Dude, like how did you know? It's like every CEO does it. This is not Supercell specific. So, as in this case as well, there is a PR agency working closely with the CEO. It happens in

every single company. And they do this because of two reasons why this the shareholder letter comes out. First of all is they want to get ahead of the story because in Finland by law, you have to publish all of your financials. These financials would come out in any reason. This is not being done because they want to support the Finnish ecosystem by writing this blog post. The ecosystem is supported already by the company being acquired twice. First for 5 billion and the second time for 10 billion. That is the support the ecosystem needs. And the second is because this type of a blog post is authentic. It really feels authentic because the co is a big part in writing this. It creates positive PR and through that it creates two types of branding. Employer branding and CEO branding. I think there's two reasons to care about this blog post because first Supercell is still a really really unique studio in in all the world like it's Valve Nintendo type of a level at least for me. And the second part is the openness Phil as you said that comes through this letter. It's very rare and we don't have

a lot of public mobile gaming companies. This type of openness is fantastic because it allows us to at least get some real data and not just hear through.
You're absolutely right. If anyone thinks that Ilka sits down at his desk in the Finnish forest and writes this himself is is surely kidding themselves. Any especially if you are a publicly traded well public company who has to release financials. There are 15 people looking at this going over every single you know detail of what he's writing. I'm sure it takes weeks. I'm sure his leadership staff is involved in you know what is the message? What are we trying to say? how are we trying to position what's going on? So, you're you're absolutely right about those things and I would be shocked if people didn't thought that. In fact, I think AI had a big role in this. One of the things that I'm I feel like I'm getting better at is spotting when AI helps with writing things, especially because of some of the framing that it uses. You know, it's one of those is the not this but that.

It's like with a dash and it's if please again stop using this function this you know verbal template right now because it just screams that you've used AI in your writing. So I I did see a little like AI in here. I don't know. Did you see that Mushka?
Yeah, of course. Ton.
Just to be clear, Warren Buffett writes his own letters. So there's no reason Elila can't write his own letter too.
No, it's not going to happen when you have to have so many people helping to check, you know, what goes into these things.
Yeah. And Warren Buffett also gets audited. It's not about him not writing this. Of course, he writes it. Of course, these are the points that he wants to get through. All we're saying is is that this is done together with yes, the leadership team gets the the view usually and the other PR agencies or one agency gets to, you know, work on this a lot, but the ultimate ideas behind this come from the CEO. It's not like the CEO doesn't push these things that I want to talk about. And one of them like is the fact that really says this, I believe the answer is innovation. Yet this whole blog is

pretty much like a last year's ep blog post which makes a case study for portfolio resurrection.
Yeah. Well, so that's what I wanted to to say where I I struggle with this because he he ends on this innovation and everything is innovation and all of their success the last few years has been in going back and live operating and and franchise management and long-term and it hasn't been in innovation. It's been in ideiation around like what is existing and working in long-term franchises and like none of their innovation has worked in the last what six seven years now listen I think we would all love innovation but we're realizing that that is really difficult if I were them I would have come out and said listen you you know yes I would have spent more time on like what are they doing to revive heyday or clash of clans or their other franchises like that would have been probably the biggest massive strategy to put forward is like this working for us and we're

going to do more of this not like
yeah,
you know, AI AI, you know, although the profit sharing thing I think is great because the other thing that I'm hearing is that and Mishka, you talk about this all the time like 4:30 p.m. rolls around and you know all of the fins like walk out and they're like work life balance, work life balance.
Yeah.
Like where is the hunger? Where is the drive that you have when you're at a startup and you're running out of runway and you're not going to make your payroll? Turkey still has that. China still has that startups have that Supercell feels like it's lost that magic.
Yeah, I'm I mean I'm not that interested in this Supercell topic. It's only once a year, but at least before I know that they were paying pretty much 4x the finish salary to a normal dev. So, because once you get in, let's say you're making 5,000 or 10,000 a month, then they doubled that before because every year was 100% bonus. I believe last year was the first one where people didn't get 100% bonus but they would double it automatically by the company

bonus. So now it's 20k and then there will be these option plans that are internal. So basically the company gives you options and it buys it back. So through that scheme that also doubles the revenue. Somebody leaves a company and one Supercell comes calling, it's natural to leave because your salary is going to quadruple and a normal dev in that company would be making almost a salary of a midsize company CEO and through that Jen comes complacency because you are getting paid a lot. Why would you rock the boat? Why would you think anything else that you are amazing and this company is amazing? Because look, I'm in this palisade of a office space with baristas and saunas and like it is a beautiful office and and you're getting paid out of wazoo and the company you know blog posts are amazing. What's the problem? What are you trying to tell me? So that that has at least before been the issue but as we've seen now if people have seen on LinkedIn there are people changing they're moving. So the company is becoming much

more like conscious about that that they need new blood they need hungry people. And when they talk about Spark Labs, like that's the other one thing as we've talked about on this podcast and Phil, you've said this multiple times. These are people who don't even work for Supercell. They're like contractors and they're placed in a different building. They're not even in that palisade. Like they can only dream about the chefs and the baristas. They sit in a different bunker and they make new games over there. So yes, that element of hunger is coming there. And they also actually send some old Supercellians there. And it is kind of different because like if you're a supercell like oh yeah I would like to pow-wow on this new game but we're actually having an offsite in Costa Rica so I'm going to peace out. You guys keep working on this new game and I'm going to come back. But anyways like they are adding these elements and the culture is changing through that. But yes, it was very complacent in many ways that I was hearing and still is through old people, but the old people are getting the the pink slips and the uh
and the bonuses to kind of seek new

adventures.
I want to say a couple of things about the sort of a learnings like the one was squadbusters. So they say why did we launch and this was as Phil said incredibly open early retention numbers were solid and improving but we're talking about day one to day seven as decision-m numbers. They said Apple and Google love it. Chris would say, "Who gives?"
Blame Apple and Google. Of course, they're going to tell you what
if Apple and Google love it, do not ship it, right? Dude,
every time they do appear, it's like Apex Legends. It's like that game is killed. No, it won't.
They don't know all about gaming on their platforms that they should not be even a consideration.
No, no, no. Let me defend. like they know all about gaming but they only know what Supercell is going to tell them. They don't know the entire picture. They don't know like the road map. And slightly in defense is I think this is the first time that when they went through this beta process and they started to get these numbers, you know, anyone who just runs it by day one or

day seven, like obviously you're not looking at the long-term impact of does somebody actually like and stick around for this game. What I don't love that Supercell did was like blame other people for why for why they launched. Like they should have known their own and not send well well I was told I was pretty so um yeah I went out to the modeling agency to try like that's
Well again like the problem is that the it's the misalignment right? Like having the support of the platforms is irrelevant these days right? If you can't drive UA profitably then doesn't matter if Apple and Google loves you. They don't matter anymore, right? As a platform, that's not where you drive traffic.
Yeah, because we we talked about like discovery inside of the App Store and the Google Play Store is much more difficult. That isn't as relevant as it used to be 10 years ago to launch a game. I do think remember Google did allow them to do something special where they were able to pre-regge the game inside of another game, another Supercell game. So Google Play made some

concessions and did some like magic stuff to allow them to be like one of the first companies to do that. So that was actually I think super cool and interesting and led to the what do they have 3540 million prereges on that
which just didn't convert. If they had done more testing and they had seen if the meta was there if they had seen long-term retention marketing actually worked. They drove all of those installs. What failed was that the product couldn't keep them. So even though they spent all that money, marketing actually performed.
Yeah. And I mean Il Kaput himself in this blog post he said we walked away with obvious learnings. And I don't know it was it was weird that these are the things that drove you. The Apple Google praise the internal pressure of let's justing go we got 100% success rate. We can live ops anything which is kind of true these days. And so it's it was just a definition of a company hubris that cost $150 million. Good for them. Um the

west is behind and the industry is coasting. So this is the type of stuff that leads on LinkedIn. So this is kind of like the CEO's personal message. Yes, there's the fact of you know everything is coming through Asia and only a few things are coming from the west. He does mention a little bit on a side note that there are some structural disadvantages. Yeah. like Chinese companies have a TAM that is like about 600 million players more than a Western company. Yeah, that's uh that's a little bit there. And they can also do very misleading ads and don't have to, you know, adhere to IP rights. Sure. But he doesn't mention the good old partner Apple for destroying the user acquisition market and essentially killing it for Western developers. But overall with this sentiment, the main point that he's making is we're missing these new games that truly changed the way we play like Pokemon Go or Clash Royale when it came out. Actually, Call of Duty was also the type of game that that totally kind of like broke my head and what's what's possible within shooter space on mobile. And I

agree, but at the same time, like Supercell is not innocent here. Yes, they've done a lot of innovation, but they also done a lot of games that have very little innovation, like Spooky Pop, Heyday Pop, Smash Land, the three Clash of Clans games that they announced, didn't ship. Like, all of those are very iterative. And it also is weird a way of talking about the growth because Supercell's growth comes through live ops. It doesn't really come through new games anymore. I'm not I'm not letting that fly, dude. This is not a live ops thing. They're positioning it as a live ops thing. It was a UA thing with additional like features on the games, right? This is not a live ops thing at all, right? It's it's it's total UA.
But Chris, why isn't it live ops plus? Like you you know, it's like one of the you can't have one without the other.
Really? You don't think they could have done a huge UA program with the existing game and drove revenue?
I do not.
No, they shouldn't have. They should already be doing that. You should always be spending up until your marginal cost

equals your marginal cost.
But they're not.
We don't know that. Dude, the downloads were down in the floor and all of a sudden they peak exactly within line with revenue.
The game had changed which I am sure gave them better early monetization signals which extended LTV which lets them bid higher in the ad auction. If this is correct, Eric, and they were not spending up until marginal cost equals marginal revenue. That's really stupid. If you're suggesting that they move their payback window out to get programs like this done, I think that would also be a knock against them, right? because you should be doing this on all games all the time.
How can you explain that revenue is down below the original revenue run rate for these games? Like we're already seeing it decline to the same levels as they were. This is less than a year and we're already
your strongest I think that is your strongest point.
We have it from last December. It's called I analyzed class real marketing. Here's what I found. All the graph is done together with sensor tower analyzing exactly this question. people,

if you're interested, there's going to be a link in the description. So, I want to just end this with with the main thing that that is the key statement, the key call to action of this blog post, and that is that Supercell is a great launchpad and a place for builders. So, on one hand, yes, it's an amazing company to work with with all the benefits, the incredible talent that works at the company, with the games that they have made, with the brand that they have. It's it's a fantastic place to work. But when we're talking about founders, because this is the type of audience that they want to come to the company, you have to take it into account of, you know, Supercell's investments over the past decade, their acquisition of companies. What has happened to those? Like, where are the founders that they have actually invested in? The history is is is not great. Like the only thing that is mentioned out of Supercell Investments is that channel 37 had 1 million pre-signups, but there's no talk about Frogmind. that was like super innovative company that they

acquired that is now hypo. They're not talk about space ape but the founders are long gone and and the company has been dissolved. There's not talk about Meta Core that essentially slipped outside top five in a category that it created. So this this talk of this is the the best place for founders could be very much could be but and most likely they're building towards that but we don't have any evidence that it has been.
Way to sell it for them. Way to sell it. [laughter]
All right.
All right, everyone. Uh, the Supercell ban is now back on. We will not talk about Supercell for the next couple episodes.
12 months.
No, I'm sorry. Something else [laughter] see you next year.
All right. See you next See everyone next week. [music]