Implications of Supercell's $1.7 billion 2014 revenue

hello and welcome to pocketgamer.busy's weekly news digest for the week ending the 27th of march 2015. i'm john jordan so the big news this week um was supercell announcing its 2014 financial figures so it's one of these kind of oddities of scandinavian countries that even though um uh kind of companies like supercell and like rovio um and the swedish company as well even though they're not public companies so you can't buy their um stock on stock exchanges which means companies have to release their financials every three months um because they're such egalitarian societies they're quite open about all corporate um kind of dealing so effectively you can look up any company um it's financials in if they're swedish or finish and kind of basically find out what's going on so what tends happened with big swedish and finished companies they tend to announce their figures kind of publicly anyways if they're a kind of

public company um and that's what supercell did uh this week so i guess um to no great surprise um supercell's numbers were very good um obviously supercell which is our number one um game developer for 2015 has three massive games it has clash of clans which is the biggest um free to play game in the world um it has heyday and it also has boom beach um so it's kind of like a triumphant of kind of success there so no surprise to hear that it's um financials for the calendar year 2014 were 1.7 billion dollars of revenue um so that's increased three times since uh his figures for 2013. profits um had doubled so they were they were um 580 million dollars um um and i guess you if you were kind of quibbling you could say well they've kind of like tripled their sales and only doubled their profits i think to a degree that shows um how much money you have to spend um kind of continuing success if you have success so

um supercell doesn't doesn't announce these figures in terms of how much money it spends on marketing or user acquisition but it's generally reckoned that the big companies are spending between kind of 20 to 30 percent of all their revenue kind of coming in is being spent um marketing and advertising and just gaining more users to make sure its games continue to be successful um and i guess that's kind of interesting uh from the larger kind of structural point of view of the industry so you now have these very big companies like supercell and like king and like machine zone and like gung-ho in japan um and they just they just generate you know hundreds of millions of dollars every year and because they're spending so much money on marketing they're effectively driving out any competitors getting into those marketing spots because they're the most profitable companies in the world so they can spend the most on user acquisition so they can make sure when a high kind of value user is on facebook or in another game that is the advert they see is for clash of clans or for candy crush or for those kind of games so it's kind of an interesting um kind of trend that is kind of we're calling

it kind of top of the charts kind of stasis um in general it's kind of seen as a bad thing um in the sense that those top of those charts now are just kind of stuck they've been stuck pretty much for for a couple of years now there's not really a lot of new games going in there um it's kind of an interesting question it's kind of a question that we asked our mavens group so our mavens group is a group of kind of mobile game experts and we ask them questions every week and the question we have out this week is is you know is the likes of dominant by supercell and machine zone and gung-ho and king is that kind of killing off the market is that killing disruption you know were those companies because it's kind of interesting now that those companies released games in 2012 and 2013 and that just happened to be when the when the kind of ios and the android market was taking off so to agree you know you make your own luck but they were lucky that they kind of released these games at exactly the right time and they were obviously skillful enough to maintain and operate those games um but it's very hard to see kind of another certainly very hard to see another developer coming in and doing a supercell in terms of launching three massively successful global games because a company that now has to enter

that market has to compete with supercell um when when supercell launched clash of clans there was no equivalent of supercell the market didn't exist um so i guess to agree the maven's kind of saying it's very hard for anyone to kind of come into that market and and kind of take that level of dominance but that's not to say there aren't very valuable um opportunities still for companies so it's obviously big disruption happens in in gaming a lot because it's gaming is very driven by hardware so you know the consensus seems to be the apple watch won't be a massive gaming platform but who knows you know maybe people thought that about the ipad um and maybe a micro console maybe an uyer equivalent or maybe a an apple tv maybe apple games console will come in and cause massive disruption in the market so it's very hard to say you never have another billion dollar company coming into the games industry but it's generally kind of seen that the kind of smart companies now are looking at kind of niche area so they're kind of looking at kind of maybe more kind of this kind of mythical mid-core kind of audience or maybe they're looking at very hardcore rpgs in china or maybe they're looking at this is kind of a phrase now super casual so maybe a game like crossy road

is a super casual game that doesn't monetize very heavily but it has a massive um kind of audience in terms of millions of users and maybe with with video advertising which is the the kind of the uh hitting a sweet spot at the moment maybe kind of companies can make millions of dollars in a different way than companies have made millions of dollars before um i guess kind of a another kind of interesting point from the kind of arising from the supercell um kind of financials was i mean supercell is an interesting company and it kind of the way it presents itself is very interesting so kind of coming back to the user acquisition thing i mean supercell was one of the three companies spending money in the super bowl this year so it did a very funny um and very well crafted um advert for clash of clans using uh with adam um adam nielsen um with liam nielsen i'm pretending to be an annoyed player um and maybe maybe super trying too hard but they were someone asked them a question about how they came up with this idea of doing a um a super bowl advert and um they were just kind of in a very finished way they were just like oh we were all in the sauna and we were just kind of like talking about what we

should do and someone came up with this idea and we all voted on it then and we didn't really think it through we didn't kind of right through any number to see how much you know how many users we were going to reach and whether it would be roi or return on investment positive and all that stuff we just did it and i guess to a degree that kind of partly shows how massive supercell is it doesn't really matter that it spends 10 million doing a an advert for something like um um the super bowl uh but equally partly it shows that supercell is still kind of a little bit desperate to be seen as a very cool company that doesn't really work very hard and doesn't really know what it's doing which is absolute rubbish clearly to get 1.7 billion dollars you your your laser focused on on operations and how to get money off people and and obviously making good games as well that comes as part of it very hard to make 1.7 billion dollars if your games aren't very good um so so that was the the news for this week um come back next week and we'll see who's what companies disrupting the industry making billions of dollars then