TWiG #370: Supercell’s Annual Letter, Reading Between the KPIs

They said Apple and Google love it. Chris would say, "Who gives a fuck?"
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 app of the year, it's like Apex Legends. It's like [laughter] that game is killed. No, it won.
Dude, they don't know [ __ ] all about gaming on their platforms that they should not be even a consideration. [laughter]
[music]
Hello everyone and welcome to this week in games 370. I'm Jen Dano live from Dice in Vegas. I fill the marketing and publishing role in today's podcast. Today we have
Chris Strategy Investing
Phil Black Monetizations are
Mishka Katcov friend of the founders as an LA Dodgers fan.
Well, they did win the World Series as an LA person. Well done.
I like winners.
Yeah. Yeah. Well done. All right. Here's what we have on the podcast today. Newu has a year-end PC console performance

recap. Roblox had their earnings report. They continued to grow, but they finally have some signs that it's slowing down. And we're going to go through a lot of that today. We have an update on a small company called Budge, which does kids games, and how they were just purchased by a PE company. So, really interesting there. Clash Royale had a halftime counter counter counterprogramming show with Lil Wayne. And then it's Crest's Christmas because we're going to talk about Ilka from the CEO of Supercell's annual blog, which just sets him a light. So, if you love to hear Crest get pissed off, just wait for that segment. And then, you know, in sad news, we wish the best to the 80 folks laid off from Riot's 2x KO fighting game. Phil has some spicy takes on Riot, and as a former rier, I'm going to fight you on some of that. Anyway, there is a SAS apocalypse going on in the stock market right now. It first hit the game industry and now it's hitting SAS and

then Liftoff. Actually, an ad company just postponed its IPO on the NASDAQ because of the $800 billion has been wiped out of the of the entire stock market because of what's going on with AI. So, Chris, do you have a take? AI is a, you know, existential threat to some degree to some of the um tools that are out there on the software as a service industry. You know, like they could replace a lot of the functionality of these tools. So, that's scary, but I honestly don't think it really applies to gaming. And I think the AI bubble and you know, a lot of people writing about how it's going to like impact games is a little bit I actually not a little bit way overstated. But for the software as a service category, there is potential that some of these things will get disrupted pretty significantly if a lot of these capabilities are are just replaced by AI.
Like Salesforce is down. That's what I know as a shareholder. Any I have to say about Liftoff like their financials were

not great cuz they were sort of comparing themselves to AppLov and I think that was kind of pushing them towards to go public. But this company had approximately 635 million in trailing revenue and at the same time was posting actually losses of like about 26 million a year. This is not apploining like mini.
So
got it. hedge fund hotel as somebody would say [laughter]
and and and Unity has gotten absolutely [ __ ] annihilated, right? Partially because of this, but also because they guided to, you know, poor revenue guidance for Q1 and it was spooked the out of people. It's down like 30% today. So, that's kind of independent of this like SAS apocalypse, but it's all tied in. And again, the moral of the story is don't buy individual stocks, buy the VTI.
[laughter]
I'm just going to keep saying that over and over again. If you're trading these names, you're not being very smart. I'm looking at
the efficient market hypothesis. Happy to have you. [clears throat and laughter]

But I do have to defend Unity. Unity is up by five or almost 6% compared to last year. If you take a full year, they're actually up. So despite losing 56% this year alone, [laughter] they're up.
So Josh, I'm sorry, Josh. reality did not match the hype that was being built on Unity. And I think Bramberg did a great job ofing pushing that hype. But the reality is they have no access to data. Garbage in, garbage out. And the licensing engine business is [ __ ] And so it's game over, dude.
They crushed earnings, but you said it the reason it's down is because of for guidance.
Yeah. And they there's nothing left in the tank.
Stock is different than real business. So
all right. So, um, on the shill section, just a quick thank you to Mike Williams, I did my Yoda session, which is I go and talk to some of these undergraduates. So, this was at San Jose State University. So, just a reminder to everyone, go out and volunteer, speak to the next generation of game industry

makers. There's so many different colleges that could use you. Do you know that Mike gets Frank Jabau, Peter Moore, Brian Knightly to present at his class? I think I should audit his class and go heckle these people in the back seats.
Like it's And then there's others like he had Travis Boatman's going in the fall semester, too.
So, I spent a lot of time with Travis actually last night at dinner. This dude is doing AI insane. So, I'm going to I I'm going to do a podcast with him on all the things he's doing with AI in his in his company and on his personal life. He's doing the open claw stuff. It's crazy.
Yeah. No offense to Mr. Bowman, but he was he was pitching this [ __ ] like two years ago. [laughter] So, like I don't know, man. AI is supposed to drive efficiencies, right? We're not You know what I mean? Like
Yeah. Well, I what I appreciated about our conversation is like
he was able to show me real things that he's doing unlike all these other presentations I go to that's like vaporware of well AI and philosophy and like he's like no no no like look at

what smoke is doing. his his AI his open claw is called smoke and he's this is what it's doing right now and it it made us a song about our dinner and like I anyway so sign up for the deconstructor of fund newsletter deconstructorfund.com all of the GDC invites will be going in there just a quick you know save the date for the beta hat deconstructor of fun kickoff party on March 8th and that is the Sunday so you have to come in early for that and then what else do we have on podcasts
this week we had write up and a podcast about AI uh AI and art direction. I'm sorry, this was [laughter] just following that part, but we had a senior art director from Scyplay coming in and talking about, you know, our direction in general, but we actually steered a lot into AI talk and and how is our direction, what do the teams look like going into the future. So, it's a interesting conversation because usually art people avoid these conversations, but he didn't because he's a very business-minded art director. Anyway, give it a listen. I wonder what the art directors think about it. And by the way, if you haven't noticed, something

that we've changed is we have way more genre and game deconstruction. So, we have more contributors writing those. I'm looking at the output. People are really liking them. So, we have Pixel Flow coming in probably this week. We got more Turks doing content. So, it's you know how it is. It's going to be golden.
I've heard rumors of a Puzzle Monthly. Could you confirm or deny such existence?
So, we we filmed already UA Monthly Mr. Josh Chanley was there.
Oh,
and Puzzle Monthly,
Philip Black kind of showed us the way with shooter monthly. So, Puzzle Monthly is coming through and we have AI monthly as well. So, monthly shows rolling out. Of course, I'm doing UA Monthly, Jen. Naturally, you should do the product monthly.
Oh my god.
UA Monthly, are you out of your gosh darn mind? I don't know [ __ ] about UA.
It was great. It was Yeah, that's why it's fun. [laughter]
Okay. All right. Good job. Correction,
quick corrections. Baseball hits Hits 26 from Airy Studios is being designed and

developed by many of the key members of Tap Sports Baseball that worked at Glue. So, I actually knew this when he said it, but I wasn't 100% sure and so I didn't want to correct him if I wasn't sure. So, Mike Dot reached out and said, "Misk is an idiot." No, he didn't say that.
No, Mike Dot reached out. He's coming on a podcast and just as we asked. But also, I will explain why I got this wrong. I only looked at one person which is the the head of studio of the previous one and also my former boss and he works at Scopi these days. So I was like oh he went to Scopi and I assumed that he took the entire team but he didn't. I should have done more research but I did it during the podcast. And also there was another correction regarding this news that Swift Games out of Berlin which is another studio that Aries game acquired their founder informed us that they don't run on Club Mate. They run on Fritz Colola because Club Mate is something you drift in [laughter] Hamburg.
So, so uh yeah, important news for all the Germans.

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All right, let's get into our first our first topic, which is New Zoo. They released an article that is about PC console year end. And so here is a few different things that I took away from it. So, by the way, this is for mostly on revenue 2025 releases and then on MAU they do kind of like full year because you kind of have to of what's the top of the game. So, in 2025, PC and console revenue was clustered around a small number of higher impact titles rather than a a wide spread of titles. I mean, this is pretty consistent. Live service still dominates, especially in MAU. You

know, you got CS2, you got Minecraft, Roblox, Fortnite. So, it wasn't really about new launches there, and only a handful of 2025 releases actually crack the top MAU ratings. Post-launch support is strong, and I know Phil is a big proponent of live ops here. So, Diablo had a big update. GTI 5 had some big updates that came out that really helped them. And then PC was friendlier to new IP versus console. And I think we've been seeing this trend where there's been a lot more double AAA indie success on PC than on console. It's, you know, obviously much easier to release on that versus getting console titles approved. So multiple non-fr franchise titles hit the top 10 in revenue on PC while console remained dominated by annualized sports franchises and established brands. I mean, this is the same thing we always talk about that PlayStation is all about sports, Xbox, you know, is about the shooters. And then Nintendo

first party is obviously strong. I think about half of the top of the top 10 titles are first party, but there were a couple of the top PC titles in there. So you had I think Silkong and and Hades were in there as well. But the number one title I was a little bit surprised, well I wasn't too surprised was Pokemon was number one on this. So Phil, what do you take away from um all of this? It's stuff we've already known in the sense that Steam is composed of these weird hardliners. It's not like other platforms where you can have things like schedule one, a drug dealing game, come out as the number one number three top PC game by Revenue. Monster Hunter Wilds is like a very particular title. We also have things like Repo, another like indie hit. Kingdom Come Deliverance, just like stuff you don't see on other platforms. I think the most interesting thing is getting data on games that we're not normally able to cover because they don't have good Steam coverage. So Minecraft for instance is number two in terms of MAU and we just don't have a lot of good empirical insight. So it's

hard to say oh hey there was an update MAU went up or went down. Sims number five. You can see why Enzo mattered so much.
League of Legends six. I would love to see a time series on this but in number eight is Valerance. And I think very quickly Valerant is going to become a more important product to Riot than League of Legends is. It'll be interesting to see how that changes the company. But these are games we don't always get insight into and it's very good to get some actual data on them and it shows that Steam still has some room to conquer. Like these are games that are not on Steam. The market power is not 100% yet for them.
The only game that broke through the ranks in console that launched in 2025 was actually Arc Raiders. That's pretty neat.
I'm just going to say this is like the top 10 console and PC games by 2025 release actually really kind of unhelpful and and misleading and and you guys are actually doing a little of that right now. It's if you had added all games for 2025, not just the 25 releases, then all a lot of these games

just get pushed right the off these lists and it would be the same games over and over again. Call of Duty, Madden, FIFA. I know why they don't do it. I think they're trying to like protect you their database and so that they don't give up all the information, but this is totally misleading, right? In terms of what is actually doing well, right? Fortnite is not a top 10 revenue. No, I mean that that is a top 10, you know.
Yeah,
all these games that are on the MAU charts are all top 10 revenues and they would kick off many of these games. Um, so yeah, I I don't like these charts at all when they do this sort of thing. I think it's just a different cut of data.
Like it's interesting to see the top 10 games by revenue that were released in the year. That's the important information that helps us.
It's not because 85% of the revenue is being generated by games that have been continuing being released like the old games in the marketplace. That's like doing a top 10 revenue by in mobile, right? Do you think that's a relevant number by release for 2025?
I think different cuts of data give you different insights and I agree with you.

There should have been a prep slide here that said what is the share of revenue by these top 10 releases versus other. That would have been really powerful contextual information. But it's still important to know that like repo was number seven on the new releases
again. No, because in this market
it's all about the incumbents these days, right? The market is being dominated by incumbents and this kind of misleads the masses on what is being is successful out there.
Fair point. I mean, even with Nintendo, I think you, you know, when I was looking at that list, I was like, seems like a bunch of things are missing, you know, from that list because it was only 2025. Okay, let's move on to our next story. So, Super Bowl happened. Sorry for those of you that don't care about American football, but during that time, Supercell Clash Royale had a halftime concert with Lil Wayne. And there's a a pretty good YouTube song. And by the

way, it was only one song. It wasn't like, you know, a whole thing. It was just one song, but it was kind of like a music video. It's pretty adorable. So, this was CounterCounter Programming to the Delightful Bad Bunny show that was actually at the Super Bowl. I just pulled the YouTube views, 11.6 million in 4 days. I think on Monday it was at 7.7. So, it's pretty there's a lot of people are actually seeing it on YouTube. Really well done. I mean, if one thing Supercell does fantastically well are their animated, you know, videos that mixed in with live action mixed in with Little Wayne singing. You know, as a marketing person, I wouldn't do this expecting to get big in-game KPIs. I mean, to be honest, I actually would not have done this strategy. I would not have done like a major moment like this with all the other stuff going on in the world. I don't know why you compete with one of the biggest events, you know, on TV. But, you know, hey, I would recommend shooting for an open window. But as of Monday, when I pulled some sensor tower data, I didn't see any in-game KPI movements on downloads or

DAUs versus trends. Phil, check me on that. What did you see?
Yeah. You think? You think? I mean, this is the stupidest thing ever, right? What? What the [ __ ] [laughter] Of course. 20,000 uptick in downloads. It's what I can see. I mean, Jesus Christ. What are you spending money on this [ __ ] I get this stuff. All right. Sorry, Bill. So, first of all, I agree with you, Eric. And the thing I would argue here is I still think there's insight, even if this one isn't particularly successful. Also, Little Wayne, very strange choice. I'm not quite sure if that fits your target audience.
Whatever song he picked, like there's a lot of cursing that you could tell was there. And remember who is playing this game right now? 12-year-olds. This game is on fire with 12-year-olds.
No. And the thing that I kept going back to was this talk called the rhythms of free-to-play games. And it was given by someone named Toyit Van Dumman. Although I'm probably [ __ ] up his name, it is German. And he has this slide called the butt. What is the butt? And we're looking at the butt right now on the

screen.
And the butt is a shape of a CCU curve or a PSU curve. So this is the number of simultaneous players that are online at any one time. And I can tell you that mobile studios spend very little time examining CCU or PSU because normally they don't have to do matchmaking. And so in HD that's much more important. So you have to have a certain amount of a CCU online at any one time. Then you subdivide it by ranks. There's a bunch of things that make this more important. But mobile studios are almost always looking at things on a daily basis. And the insight of the butt is that it was from a particular game. And the butt had this little this nice little butt crack in the middle. And does anyone know do you want to take a guess on what this butt crack represented?
Too many jokes, Phil. Too many jokes. [laughter] I I I will give you a hint. It's a halftime. It's a halftime of a football match. So, what was happening is that before the match, there was a number of high CCU. The match started, CCU collapsed, and then it was halftime. Everyone diddled around on their phone. Then the game resumed,

depressed again, and then the game was over, and then the PSU increased. And so the argument I would make here, and this is how I've started to think about live ops, you know, we think about live ops as, oh, we update the game, we do user acquisition, but I think a far more instrumental and specific definition is just being relevant. Being relevant to your players at a certain time or place. And I think the Clash Royale event had the right strokes of being able to do that. Like people might dick around on their phones at halftime or during particular matches. And we're not spending enough time in mobile about trying to do ultra local high ops. Yes, we think about Lunar New Year. Yes, we think about these holidays, but I mean specifically time and place. How can we get more involved into players lives? Why didn't I get more push notifications at halftime from the mobile games I play? And the problem with the Superol event is they launched it on Friday, [laughter] but they didn't even launch it during the Super Bowl.
Oh, really?
Yeah. It was just kind of lame. Like it it wasn't relevant in the way it should have been. And right now, if you're a mobile game developer, the World Cup is

coming up and you should be preparing your [ __ ] on how you're going to be relevant to players at halftime when they're [ __ ] around on their phone. You should be having a push notification interstitial funnel. You should be having some sort of event that they complete during the halftime show. So, even though Supercell didn't execute, I think with the funnel on this one, the creative was strong. I think it was like really well done. To your point, Jen, we were just looking at the video. It looked really cool. Bad musician, bad timing. I still think there's insight here that other teams should pick up now that the world's biggest sporting event is coming in a couple months.
H All right. You're I just I know the audience is I need to see the picture of the butt that Phil is putting on putting up on screen. Check it out on Spotify video or YouTube. All right, let's go to the next story, which is Budge. Mishka, are you doing this one?
Yes. Yeah. So, I'm I'm the closest to Budge because my kids play games made by Budge Studios. And this was an interesting one. So, Budge, if you're not familiar, does a lot of IP based

kids games. We're talking about Barbie, we're talking about Bluey, we're talking about all of the big names.
Exactly. Paw Patrol, anything. So, they work with a big brands, kids specific brands. And I wasn't really that familiar with this company until this news broke out. And Havlli on the other side is private equity that is very much focused into gaming quite unique and they have built a very senior team. A lot of exing of people a lot of people who have been operators in gaming industry have gone to private equity and private equity means they buy a company they improve it and then they sell it or IPO it. So I'm confused by this one because Budge Studios did not publish their own games. They made games that were often published by others and that one that has been publishing the most of their games has been Tilting Point. So my interest kind of went away from private equity and kids games into Tilting Point and a question arised

where is Tilting Point? Because the last news that they released was they're going into UA funding I think again. I think they were in before and they kind of came back and when we kind of looked at the numbers it feels that that Budge Studios were one of the best assets they had within Tilting Point and now if they've sold that to private equity is Tilting Point essentially in a fire sale mode.
Seems like it I don't know. I haven't heard much from them.
Yeah, I'm looking at it without budge. They don't really have anything else. The last news from Tilting Point was in March when they launched a new $150 million UA fund.
Yeah.
Anyways, if if somebody's working with Tilting Point and they are funding your UA, General Atlantic was probably doing that UA stuff.
Yeah, this is weird.
It's still an interesting business that they've created. I think it's worth just spending a moment and talking about these games which they've grown to doing as a portfolio around $5 million a month

which is pretty impressive and their monthly active users sits around 25 million. They're kind of sharewware games. They all kind of have a very similar model where they're free to download and then sometimes there's some deal paid DLC that you're able to have. The Barbie one has small amounts of MTX, some gems that you're able to purchase. But when we talk about Apple Arcade, you guys were like trying to rebrand the subscription in many ways for Apple as something that you could hand off to your kids. I think these are also games that as a parent you should feel comfortable handing off to your child and that's exactly what they've gone after as a strategy. And I think they've been able to build some user trust in pursuing it.
Especially when I was looking at the Barbie game, it's a subscription game and I forgot if it's weekly or monthly. I know Ethan was doing that for his daughter at the time and so they were using a lot of the subscription model where you know yeah it's free to play and then obviously your kid comes you know crying that they can't really actually do anything in the game and then you spend 999.99

but Barbie Dreamhouse has been incredibly successful for them is another one that does really well we forget about audiences you know we just talked about kids we talked about 12-year-olds if you can be the hit game with 12-year-olds you know as Brawl Stars and Crash Royale have fun. That is an audience segment. And then it kind of goes into the next topic that we have, which is again appealing to kids, Roblox. So Roblox just had their Q4 earnings, which basically means that we have full year 2025. So they had big year-on-year numbers, but when you look at the Q3 to Q4 trend, it tells a little bit of a different story. DAU finally dropped quarter over quarter. It was only down 5% from Q3, but um it Q3 peaked at 151 million and and so it moved to 144. Adjusted Ibida collapsed 96% year-on-year to essentially zero. Chris, I know you always have comments on that specific point, but it just I'm just noting the decline. The forward

guidance signals clear deceleration. So for me, what I just saw for the first time was like, hm, it doesn't look like it's continuing this massive trend that we've been seeing. Q1 of 26 implies a 20% sequential bookings decline. Full year 26 guidance calls for 22 to 26% bookings growth, way down from 2025 to 55%. And then this will be the topic I think we talk a lot about is age. the 18 plus segment of users are the fastest growing segment growing 2x faster than the under 18 and then from international APE grew almost 100% year-on-year. However, as we all know is very difficult to monetize that particular region. So the the other thing I wanted to mention was their strategic focus. They kind of outlined four areas and Chris I know you're going to have a lot of comment on this. They are focused on 18 plus. That's their number one bullet point that they come out and say. Number

two was AI. So creation, safety, discovery, monetization, social communication. It also plays into their third point which is safety and civility as their strategic advantage. They use the word advantage. I thought that was interesting when I feels like it's actually a challenge. And then accelerating flywheel. So they're really focused on feel I'm sure you love this stuff. pricing optimization, advertising, increasing the DevX percentage is something that they said they would like to do. I felt like this was a Cress and Phil slide showing basically ARPD or ABDO because they use bookings over kind of like revenue. So, the slide shows the first negative year-on-year trend for Abdow in Q4, you know, where I start to see a little bit of worry that the younger and these international audiences like, you know, are not monetizing. So, Crest, dying to get your take on all of this. What do you think?
Well, first of all, they just have an impossible comp, right? I mean, at the end of the day, like this isn't really a

sign of the apocalypse by any means. Like, they they just I mean, they have the biggest games and the Brain Rock games continue, but Grow a Garden has fallen off a cliff, right? You know, that's tough, right? And I So, I would I'm not reading too much into that in terms of the overall declines. I think the biggest story here is this age verification thing and what it means in terms of describing what the audience is. And so with these like new like kind of age checked data, we're starting to see a little bit more evidence of as to why they have unsuccessfully in some ways gotten to the 18 plus audience. So based upon the age data, there was a service that did this that 73% of the audience is under the age of 18. Right? That's a [ __ ] problem, right? That that's a [ __ ] problem, right? We don't know what the geo breakout is. You know, US could be actually more than that because over 18 people have a lot more options in the US and tier one English countries, right? So, there's console, PC, etc. And what we don't actually

know, which I was going to say later, is that what is the actual concentration of engagement, right? I mean, it could be 90% is under the age of 18 from an engagement perspective, right? So maybe we'll get more and more of that data as the age check data starts to manifest itself. So as I said they had an absolutely insane year last year with steal a brain rot and grow a garden. You know in other words the child torture video creators [snorts] and again the steal of brain rot still doing well but it's well below its Q3 peak and grow a garden again is is in the [ __ ] So what they need to know is what is next for the platform right? We need to see some more games that come online that actually could continue to grow that. The fact that they're still growing 20 to 25% from that high last year is actually pretty good. You know what I mean? Like when you have the shitty demographic of 18 and under driving 75% of your user base,
this audience can't monetize. They don't have like dispensable income, right? It's really hard to monetize that audience more than what you're doing. That's why their strategy is going after

18 over because 18 under is shitty, right? Um, and on top of that, they're spending more and more money to support the infrastructure of an audience that doesn't monetize. This audience is not necessarily a good thing. It's more of an albatross as you continue to support these 1800s that can't monetize very well. So, this is the fundamental problem with this whole platform is that like it is just catering to 18 and under. So, frankly, I think the stock has gotten destroyed for no reason. I mean, I still think advertising is still a huge potential. Obviously, only 25% of the audience would care for advertising. So, I still think there's opportunity here. I'm actually, you know, not that negative at this level, right? Um, but certainly at 140 seemed ridiculous. So, I don't know.
You dropped in this novel game expansion to serve all audiences quote from their like shareholder letter. What did you What were you thinking about this? Well, this is the only data I could find on um age check data
that revealed the actual percentages.

This isn't that much different than what they self-reported. The only incremental information we got is what the under 18 age is versus the under 13 and 13 and above is what they self-report. Look at the I have
Jeez, don't bury the headline, Eric. This is your big point for weeks. I think you got to take the L on this. So, what is the the numbers you're referring to? So they required age verification to access chat inside of Roblox. So this is the first chance we're getting to see what is the actual age of the participants cuz they have to go through this process. And so the thing to keep in mind is that 45% of DAUs have age checked. So the other thing you need to keep in mind is that they're probably self- selecting knowing that they're going to pass the barrier. So I would imagine that if we were see this expand to 100% of DAUs that these numbers would be weighted downwards. But that being said, Roblox has still reported the age group breakout between under 13 and 13 plus in their quarterly earnings reports. And if we look at their

internal data, 32% of their audience was under the age of 13. And when we look at the age verification data, it was actually only 35%. So that's pretty close. That's pretty close. That's three percentage points. That is not like a big revelation that all these kids were lying. If we look at the percent that were over 13, it was 68% in Roblox's quarterly earnings disclosures, while the age verification had 65%. Again, I expect these numbers to be dragged a little bit where we'll see more relatively under 13s as more users verify. But that being said, like it wasn't this crazy slam dunk. Like the other thing that I thought was crazy about this data, and you mentioned it, Eric, is this is the first time we've seen over 18 data, right? because it's mostly been under 13 or over 13 that Roblox has reported on. 27% are over 18. Has anyone met a a Roblox user over the age of 18? What the [ __ ] That's crazy.
Well, it's crazy.
It's typically a collegeaged woman playing Dress to Impress.

You know, that was a lot of I don't know. Do you think they're playing that rival shooter game, Phil?
I mean, I am. I [laughter] think it's I think it's great. I still think that's impressive. And to me, that isn't, "Oh, this is [ __ ] That's room to grow." And Eric, you're completely right. This is the problem I have when I work with all of my education clients. They all come with the same problem, which is that acquisition has been on fire. Kids share things very quickly. This is how, you know, social networks tend to spread. Kids who are under the age of 18 tend to share things very quickly. DAU explodes, but they fail to monetize, right? And this is why Roblox introduced gift cards is because these kids don't always have access to credit cards. And so, yes, this this is a big problem. They do need to age up. They do need to get to age groups that have higher disposable income. So, I completely agree with you. I just don't think this is as damning as people thought it was. I do think the platform is aging up. Although, we don't know. We don't know if it's aging up or they're attracting people over the age of 18, new users, which I think is another kind of hidden question underneath this. But, you're right. they do need to go after older users if they

want to monetize at higher rates
and also the advertising falls apart if they don't have over 18 right so any advertising strategy doesn't work really you can't advertise at all to 13 and under and 13 18 demo is just not that interesting to most the advertisers and they kind of move away from that
and remember eCPMs are correlated with the revenue that the users bring in if you're not spending that decreases your eCPMs for the users too like those things are correlated
right
I think is an interesting area that they're going to have to examine is whether or not there's negative margin users on the Roblox platform. You know, if there's a user in India playing and they're not generating revenue, but they're sucking up server space, it is entirely possible that they're negative margin. And so, they need to start examining what they're going to do about that.
No, 100%. That's the whole problem. You know, 75% of the audience is sucking up 90% of the costs, right? That and they're not generating the revenue.
That's an optimization lever, though, right? That's an opportunity for them to increase their bookings. I wouldn't paint it in a negative light. I think it's just another way they can make more money.
I I think you're right. I mean, I think

that there's an opportunity here. It's just that all the bravado about aging up just doesn't seem like it's actually having as much impact as they say, right? The numbers are not like showing that they're growing that profitably and and capturing a broader audience, but they're just they keep repeating it over and over again. To be clear, this data basically gives the 18 and under, right, which we have not seen ever before, right? We only saw 13 and under, 13 and over. So now we know that 18 and under is like n 80 75% and probably 90% of the engagement. That's bad. That's really bad. That is an albatross. That is an absolute albatross to their business model. They need 18 to 44 year old males particularly in order to like really drive monetization. And so this is I think what people are seeing and getting a little bit spooked about on the on Wall Street. So basically the aspiral is that as they push and grow their audience they get more kids especially those outside probably tier one west and that means that their infrastructure goes up but the audience cost also

increases especially since those users are not that likely to watch ads or make any inapp purchase revenue and that essentially decreases your unit economics just everything weakens as they grow outside tier one west is that
yeah basically Yep.
Okay. We actually I wanted to just puff an episode that we did with Roblox. It's going to release in a week or two, but we talked about these novel experiences and their algorithm and how that is changing. We had Nick Turno, their senior vice president of engine and creator engineering on the podcast and he talked really about like that what they're looking for is more games with retention and longevity. He didn't specify that they didn't want something and want something else, but we did talk a lot about how the algorithm is structured at the point and and what has changed. And my understanding from that is is that the focus will be more on games like Rival or Brook Haven or Creatures of Creatures of Senaria. So really pushing towards games that have a lot of longevity almost like RPGs and

shooters and stuff that has been on other platforms for a long time.
Yeah, good luck. Good [ __ ] luck. All right, moving on.
[laughter]
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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 [laughter] ass one. Anyway, in Supercell's 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, 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. Repurpose from the canceled Clash Mini. At the same time, he notes Royale is already sliding off the peak. It has actually slid.
How? Okay. 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 healthy? Their Ebida 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 clash marketing.
Why isn't it mentioned in the letter? This is what I'm This is what bothers me. Why isn't it not [clears throat] mentioned in the letter? Because they're obiscating [ __ ] Right. He
PR letter. This is a shareholder PR letter. Like you
Exactly. [laughter] 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. Continue. I'm going to walk. Hold on. Eric, hold on. 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 the point? 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 let 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 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 in Brawl Stars, 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 I does [ __ ] and I shouldn't look at that as
I think they maintain Ibida, right? They've maintained profitability, right? They pulled back from UA on Brawl Stars and just put it out 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 [laughter] think he's just 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 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't 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 in like events, they don't attribute anything.
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 video.
Okay. 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 $100 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 [laughter] 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 squadbusters. 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 Crescent and a deconstructor of fun, 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 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. What about your own internal initiatives applying the same bar to? Is this only for the AI labs? Where the is North America, 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's 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 principle 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 Elka 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 uh I 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 is working for us and we're going to do more of this not like
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 at a 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. So somebody leaves a company and when 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 a [ __ ] 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 other 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-making numbers. They said Apple and Google love it. Chris would say, "Who gives it?"
Blame Apple and Google. Of course, they're gonna 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.
Dude, 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, Ilka puts it 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.
No, they shouldn't have. They should already be doing that. You should always be spending up until your marginal cost equals your marginal.
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 with in 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.
Dude, 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 analyze class real marketing. Here's what I found. All the graphs 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 hypop. They do 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.
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. [laughter]
No, I'm sorry. See you next something else.
Yeah. See you next year.
All right. See you next [laughter]

uh See everyone next week.
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