Supercell (company)

Business model

Supercell focuses on the development of free-to-play games that yield profits through in-game microtransactions. The company's objective is to develop successful games that remain popular for years. The focus has not been on revenue, but on the principle "just design something great, something that users love".[8] Game development focuses on "cells" of five to seven people which start with an idea generation and an initial review by CEO Paananen.[8] The team subsequently develops the idea into a game, which the rest of the company's employees get to play-test, followed by play-testing in Canada's App Store; if the reception in Canada is good, the next step is global rollout (App Store).[8] Successful failures are celebrated by employees.[8] One of the games that was cancelled well into development was Battle Buddies, which had also been rated well in the test market, but the number of players was still too small. The final decision to cancel a project is made by the development team themselves.

Background and founding

Before Supercell, two of its founders, Mikko Kodisoja and Ilkka Paananen, worked at Sumea, a mobile game company. Kodisoja co-founded Sumea in 1999, and Paananen was hired as the company's CEO in 2000. In 2003, Sumea made a profit of €1.2 million. In the following year, the American Digital Chocolate bought Sumea and made it the company's Finnish headquarters and Paananen the European manager. Kodisoja, the firm's creative director, left the company in 2010, followed soon after by Paananen.[9]

Paananen moved to a venture capital company Lifeline Ventures, but wanted to create a game company where executives would not disturb the work of the game developers. Together, Paananen, Kodisoja, Petri Styrman, Lassi Leppinen, Visa Forstén, and Niko Derome, who had all known each other through work connections, founded Supercell in 2010. The company started its business in the Niittykumpu district of Espoo.[10]

Kodisoja and Paananen invested €250,000 in the company. Tekes, the Finnish funding agency for technology innovation, loaned them a further €400,000 and Lifeline Ventures also invested in Supercell. The following October, Supercell raised €750,000 through seed funding, including from London Venture Partners and Initial Capital. The first game that Supercell started to develop was the massive multiplayer online game Gunshine that could be played on Facebook with a browser or on mobile platforms. The game prototype was ready in eight months.[10] After Gunshine's completion, Accel Partners also invested €8 million in the company in May 2011, and shareholder Kevin Comolli became a member of Supercell's board of directors. Accel also invested in Rovio, among others.[11]

Change of strategies

In November 2011, Supercell abandoned Gunshine for three reasons: it did not interest players for long enough, it was too difficult to play, and the mobile version did not work as well as the browser version. At best, the game had approximately half a million players. Supercell considered Zynga's market leadership in games on the Facebook platform insurmountable and so decided to focus on iPad games, cancelling a Facebook game it was developing. In order to ease concerns of Supercell's investors due to the change of direction, Paananen increased the level of detail in progress reports.[10]

The company simultaneously developed five games, and the first to be released for public testing was Pets vs Orcs. This game and Tower were abandoned. In May 2012, Hay Day was published and eventually became Supercell's first internationally released game.[10] Hay Day was Supercell's version of Zynga's successful Facebook game FarmVille, an easy-to-play farm simulator. Supercell added to their farming simulator the ability to refine products, a production chain, and touch-screen properties. The social aspect of the game was emphasised as well. In four months, the game became one of the most profitable games in Apple's App Store in the US, and was one of the most profitable in the world for two and a half years. The game received regular updates and was maintained by a team of 14 people.[12]

Development of Clash of Clans

Lasse Louhento had started at Bloodhouse, and Lassi Leppinen was the chief programmer at Sumea and Digital Chocolate. Their team had spent months on a fantasy themed Facebook game when Supercell changed strategies. Leppinen and Louhento wanted to make a strategy game that would use a touch screen so playing would be as simple and pleasant as possible. The development of Clash of Clans took six months, and the game was released on 2 August 2012. In three months, it became the most profitable app in the US. According to App Annie, in the years 2013 and 2014 Clash of Clans was the most profitable mobile game in the world. The eponymous battle between the clans was added to the game as late as 2014.[13]

In summer 2013, Supercell began a marketing collaboration with the Japanese video game company GungHo: the companies cross-marketed each other's games in their own markets. As a result, Clash of Clans became one of the most downloaded apps in Japan. GungHo's chairman of the board Taizo Son flew to Finland to thank Paananen and later introduced him to his brother Masayoshi Son, the CEO of the SoftBank Corporation. Soon, they proposed a corporate acquisition which indeed happened on 7 October 2013. SoftBank and GungHo bought 51% of Supercell's shares for 1.1 billion euros, which is the largest price for a Finnish private company in history. In six months, Supercell's value had tripled, due to the company's sale of 16.7% of its shares for 100 million euros in the spring of 2013.[14]

Development of games after Clash of Clans

Both Clash of Clans and Hay Day were released in summer 2012,[8] and Supercell did not release a new game in almost two years. The design of the third game, Boom Beach, began in the autumn of 2012, and it was released in 2014. The new strategy game was released in the test market at the end of 2013, after which it went through large changes. The game was very successful in the US right after its release in March, but it did not stay at the top of the download charts for very long. However, it rose to the top 30 most downloaded iPhone apps after Supercell started an expensive marketing campaign in December 2014. In 2015, the game surpassed Hay Day in the charts.[15]

In March 2016, Supercell released its fourth supported game, Clash Royale, which uses similar characters from Clash of Clans. Between the releases of Boom Beach and Clash Royale, Supercell had discontinued multiple game projects, two in their test release phase. One of them was Smash Land, which had been developed by four to five people for 10 months.[16]

In December 2018, Supercell released Brawl Stars globally, which was their fifth supported game and took 18 months to develop from its original release.[17]

On 15 December 2021, Supercell announced that they were opening a new game studio in North America to make games for other platforms like PC and consoles.[18]

Subsequent years saw Supercell experiment with multiple new projects, though many were discontinued during development. On 29 May 2024, Supercell launched Squad Busters, its first globally released new title in over five years.[19] The game combines characters from established Supercell franchises, such as Clash of Clans and Brawl Stars, in fast-paced 10-player matches focused on collecting gems. Squad Busters amassed over 40 million pre-registrations prior to launch and topped download charts in over 120 countries.[20] Despite surpassing $100 million in revenue within months and winning Apple's Game of the Year award, its performance was considered mixed within Supercell due to challenges in scaling player engagement and retention relative to their greatest hits.[21][22]

On 23 March 2023, in response to the Russian invasion of Ukraine, Supercell suspended service for players in Russia and Belarus until at least 1 June.[23]

Funding

Accel Partners and Index Ventures invested $12 million in the Series A of Supercell in 2011.[24] In October 2013 it was announced that the Japanese company GungHo Online Entertainment and its parent SoftBank had acquired 51% of the company for a reported $1.51 billion.[25] On 1 June 2015, SoftBank acquired an additional 22.7% stake in Supercell, which brought their total stake to 73.2% of the company and made them the sole external shareholder.[26] In 2016, Supercell reported annual revenues of around €2.11 billion.[27] In three years, the company's revenues have grown a total of 800 percent, from €78.4 million in 2012.[27][28][29] In 2024, Supercell had revenues of $3 billion.[30]

Ownership

In June 2016, Halti S.A., a Luxembourg-based consortium founded that month, acquired 81.4% of Supercell for $8.6 billion.[31] At the time, Japan's SoftBank valued Supercell at $10.2 billion.[32] Halti S.A. was 50%-owned by Chinese technology company Tencent; in October 2019, Tencent increased its stake in the consortium to 51.2% by acquiring shares worth $40 million as part of a convertible bond.[31][33]

Subsidiaries

In 2016, Supercell acquired 51% of Frogmind, developer of Badland. They would later rebrand as HypeHype in 2021, with Supercell investing an extra €13 million to fund development.[34]

In 2017, Supercell acquired 60% of Space Ape Games, a mobile game developer based in London.[35] In February 2021, it was announced that Space Ape would collaborate with Supercell to make Beatstar, which led to Supercell ID becoming available on Beatstar.[36] In late 2021, Space Ape developed Boom Beach: Frontlines, a spin-off of Boom Beach with Supercell. It was soft-launched in Canada on 19 October 2021 and was released to selected countries. On 30 November 2022, the game was announced to be discontinued with servers shutting down in January 2023.[37]

Supercell acquired the rest of Space Ape in late 2024,[38] absorbing several Space Ape employees into Supercell's London office while laying off others.[39]