Although recent updates to Brawl Stars may be knocking some of the shine off its reputation, there’s no doubt Supercell remains the industry’s most admired mobile games developer both in terms of its financial success and company culture.
Small wonder that its decision in 2016 to start investing into other mobile games developers gained so much attention.
Since then though - in typical Supercell-style - the company’s M&A activity has been low key, even off-beat in terms of deal selection.
And there’s both method and unintended madness in its approach.
Starting close to home
In retrospect, Supercell’s first deal was an obvious one: it was small scale and highlighted strong local and cultural similarities.
In September 2016, Supercell spent around $8 million acquiring a 51 per cent stake in fellow Finnish indie Frogmind.
Frogmind had come to prominence with its artful, noir platformer Badland, a paid mobile game that gained an Apple Design Award and an Apple Game of the Year award back in 2013.
And despite some hesitation prior to the acquisition it had started work on free-to-play games, two of which - Badlands Brawl and Rumble Stars Soccer - are currently in soft launch.
On that basis, the investment enabled Frogmind to scale up its teams, gaining support and expertise from Supercell while keeping its independence as a studio.
However, without the investment, it’s likely one of those soft launched games would already have been released. Indeed, in a post-deal interview Frogmind CEO Johannes Vuorinen suggested one of its games could potentially be out in 2017, something which clearly didn’t happen.
In that sense, Supercell has perhaps acted like a comfort blanket; its cash and confidence enabling Frogmind to spend too long on games that should have already gone live or been canned.
Still, given Badlands Brawl - a super polished, physics-heavy PVP tower defence game - has only been in soft launch for six months, maybe this remains a borderline call.
Supercell’s second deal was again local and small, but this time early stage: $2.9 million into location-based games start-up Shipyard. Its debut title is about to enter closed beta testing with a release planned later in 2018. One for future discussion.
But Supercell’s third deal remains the defining part of its M&A strategy.
Elevating Space Ape
London-based Space Ape was founded in 2012, mainly by staff and executives from EA’s Playfish studio, and it hit the ground running with VC funding and a strong idea of what it wanted to do.
Supercell’s future well-being isn’t dependent on any of its companies generating returns.
Ironically, in the case of its first game that plan was to get a Clash of Clans-style strategy game released for Android devices before Supercell got around to porting the iOS version of Clash of Clans. Space Ape succeeded in its aim with Samurai Siege being the number two top grossing strategy game on Google Play behind IGG’s Castle Clash.
And it quickly built momentum with its follow-up, the fantasy-themed strategy title Rivals Kingdoms. As often happens it was a better game of the two but not as commercially successful, something Space Ape put down to the fantasy setting being less appealing to the mass market.
Indeed, it was around this time Space Ape started to give conference talks revealing the sort of operational figures most other companies keep locked away.
Combined with this openness was the feeling something needed to change.
Space Ape was well established, growing and profitable but had to get off the strategy game roundabout - its third game Transformers: Earth Wars was a disappointment - and attempt something new.
Something’s got to give
The decision to rethink its plan, and the creativity unleashed proved to be the making of Space Ape, at least in terms of Supercell’s investment: a 62 per cent stake costing $56 million announced in May 2017.
Getting acquired by the industry’s most admired mobile game developer brings a new set of responsibilities.
Significantly, in another post-deal interview, Space Ape CEO John Earner revealed Space Ape had been in talks with Supercell in 2016, and its subsequence change of direction in terms of the games it chose to make and company structure was a direct result of these.
Closing the circle, Supercell’s investment was a direct result of this change of direction.
Yet, as with Frogmind, in the 12 months since Supercell’s investment, from the outside it’s not clear what the impact has been on Space Ape. Partly this is because you can’t make mobile games in 12 months anymore, also because getting acquired by the industry’s most admired mobile games developer brings a new set of responsibilities.
As Earner noted at the time, Space Ape’s status as a ‘Supercell company’ means any game it now releases will face widespread scrutiny and sky high expectations both externally and internally.
“I don't think we would want to launch a game ever again that didn't have a very real shot of defining and owning a category on mobile,” he commented on the changed perspective on success.
Given the vanishing small number of developers which have managed to ‘define and/or own’ a mobile game category, however inspiring the new vision, it must be a burden too, especially in a mobile ecosystem now dominated by existing hits, high profile console franchises and games that appeal to middle-aged women.
Supercell has spent $80 million, anointing five companies with its seal of approval.
This is particularly an issue for Frogmind and Space Ape, established studios that have up-to-this-point created games for core gamers, but perhaps also sheds some light on Supercell’s two most recent, smaller deals.
Experienced teams, fresh ideas
Early February 2018 saw Supercell invest in its second start-up: $4.2 million into Trailmix, which was co-founded by leads from the London studio of Activision Blizzard’s mobile arm King.
At King, they’d created and launched the very mass market Farm Heroes Saga, and Trailmix’s aim is to make mobile games for people who don’t consider themselves gamers, or who don’t even yet play mobile games.
The situation is similar in terms of $5 million Supercell recently invested into US studio Redemption Games.
Founded in 2015 by creatives who worked on Jam City’s match-3 hit Cookie Jam, its first project was a match-three game set in the Temple Run universe.
Ultimately, however, Temple Run: Treasure Hunters, a joint project with publisher Scopely and licence holder Imangi, was killed in soft launch. Redemption doesn’t have any other publicly announced games so it’s impossible to judge what caught Supercell’s attention other than the people and culture.
As for Supercell’s CEO Ilkka Paananen, his explanation of Supercell’s M&A activity remains as hands-off as his management style.
“It's all about independence, trust and encouraging risk-taking and long-term thinking,” he said, following the Redemption deal.
“So that will be the case with Redemption, just like it is with Frogmind, Space Ape, Shipyard and Trailmix. Of course, we'll always be here for advice and support if they need us, but it's up to them.”
Should you trust a wizard?
Akin to those free-range parents who encourage independence in their offspring, the additional fact that unlike all other investors, Supercell’s future well-being isn’t dependent on any of its companies generating returns makes for a curious situation.
Having an investment from Supercell is like meeting Gandalf in the dark woods and having him agree to join your quest.Michael Witz
After long scrutiny and over three years, it’s spent $80 million on a handful of deals, anointing those companies with the Supercell seal of approval and raising the standards to which they now aspire.
Yet without the need for the typical financial outcome demanded by normal investors, one of the key traditional feedback loops of such activity is weakened. Maybe the entire process could be filed under ‘Be Careful What You Wish For?’
Hence it’s interesting to consider what Redemption CEO Michael Witz said about the deal.
“The mobile games industry is extremely challenging and the odds of survival are low," he said. "Having an investment from Supercell is like meeting Gandalf in the dark woods and having him agree to join your quest.
“The odds are still against you, but it’s sure great to have some magic on your side.”
No doubt, it’s reading too much into the comment to point out Gandalf wasn’t the most reliable of guides in The Lord of the Rings. As with a Supercell currently struggling with its own creativity, Gandalf had his own battles to fight.
Of course, the counter-argument is Gandalf ultimately did enough to inspire his charges to complete their mission and save the world.
So despite the hands-off philosophy and the added pressures for its new studios, Supercell’s unique approach may still be enough for some of them to beat even those odds.