Supercell is the latest fast rising online game fad company

supercellFollowing is an article from last week’s Wall Street Journal that I found extremely interesting as it relates to the ‘faditzation’ of mobile games. (I have edited it only slightly.)

‘Last week on October 16 Japan’s  Softbank Corp. agreed to buy 51% of the Finnish company Supercell, which has two games and just 100 employees, for $1.5 billion. It is the largest ever investment for a mobile-app company, according to Rutberg & Co. Two of Supercell’s co-founders stand to make more than $200 million apiece.

The investment in Supercell is another cog in SoftBank Chief Executive Masayoshi Son’s sprawling empire, which now includes SprintCorp.’s.  Supercell will be paired with Gungho Online Entertainment to enlarge SoftBank’s stable of free-to-play mobile games.

 

Supercell co-founders Ilkka Paananen, left, and Mikko Kodisoja at its offices in 2012. Agence France-Presse/Getty Images

But it’s risky: Zynga Inc., a U.S. social-games maker that went public in 2011, has a market capitalization of $2.8 billion, down about 60% from its debut. Its prospects faded after it failed to create a convincing successor to its “Farmville” franchise.

Supercell is among an army of new firms to quickly generate significant value and disrupt mature industries by latching on to new distribution systems such as Apple Inc. app store and Facebook Inc.’s network. But unlike many of its peers, including Sweden’s streaming music company Spotify AB, Supercell is profitable.

The company serves as a poster child for the burgeoning “freemium” game distribution strategy. It allows players to download and play titles for free in apps stores, but it requires them to pay for extras, such as special weapons or power boosters that speed up a game’s play.

About 10% of Supercell users purchase in-game extras, much higher than the industry norm. Last year, the company made a profit of more than 40 cents on every $1 of goods it sold, or $40.3 million on sales of $105 million.

Supercell’s success has come with only two games on the market: “Hay Day,” an app that simulates farming, and “Clash of Clans,” which simulates combat. Both debuted last year on Apple’s iOS and “Clash of Clans” was recently launched on Google Inc.’s Android in a move aimed at better targeting Asian markets.’

Whether it is Zynga, Supercell or King. Inc (maker of the wildly popular Candy Crush), the new standard seems to be to cash in and on the fad wave since they are, fads.  That is to note that they will not last.  Everyone knows that and yet people still get excited enough to invest since catching the wave at the right time can turn some tidy profits.  But it’s a timing game that the average investor is unlikely to ever win.

Would you invest in any of these fad-based companies that claim they are technology companies? 

 

 

 

About markkolier

Futurist, entrepreneur, left lane driver
This entry was posted in Best business practices, Innovation, Media, Mobile Communication, Mobile Gaming and tagged , , , , , , , , , , , . Bookmark the permalink.

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