How Supercell Used “Clash of Clans” to Become an $8 Billion Business

Clash of Clans

Like its name suggests, “Clash of Clans” is a game in which players recruit a wide range of often whimsical units to raid other players so that the resulting resources can be used to build up their own bases. As a result, it is classified as a MMO strategy game that has been made available for both Android and iOS, which are the two leading mobile operating systems. Furthermore, “Clash of Clans” has the notable distinction of being one of the most successful games ever not just on mobile but on all of the platforms that have existed so far, so much so that Tenhold Holdings, Ltd. is spending more than $8 billion to buy “Clash of Clans” developer Supercell from its current parent company. (1)

To elaborate, Supercell is the Finnish company behind “Clash of Clans” as well as a number of other mobile games such as Boom Beach and Hay Day. In 2013, the Japanese company called SoftBank Group Corp. bought 51 percent of its stock shares for $2.1 billion before following up in 2015 with a second purchase of another 22.7 percent of its stock shares. However, SoftBank has been struggling with more than $80 billion in interest-bearing debt from its acquisition of Sprint, which could be why it has made the choice to go along with the Chinese company called Tencent Holdings Ltd.’s plans to buy 84.3 percent of Supercell’s stock shares in exchange for $8.6 billion. This is a natural extension of Tencent’s existing revenue-earning operations, which make more than half of its $8.5 billion revenue from games of a similar nature and intends to use “Clash of Clans” as a way to increase its influence in non-Chinese markets.

How Did Changing Market Conditions Make “Clash of Clans” Possible?

Clash of Clans Commercial

First and foremost, it is important to note that “Clash of Clans” would not have been possible without the popularization of smartphones and other mobile devices in countries all around the world. In main, this is because when mobile devices became powerful enough to provide more than their primary functions, they became powerful enough to run mobile games as well as other apps. As a result, the number of potential customers for game developers saw an enormous increase as all of the mobile device users out there were added to their ranks, where once they had been limited to PC users as well as people who were willing to sink a not insignificant amount of money into buying a console whether handheld or not. Since more potential customers mean more potential revenues, it is clear that “Clash of Clans” could not have earned as much as it has in the time before the popularization of mobile devices.

However, it is also important to note the incredible convenience of smartphones and other mobile devices, which can be brought with their users whenever and wherever they want to. Given that most people spend a fair amount of their daily lives waiting for one thing or another, this meant that they were now presented with the constant temptation of mobile games, thus increasing the chances of them actually taking the step of trying them out instead of just ignoring them as people in previous eras would have done. Once again, it is undeniable that the fundamental nature of mobile devices have been a just as fundamental part of the success of “Clash of Clans.”

How Did Supercell Turn “Clash of Clans” Into Such a Success?

Supercell

Of course, this does not mean that Supercell has not made good decision that have contributed to its success. For example, the fact that “Clash of Clans” is a freemium game has been fundamental to its success as well. Those who are not familiar with the concept should known that “freemium” comes from the words “free” and “premium” squashed together, meaning a game that is free to download and free to play but can provide a richer as well as an easier experience for those that are willing to spend real world currencies to buy in-game assets. For example, “Clash of Clans” provides its players with the choice to spend money for resources, which is not particularly uncommon for strategy games that have been released for mobile devices. Regardless, freemium is a fundamental factor to its success because it lowers the barrier of entry, meaning that a lot more people could be convinced to play than if they had to pay for the game before doing so. At the same time, freemium meant that Supercell could earn money from “Clash of Clans,” which is critical for a game developer that wanted to run a business rather than develop for fun.

Furthermore, it is worth mentioning some of the choices that have been made in regards to the freemium formula to make it as successful as possible. (3) For example, the prices for in-game assets in “Clash of Clans” are relatively low, meaning that Supercell can encourage a much bigger number of people to make payments from time to time than otherwise possible, thus enabling it to thrive on the volume of its sales rather than the amount paid on each sale. Similarly, the features of “Clash of Clans” are available by advancing through normal gameplay, which serves to retain the player goodwill that is so important to convince them to go along with the game developer’s intentions rather than defy them at every end. Finally, the MMO nature of the game encourages a sense of competition among its players, while its single-player mode also brings in more players than otherwise possible. Combined, these two features result in a higher number of potential customers while also convincing each paying customer to spend more, which is always a powerful combination in business.

Further Considerations

It remains to be seen what will happen from Supercell’s acquisition by Tencent. However, it is interesting to note that Tencent has a fair amount of expertise and experience with mobile games even before the acquisition. Furthermore, there have been claims that the Chinese company is planning to incorporate “Clash of Clans” and Supercell’s other games into WeChat and other Chinese social platforms. If successful, this could mean an expansion of the player base of “Clash of Clans,” which in turn, would mean even more revenues in the future. Based on the fact that it was willing to pay more than $8 billion dollars for the Finish company, the leadership of Tencent certainly seems confident that this is how it is going to be.

References:

  1. http://www.celebritynetworth.com/articles/billionaire-news/clash-of-clans-sale/
  2. https://en.wikipedia.org/wiki/Supercell_(video_game_company)
  3. http://www.businessinsider.com/why-clash-of-clans-is-so-popular-2014-9


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