HELSINKI—Weeks after Chinese investors agreed to buy a controlling interest in the Finnish maker of “Clash of Clans” last summer, chief executive and founder Ilkka Paananen lost his Nordic cool.
While the mobile-gaming transaction led by Chinese internet giant Tencent Holdings Ltd. valued Supercell Oy at more than $10 billion, making it one of Europe’s priciest tech startups, Mr. Paananen was receiving alarming reports: the studio’s signature games no longer ranked among the top-grossing apps in online stores.
Instead, “Pokémon Go,” the mobile game developed by Nintendo Co. affiliate Pokémon Co. and Niantic Inc., had raced to the top of the charts in just a few days as its appeal went viral.
Read it on the Wall Street Journal.
Further upsetting Supercell’s CEO was that nothing his team was doing to boost revenue appeared to be working. A television ad campaign timed around the Summer Olympics in Brazil, the largest marketing push since the company’s creation in 2010, was “a complete failure,” Mr. Paananen said.
“Every single thing that we tried seemed to go wrong,” he said in an interview.
Five months later, Mr. Paananen says Supercell has fixed problems, paying more attention to customer complaints and refreshing its handful of games more often. Already by the end of September, its latest game, “Clash Royale,” was again the top-grossing app in Apple Inc.’s app store for the iPhone in the U.S., according to industry tracker App Annie.
Still, the summer lapse had thrown into question the success that was seemingly a Supercell birthright. The hefty price Tencent and its partners agreed to pay was a bet on the Finnish company’s ability to produce several hit games in a row—a rarity in an industry that answers to the shifting tastes of fickle players.
Had Supercell been a publicly traded company, the disappointing summer results could have crushed its valuation, said KooPee Hiltunen, director of Neogames, Finland’s videogame industry association. He said the episode underscores how competition has risen in the sector, increasing pressure on developers to produce ever more attractive games.
“All the companies, including Supercell, have to find new ways to get new users,” Mr. Hiltunen said.
Tencent, which led the consortium’s move to buy an 84% interest in Supercell for $8.6 billion in June, declined to comment for this article.
Mr. Paananen said he received a phone call from Tencent President Martin Lau in August. The new Supercell owner had seen the worrisome numbers but voiced no particular concerns, instead offering reassurance that he was in it for the long run, according to the Finnish executive and a person close to Mr. Lau.
Back in the summer, Mr. Paananen sought to understand what was going wrong.
He had said Supercell’s games were designed to be played for “years, if not decades.” And yet “Clash Royale” revenue dropped sharply from $133 million in March, when the game was launched, to $62 million in July, according to SuperData Research Inc. Most mobile games, including Supercell’s, are free to download but earn money by selling virtual goods that help players advance.
User complaints kept pouring in about certain features in “Clash Royale,” such as sending smiley faces to a defeated opponent at the end of a battle–which many players on the receiving end perceived as humiliating. Users were also asking for more updates to the game.
“We weren’t good at listening to players,” Mr. Paananen said. The CEO said he decided to share all information about user feedback and dwindling downloads with Supercell employees, “no matter how horrible they looked.”
Mr. Paananen said the company looked at how Japanese “Monster Strike” maker Mixi Inc. and other game developers in Asia—where the free-to-play model has been prevalent for longer than in Europe and North America—keep their games eventful and revenue-generating. “When players return to their games, there should be something new,” he said.
As of Monday, “Clash Royale” and “Clash of Clans” were both in the top 10 of Apple’s U.S. app store, ranking first and fourth, respectively.
Despite Supercell’s multibillion-dollar valuation and Tencent’s global ambitions, the studio’s staff numbers just 210, and Mr. Paananen said he plans to hire only 10 more people in the current quarter.
“We hire as slowly as possible,” he said, with an eye to maintaining the studio’s culture. He also said Tencent has respected its promise to leave the Finnish company largely independent. Longer term, Supercell is considering opening game-development studios outside Finland, in large gaming hubs such as London; Barcelona; Vancouver, Canada, or Austin, Texas.
Supercell plans to test one or two games next year for a select public of a few thousand gamers, but has no immediate plans to add a fifth game to its portfolio, Mr. Paananen said.
Supercell’s new employees should be prepared for more failures, Mr. Paananen said. “We should expect this to happen again,” he said. “This is what the games business is all about.”