FINLAND –Europe’s Mobile App HOTHOUSE

Will Cardwell* Tero Kuittinen*Aalto University Alekstra, BGR

*Idea’s here are ours and not necessarily our employers… January 16, 2013

Top Publishers by Monthly RevenueRank Publisher Rank

Change Category HQ Country # of Apps

1 Supercell 1 Games FIN 2

2 Electronic Arts 1 Games USA 969

3 GREE 7 Games Japan 108

4 Rovio 8 Games FIN 245 Gameloft 1 Games France 260

6 Zynga 3 Games USA 58

7 Kabam 2 Games USA 5

8 Apple 3 Various USA 19

9 Storm8 2 Games USA 4010 CyberAge 6 Games Japan 93

SOURCE: App Annie Index ™ December 2012, iOS only

Top Game Apps by Monthly RevenueRnk Game Rank

Change Publisher HQ Country Subcategory

1 Clash of Clans - Supercell FIN Strategy2 Hay Day 2 Supercell FIN Simulation

3 The Simpsons™ 1 Electronic Arts USA Simulation

4 Kingdoms of Camelot 1 Kabam USA Simulation

5 Puzzle & Dragons 2 GungHo Online Japan Puzzle

6 Slotomania 1 Playtika Israel Card

7 Angry Birds Star Wars new Rovio FIN Arcade

8 CSR Racing - NaturalMotion UK Racing9 Poker by Zynga - Zynga USA Card

10 Angry Birds Star Wars HD new Rovio FIN Arcade

SOURCE: App Annie Index ™ December 2012 iOS Only

Tale of Two Start-ups• Rovio’s 2012 revenue is expected to be about 4x 2011; up from $106

M in 2011, $7 M in 2010, $2 M in 2009• Rovio’s monthly active user base has increased >10x to 260 M from

23 M in one year.• Licensing and merchandizing probably more than 40% of Rovio’s

sales by end of 2012.• Supercell was founded in 2010, and launched its first game in June

2012 and the second in August 2012; the two games were thought to be grossing $30M per month in December 2012.

• Estimated 2012 revenue: $70+ M in 2012, up from nearly zero in 2011.

• Supercell’s 2 games are now outgrossing EA’s 969 games, and it hasbeen suggested by Accel Partners that Supercell is its fastest growingcompany in history.

Mobile Games Underestimated ?• December 2012: Twitter hit 200 M monthly users – and

Rovio hit 260 M monthly users. Twitter launched six years ago; Angry Birds three years ago.

• Arbitron engagement survey: In July 2012, iPhone app users spent 150 min on Twitter, 52 min on YouTube, 51 min on Ebay, 38 min on Gmail, – and 60 minutes on Angry Birds.

• % of monthly users who also use an app weekly: Twitter 34%, YouTube 26%, Ebay 30%, Angry Birds 28%.

• Rovio is already a major influencer in the educationmarket – teaming with NASA and National Geographic.

• Can the converged expertise in Mobile and Gaming beleveraged into other societally important verticals?

Rovio’s Evolution• Many dismissed Angry Birds as a fad when it hit big in

Feb -10• Jan 12, -13: AB Star Wars #1 paid app after 66 days in

Top 200; AB Space #4 after 287 days; Bad Piggies #7after 109 days; Angry Birds #32 after 1,057 days; AB Seasons #51 after 814 days

• Rovio is expanding its stable of characters like Disney during the Thirties – gradually and within the same universe

• Cannibalization of older games is minimal• Cross-promotion of mobile games far more effective than

in other entertainment sectors

Supercell’s Overnight Success

• Clash of Clans debuted last August – it has been the #1 iPad app in revenue generation in USA on most days since Sep 15.

• For most of this January, Clash of Clans and Hay Day have been the two highest grossing iPad apps in America.

• Both Clash of Clans and Hay Day were outside Top 50 in downloads when they became Top 3 highest grossing apps.

• Both games hit top on iPad first – then became Top 3 iPhone revenue generators a few weeks later. This reverses the old pattern of iOS blockbusters.

• Supercell has probably less than 2% of Rovio’s download base; but it now makes more revenue per month directly from games.

Rovio and Supercell –Radically Different Revenue Strategies

• Both Rovio and Supercell have unusual customer loyalty, but Supercell turns a smaller group of players into rabid fans

• Clash of Clans has an exceptional average play frequency; 12 times a day

• Rovio has topped 1 Billion downloads, while Supercell gets a smaller group of fans to pay continuously for in-app features.

• It is likely that Rovio will got more than 50% of its sales from licensing fees during 2012, and up to 70% in 2013, as theyleverage a massive base of casual fans into retail success.

• Rovio moving quickly into new verticals. They are alreadyubiquitous in retail, significant in education: what about healthcare, environment and others? Where can the brand be used to generate engagement?

New Depth• iPad apps now generating roughly 50% as much revenue

as iPhone apps according to several game developers; Finnish companies have had a special focus on iPadsoftware thus far, but hitting new platforms now

• In January 2012, only Rovio had entries in the US iPad Top Ten game charts

• In January 2013, seven Finnish titles by four houses hit the iPad Top Ten game chart in America

• Rovio, Supercell, Fingersoft, Boomlagoon• Fingersoft is a team of just 3 people; Boomlagoon created

by 3 former Rovio employees

The Next Generation• Fingersoft’s ”Hill Climb Racing” became #1 iPhone app on

Nov 17• Boomlagoon’s ”Noble Nutlings” hit the US iPad Top 5

chart just three days after it debuted on January 8.• New Finnish app firms are getting an infusion of graphics,

marketing and in-app purchase revenue optimization expertise from older firms.

• Boomlagoon benefiting from a burst of publicity due to Rovio. Fingersoft built an Android audience of 40 M downloaders, which created built-in iOS demand.

• They will not be the last…

Why Finland, and Will it Continue?

• Core drivers born from open source, telecom, and demo scenesperculating during the 80s and 90s; and produced huge impact thruNokia, Linux, MySQL, IRC and others.

• Finland caught mobile game fever in 2001, when 5-6 start-up companiesreceived solid VC backing – the second wave then broke throughglobally in 2010-2012.

• Remedy Entertainment had a massive global console hit with Max Payne in 2001, pulling in a lot of talent into game development.

• Nokia had an ambitious mobile gaming program in 2001-2007, paying outside contractors to create content for Ngage and Symbian platforms.

• Finland is small enough for talent and ideas to quickly spread from one company to another – key talent from Rovio to Supercell to Boomlagoon to Remedy all know each other.

• New talent rolling in from Russia and Baltics.

OPPORTUNITY FOR U.S. CORPORATE AND VC INVESTORS… Still a chance to be an early mover, but the pioneers are mostly in already

International VCs relatively significant…

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Foreign Corporations Getting Active• Microsoft, Intel, Samsung, Huawei, Electronic Arts most

significant announcements so far, but MANY more are looking closely.

• Case: AppCampus shows how University and Corporates can work together to catalyze a market

AppCampus Overview

• A three year project, based at Aalto university

• Funded with 21M€ by Microsoft, Nokia and Aalto University.

• A new kind of accelerator for next generation of mobile experience

16

So, Why Now?THEN…• Nokia was dominant in

attracting talent.• University graduates were

not entrepreneurial, littleforeign talent

• Dilution-free state R&Dfunding led to ”business-lazy” talent

• Very few R&D/ Design centers for globalcompanies

… NOW• Now the talent is

interested in start-ups• MAJOR movement led by

Aalto University of bestgraduates to startup scene

• New tools combined with market situation creatingnew sense of urgency

• Global titans moving in. Huawei, Intel, Samsung, EA, others following.

One Last Important Signal…$125 US Embassy Innovation Center shows

strong US commitment to Finland

Big Thanks to Ambassador Jukka Pietikäinen

and his team at the Consulate of Finland in New York for the opportunity to share with you!

Will Cardwell* Tero Kuittinen*Aalto University Alekstra, BGRWill.cardwell@aalto.fi teromail@gmail.com

*Idea’s here are ours and not necessarily our employers…