How Rovio Makes Money

Angry Birds Game ScreenshotIn the game, players slingshot birds toward the enemy pigs

Photo: Screenshot by Eleanor Miller

Quick, take a guess: what was the most popular mobile app downloaded in 2011? Facebook? Twitter? A navigation app?Nope. It was Angry Birds, a game only two years old and yet so ubiquitous that everyone from Prime Ministers to Heisman Trophy winners are fans. 

Angry Birds is made by a company called Rovio. Rovio wants to be the next Disney: a company that makes beloved characters and brands and makes money from them every way possible. 

And they look like they’re on a good way to accomplishing that, with $100 million in revenues only two years after being nearly bankrupt.

Rovio: The Little Gaming Company That Could

Estimated total Angry Birds downloads

Photo: BI Intelligence

First, a little background.Rovio started in 2003 and mainly developed games for outside companies. Rovio developed 51 games before hitting the big time and the company nearly went bankrupt.

In December 2009, however, Rovio released Angry Birds. It became a hit within just a few months.

To date, across all platforms and including both paid and unpaid versions, Angry Birds has been downloaded more than 600 million timesmaking it the most downloaded game ever—and it only cost the company around $140,000 to develop.

Making Money: Not Just From The Game
Currently, Rovio is essentially all about Angry Birds– but that includes much more than just the game you and I play on various devices.

The company makes money in four main ways, discussed in detail below:

  • Paid game downloads
  • Ads in free game downloads
  • Partnerships and Franchising
  • Merchandise/products

The Game

Rovio: estimated quarterly revenue

Photo: BI Intelligence

We estimate that Rovio still makes most of its revenue from the sale of various Angry Birds games.

Some reports say that as much as two-thirds of the company’s revenue comes from game sales. “Angry Birds” is just one game, but it comes in many versions (“Angry Birds Seasons”, “Angry Birds Rio” and so on) and on many platforms. 

Prices vary from free (with ads) to $4.99 with a frequent pricepoint at $0.99.

So just how popular are all these versions of Angry Birds? Exact numbers are hard to come by, but estimates are impressive. After just $10 million in estimated revenue in 2010, the company is said to be on track to make $100 million in revenue in 2011.

Ads and Partnerships

Angry Birds ad screenshotAds appear periodically in free versions of the game

Photo: Screenshot by Eleanor Miller

After sales of games, ads are the biggest source of revenue for Rovio and are essential to the company.Rovio co-founder Peter Vesterbacka has claimed that Angry Birds has 10 billion ad impressions a month and has even called the game not a game, but an advertising network to challenge Google’s.

Android revenue is almost entirely ads, which are handled by Google’s AdMob. Small banner ads appear periodically throughout game play, as you can see on the screenshot at right.

Angry Birds pistachio partner screenshotRovio’s partnership with Wonderful Pistachios is just one of many.

Photo: Screenshot by Eleanor Miller

Rovio also uses creative partnerships that double as ads, in a sense, for both Rokio and their partners. For example, on the Chrome browser version of Angry Birds, a game sponsor is Wonderful Pistachios. Their logo appears prominently in the game, and players are told you can buy specially-marked bags of the pistachios and get special codes to unlock features in the game, or win prizes.These are just a couple of examples of how Rovio is gradually expanding into the social sphere: by integrating products in the gaming experience (instead of just a static or unrelated ad), players are encouraged to interact with the game, other people, and products.

Angry Birds Roku screenshotRoku’s version of the game uses an interactive remote that players wave at the screen.

Photo: Screenshot by Eleanor Miller

Other examples of Rovio’s gradual ramp up into using more social tools include an integration with Google+ (Rovio claims there are 80 million users of the game on Google+), a test run on Facebook (a fuller version is said to be in the works) and live events and parties where audience members can play group versions of the game or compete against each other for prizes.Rovio has also recently partnered with Roku, the streaming content service (including a special Angry Birds-themed Roku box that includes the game, for a regular price of $119.99) and released a version of the game that works with a hand-held device that can be waved in front of the Roku and TV screen to play. A regular Roku box that has the remote needed to play Angry Birds costs $99.99.

Merchandise and Retail

Angry Birds merchandiseEverything from stuffed birds to green piggie flip flops to a cookbook are now for sale.

Photo: Screenshot by Eleanor Miller

But the next big step for Rovio is to expand its merchandising and number of retail outlets.The company began selling merchandise online about a year ago, and has expanded the number of products you can buy. Now available are everything from green piggie flip flops to Angry Birds stuffed toys, to themed iPhone cases. The latest bit product push is a brand new cookbook centered around egg recipes– which, though fun, seems slightly incongruous with the game since the birds dive bomb the pigs to save the eggs, so the pigs won’t eat them. But no matter if things aren’t quite logical in Angry Bird land—anything with the characters on it has the magic touch: the cookbook, an Angry Birds calendar and two colouring books are selling respectably on The Rovio store occasionally sells out of some of its products, they’re so popular.

Rovio has only opened one physical store thus far, in Helsinki. Though it was opened only in November, Peter Vesterbacka told us that it was profitable within just a few days, an impressive achievement. Rovio has also said that sales of merchandise now make up anywhere from 10-20% of its revenue.

Rovio has said much of its market is in the U.S. and the U.K.– but now the company has set its sights on China for the next major push, where its popularity is growing fast (China is now behind only the U.S. in terms of the game’s popularity).

The second office Rovio opened was in Shanghai—and Vesterbacka has been quoted as saying he’d like to see as many as 200 Angry Birds retail stores open across China. The company “aims to hit $100 million in retail sales in China in the first year of store operations,” according to Bloomberg, who also quoted Vesterbacka as saying, “We want to be more Chinese than the Chinese companies.”

Rovio Wins Because It’s A Smart Marketing Machine

angry birds vesterbacka

Photo: Business Insider / Matthew Lynley

But can the magic last for a company centered so much around one brand, even though it’s diversified across products and distribution channels? Analysts have mixed opinions, but we think Rovio is on to something even bigger than just the Angry Birds franchise.Disney also shot to fame thanks to just one concept (Mickey Mouse). And we’re not the first ones to say it, but it certainly seems possible that if Rovio plays its cards right, it can become just as big as its idol.

“Disney is worth $60 billion, we’re far from that. Over the next 5-10 years, we want to go there,” Vesterbacka told BI last month. Rovio itself currently has a valuation of $2.25 billionthe price Zynga offered for the company earlier this year.

Besides the big revenue numbers, the company has an enviable relationship with its customers and the public. It’s hard to find any negative press about the company. Its executives are open and give interviews often. Their official twitter account replies to individual customers. Their blog keeps people up to date with new releases, bug fixes, and fun anecdotes– all in a breezy style, and often ending with a friendly “Squawk!”

Perhaps even more importantly, the company engages in relentless marketing—of a kind. There are no traditional ads, but Peter Vesterbacka is rarely seen without his trademark red Angry Bird sweatshirt. The company smartly aligned a new version of the game with Fox’s “Rio” movie last spring– a win-win for both parties. They also partner with other businesses cleverly– like giving players extra perks for playing if they go into a Barnes & Noble shop. And Angry Birds has its very own movie coming to theatres in a few years (they’ve even hired a former Marvel executive to help with the project).

Bottom Line:

  • Rovio has a strong fan base, all over the world in diverse markets, that’s continually shown its loyalty by downloading updates and new versions of Angry Birds and buying themed merchandise (and this loyalty hasn’t seemed to wane in the last two years);
  • The company is run by a smart, energetic and creative team who are willing to take risks (not sell to Zynga, for example), show dogged tenacity (see: 51 previous games), and seem to truly like and believe in their products and their fans;
  • Rovio’s astounging user and revenue growth suggests the company is ahead of a massive opportunity.

In sum, we think Rovio has a bright future if it keeps up its recent progress.

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