How did Rovio Entertainment succeed with their smashing hit Angry Birds?

1. INN210 – Assignment 1 – Rune Haugestad
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Angry Birds – A story based on radical innovation and creative success.
Rune Haugestad
IØR course code: INN210

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Contents
1. Introduction ...................................................................................................................................3
2. Some amazing core facts about Rovio Entertainment and Angry Birds:.........................................3
3. Analyzing Angry Birds.....................................................................................................................4
4. Value creation ................................................................................................................................5
5. Value capture .................................................................................................................................5
6. Dominant design and absorptive capacity......................................................................................6
7. Multi-sided markets and multi-sided platforms.............................................................................6
8. Economic success...........................................................................................................................7
9. Building Angry Birds as a passion brand.........................................................................................8
10. Summary and conclusion............................................................................................................9
11. References................................................................................................................................11

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1. Introduction
My choice of product is one of the biggest new game phenomena from the gaming industry;
Angry Birds from Rovio Entertainment Ltd. The main reason to choose Angry Birds as
business case is that this phenomenon is interesting seen from several cross disciplinary
subjects such as; innovation, psychology, sociology, gaming addiction, viral (Word-Of-Mouth)
marketing, branding and how digital businesses works regarding modern; innovation
strategies, digital business and multiple revenue models. The business case of Rovio is also a
highly inspirational one: Rovio was almost bankrupt when they released Angry Birds!
(Source: http://articles.businessinsider.com/2011-03-10/tech/30012723_1_atlassian-accel-partners-
angry-birds) Their economic crisis was saved by ONE creative and innovative product: Angry
Birds. Because their Angry Birds game got rapid market adaption their revenue exploded in
2010 and 2011, and the value of the company today is amazing: 1 billion USD. Source: AYTM
Market Research: http://www.adverblog.com/2011/09/12/the-psychology-of-angry-birds-
infographic/
2. Some amazing core facts about Rovio Entertainment and Angry Birds:
• Almost bankrupted before Angry Birds launch in December 2009 (Source:
http://articles.businessinsider.com/2011-03-10/tech/30012723_1_atlassian-accel-partners-angry-birds)
• 648 million games downloaded in total and 200 million monthly active users of the app (Source:
http://techcrunch.com/2012/05/07/rovios-big-year-angry-birds-helps-gaming-company-soar-to-106m-in-
sales648m-downloads/)
• 2011 Revenue: $106.3 Million; Pre-Tax Income $67.6 (Source:
http://www.forbes.com/sites/ericsavitz/2012/05/07/rovio-says-2011-revs-106-3-million-pre-tax-income-67-6-
million/)
• In 2010 Rovio's revenue was around $10 million. (Source:
http://www.arcticstartup.com/2011/12/16/angry-birds-2011-revenue-around-100-million-looking-to-ipo-in-
hong-kong-in-2013
• Estimated company value: 1 Billion USD (Source: http://www.adverblog.com/2011/09/12/the-psychology-
of-angry-birds-infographic/
• From 28 employees at the start of 2011 to approximately 224 employees May 2012 (Source:
http://techcrunch.com/2012/05/07/rovios-big-year-angry-birds-helps-gaming-company-soar-to-106m-in-
sales648m-downloads/)

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• 21,307,889 (Facebook) “Likes” Angry Birds (Source: http://www.rovio.com/en/our-work/games)
• 477.686 Twitter followers (Source: http://twitter.com/angrybirds)
• 651,829,262 YouTube video views (Source: http://www.youtube.com/user/RovioMobile)
3. Analyzing Angry Birds
Product attributes of Angry Birds
The basic attributes of Angry Birds are the following:
• Mass market (Casual games for smartphones) + Niche market (Puzzle) + Multi-sided markets
(Licensing, franchise and Mobile advertising)
• Business to consumers (B2C)
• Highly fun – wide target demographics (From children to mature people)
Forms of innovation
Angry Birds as a new game is a product innovation (Smith 2010 p. 25-26), especially
regarding the easy user interface, the low entry skills required, funny and simple cartoon
based design, new game characters and new storyline.
Types of innovation
Product and service innovations can be categorized in a number of different ways (Smith
2010). As a gaming product, Angry Birds differs little among other game developers; the
coding framework, back-end servers and delivering platforms etc. are similar to lots of other
games. With Henderson and Clark’s framework (Smith 2010 p. 32) for categorizing
innovation into radical, architectural, modular and incremental innovation types, I will try to
adapt this framework into the software and app development industry. With Henderson and
Clark’s the core part of the product belongs to architectural innovation. To quote Henderson
and Clark; “the essence of an architectural innovation is the reconfiguration of an established
system to link together existing (In this case: software/coding) components in a new way”
(Smith 2010 p. 37). All the components developing Angry Birds are existing and common
software, code language and delivering platforms (SmartPhone/PC). But in terms of novelty

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and consumer adaption by the huge numbers of gamers/consumers, Angry Birds indeed is a
radical innovation within the gaming industry.
4. Value creation
The core value creation (Smith 2010 p.10-14) of Angry Birds for the consumer/gamer is:
Have tons of simple fun! The niche of the product is within puzzle games, and an important
side effect of the game is that it is a “time-killer”, highly addictive for a wide variety of
people (Wide range of demographics). This is a typical game to be played while a person
waiting for something/someone, playing while traveling by bus or train. You simply don’t
need to use much brainpower to play it, and that is maybe also one important factor in this
kind of niche games. Angry Birds value proposition is easy to understand for consumers;
enjoy a fun game with a simple user interface! Angry Birds communicates their innovative
game and user benefits easily to prospect gamers (Smith 2010 p. 12-13).
5. Value capture
Today Rovio has implemented several revenue streams through their business model and
value capture strategies (Smith 2010 p. 14-15). They have combined both current business
(Direct sales) model with new models such as licensing, mobile advertising and franchise.
You can get a Angry Birds t-shirt, a clip-on, a case for your iPhone, lunch boxes, red flip flops,
ties, or a backpack and lots of different toys to mention a few. Forbes says that Rovio noted
that merchandise and licensing generated about 30% of revenue in 2011. Rovio has more
than 200 licensing partners creating products base on the Angry Birds franchise (Source:
http://www.forbes.com/sites/ericsavitz/2012/05/07/rovio-says-2011-revs-106-3-million-pre-tax-
income-67-6-million/). This is the same successfully business models both Disney and Marvel
have implemented which gives multiple revenue streams and reduced risks. In addition they
have incorporated both freemium business model and cross-selling strategies with
additional three new Angry Birds games (Seasons, Rio and Space). Rovio has rapidly been
able to deliver their game on several platforms and channels. You can get Angry Birds on at
least 25 different platforms. While it started on the iPhone, you can also get it on the iPad,
Google’s Android OS, an e-reader, Playstation 3, the MAC, a PC version and many more.

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6. Dominant design and absorptive capacity
Rovio’s product innovation is based on the combination of dominant design and absorptive
capacity (Smith 2010 p. 68-69). According to Nordström and Biström, a dominant design or
product configuration that comprises “the one that wins the allegiance of the marketplace,
the one that competitors and innovators must adhere to if they hope to command a
significant market following” (Smith 2010 p. 74). Angry Bird does have a new, unique and
dominant game design and usability. Dominant design, first by their consumer preferences
and its package of features (Funny, simplified cartoons, addictive storyline) and market
power (Smith 2010, p. 76). In addition must game producers like Rovio have a high
absorptive capacity to drive new innovations; both by internal learning and internal
communication and sharing skills, and to learn from external environment to build
knowledge about new gaming development software and coding processes to stay sharp in
their field (Smith 2010, p. 78). Rovio has already reinvented Angry Birds into three new
products/games to create new markets; Angry Birds seasons, Angry Birds Rio and Angry
Birds Space. Rovio’s newest game released summer 2012 is called Amazing Alex, which game
features educational elements and revolves around Alex, described as a curious boy with
interest in building things.
7. Multi-sided markets and multi-sided platforms
Rovio use both multi-sided markets (Licensing, franchise and Mobile advertising) and multi-
sided platform’s i.e.; iOS, Android, Playstation 3 and PC. A multi-sided platform grows in
value because it attracts more users, this is called the network effect (Osterwalder & Pigneur
2010 p. 77-79). A success factor is that the platform must attract and serve all groups
simultaneously in order to create desired value capturing. The platform’s value capturing for
one user group depends substantially on the number of users on the platform’s other sides.
This is solved by Rovio by both using freemium and cross-selling (from new Angry Birds
games) strategies and tactics, helped by the high adaption numbers from the free version of
Angry Birds. The term “freemium” is an acronym based on Free + Premium. This means that
the Freemium based business model implement both a free (often downscaled) product and
one premium version. This business model is often chosen by digital businesses i.e.: Flickr,
Skype and Linux.

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Infographic source: http://www.adverblog.com/2011/09/12/the-psychology-of-angry-birds-infographic/
The term “freemium” has been widely discussed and promoted by Chris Anderson, the
author of The Long Tail and Free – The radical prize of zero. But the term was earlier coined
by Jarid Lukin and later popularized by Fred Wilson (Venture capitalist) on his blog
(Osterwalder & Pigneur 2010 p. 96).
8. Economic success
This game and innovation is an economic success. Here is what CEO Mikael Hed of Rovio
points out as reasons for their success: "The strong growth in revenue clearly demonstrates
the popularity of the Angry Birds brand.” “The heavy investments made in 2011 to all
business areas will be seen in future products. To ensure continuous success we need to be
creative and stay focused on entertaining our millions of fans by continuously developing
new and innovative products and services." Source: http://www.rovio.com/en/news/press-
releases/161/rovio-entertainment-reports-2011-financial-results/ Rovio don’t stop to innovate
after their big success with Angry Birds, they know they have to reinvent existing products
and produce new innovations (games). “We are very optimistic about 2012 due to
significant investments in product development, cutting-edge branding, brand protection and
corporate infrastructure“ Mikael Hed said. Source: http://www.rovio.com/en/news/press-
releases/161/rovio-entertainment-reports-2011-financial-results/ So Mikael Hed identifies both
branding, brand protection and infrastructure as important factors in addition to creativity
and to keep on developing new innovative products and services.

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Diffusion
The usage of Freemium strategy for Angry Birds both help regarding diffusion (Smith 2010 p.
16-17) and for building a strong brand through high volume of free users/gamers and the
effect of (digital) word-of-mouth, and as a bait & hook mechanism (Osterwalder & Pigneur
2010 p. 104) from the free version, to direct gamers to upgrade to paid versions. The
freemium business model is the main reasons for high user adaption for the Angry Birds
game.
9. Building Angry Birds as a passion brand
Edwards & Day (2005 p. 78) have identified three main characteristics of passion brands:
• They are brands with active belief
• They have confidence rooted in capability
• They stay vibrant in an ever-changing world
The Angry Birds brand score high on all these three characteristics. In addition have Edwards
& Day (2005) identified these attributes for creating a passion brand: integrity, trust,
difference, loyalty, fame, belief, cohesion, principles, profit and passion. Angry Birds seem to
score high and succeed with several of these attributes; integrity (), trust (they deliver what
they promise), difference (High fun and simplicity), loyalty (Launch on time), fame (High
share-of-voice in the media and lots of buzz amongst the consumers via word-of-mouth),
belief (stayed internal focused and dedicated through a crisis), profit (Enormous economic
growth, decreased risks with several new games and several revenue stream sources),
passion (both internally and by gamers).

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10.Summary and conclusion
So when Rovio almost got bankrupted in 2009, they turned their crisis to stay focused and
create new innovations and reinventions. What insights can be learned from this business
case?
Business models
Rovio both has innovated their core business with ONE radical new product; Angry Birds, and
they have also innovated their business at the edges with both changing their business
model adding freemium, cross-selling, franchise, advertising and licensing strategies.
Innovations
Angry Birds is a combination of both radical and architectural innovation. The game feels
totally new and fresh and with a high originality factor. But new ideas consist of old ideas
and it is important to understand that originality doesn’t rely on creating something from
nothing, but it relies on putting together ideas and materials/components in new ways.
Organizational
It seems that creativity, motivation, passion and belief thrives amongst Rovio’s employees.
Rovio has developed several award-winning titles for various mobile platforms, so they are
highly innovative. The CEO understands the importance of continuing innovation into new
products and services.
Change management
Success can be difficult. It is to early to predict if Rovio will handle the enormous market and
organizational growth in 2011. Change management and strategic leadership skills are the
keys to manage fast organic growth, new business models, new innovations, new products
and services and fast increased crowd of users/gamers.
Marketing and branding
So far it looks very good for Rovio. They have successfully implemented both digital cross-
platform marketing strategies and tactics, and in addition successfully delivered Angry Birds
on many platforms (Platform ubiquity). Both the press and media seem to love them. Most

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importantly is their future online branding and online reputation management skills. Trust is
something you earn, and to continue to build loyalty they have to focus on delivering what
they promise regarding content and launch schedules. Rovio focus on online branding tactics
with use of viral and word-of-mouth marketing tactics and as a result they gain an excellent
online reputation.
Economy
Rovio’s new product (s) and innovation (s) in addition to implemented new business models
such as freemium and multi-sided platforms and markets (several new revenue streams),
modern digital marketing and branding truly saved the company and their investors funding.
Conclusion
Sometimes big problems need big solutions and change, not an endless myriad of little
initiatives. Rovio’s approach was; designing a business model for flexibility with multi-sided
platforms and markets, monetizing a free version with freemium business model,
reinvention of existing products and most importantly; continuing to innovate! All kind of
business will meet hard competition, new innovations, disruption or crisis, sooner or later.
One key success factor is how you adapt to changes: You can’t control waves, so learn to
surf! (McKeown 2008). Angry Birds are pretty good at surfing.

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11.References
Curriculum
Smith, David (2006). Exploring Innovation, Second Edition. UK: McGraw-Hill Education.
Additional books
Edwards, Helen & Day, Derek (2005). Creating Passion Brands – Getting to the heart of
branding. UK: Kogan Page.
McKeown, Max (2008). The Truth about Innovation – A small book about big ideas. UK:
Pearson Education Limited.
Osterwald, Alexander & Pigneur, Yves (2010). Business Model Generation – A Handbook for
Visionaries, Game Changers, and Challengers. US: John Wiley & Son Inc.
Internet sources
Gobry, Pascal-Emmanuel (10.03.11). Angry Birds Maker Raises Huge $42 Million Round. Located 17.08.12 at
WWW: http://articles.businessinsider.com/2011-03-10/tech/30012723_1_atlassian-accel-partners-angry-birds
Lunden, Mari (07.05.12). Rovio’s Big Year: Angry Birds Helps Gaming Company Soar To $106M In Sales,
648M Downloads. Located 17.08.12 at WWW: http://techcrunch.com/2012/05/07/rovios-big-year-angry-birds-
helps-gaming-company-soar-to-106m-in-sales648m-downloads/
Martina (12.09.11). The Psychology of Angry Birds #infographic. Located 17.08.12 at WWW:
http://www.adverblog.com/2011/09/12/the-psychology-of-angry-birds-infographic/
Savitz, Eric (07.05.12). Rovio Says 2011 Revs $106.3 Million; Pre-Tax Income $67.6 Million. Located 17.08.12 at
WWW: http://www.forbes.com/sites/ericsavitz/2012/05/07/rovio-says-2011-revs-106-3-million-pre-tax-
income-67-6-million/
Vilpponen, Antti (16.12.11). Angry Birds 2011 Revenue Around $100 Million, Looking To IPO In Hong Kong In
2013. Located 17.08.12 at WWW:
http://www.arcticstartup.com/2011/12/16/angry-birds-2011-revenue-around-100-million-looking-to-ipo-in-
hong-kong-in-2013