The $32.5 Million Problem with Smurfberries: An Early App Store Disaster

A recent Google search leading to this site on a Smurf-related topic revealed this weird-looking search phrase:

“Smurf and the Vileaf”

That’s a word? That’s a search? What is it?

It’s about an iPhone game starring the Smurfs. Why can’t it ever be about the comics?

It brought to mind one of the original controversies of Apple’s App Store. During the gold rush days when any app seemingly could make a million dollars, a Smurfs app took advantage of the rules of the store to bring in a fortune with In-App Purchases.

It led to a lot of bad publicity for Apple in all the major news outlets. That paired with pressure from a State Attorney General lead to Apple making some rule changes. But was it enough? Did it actually solve the problem, or just make some hey for politicians looking to score some cheap points?

Not exactly: It wound up costing Apple millions of dollars.

Let’s look today at the story of $99 Smurfberries and the children that purchased them.

Lots of them.

What Are Smurfberries?

Smurfberries were a creation of the 1981 NBC series. They do not come from the comics. They were used in the movies (both live-action and animated), but the current animated series isn’t using them. Shame.

When The Smurfs were blowing up on Saturday mornings in the early 80s, they inspired a breakfast cereal named Smurfberry Crunch. It lasted a few years before being replaced in 1987 by Smurf Magic Berries. That was the same cereal, but with added marshmallows.

You could never have enough sugar in 80s cereals….

As the popularity of the cartoon died down, so did sales of the cereal. They all disappeared around the same time.

This YouTuber specializing in cereals has a complete history and review.

You can relive the glory days of the cereal with this television ad for it:

What do Smurfberries taste like? I’ve read dozens of forum threads, YouTube comments, and blog articles that mention the cereal. Nobody seems to agree on what it tasted like, because they were kids 40 years ago and their memories shouldn’t be relied on in any way.

The words “citrusy,” “chemical,” “sweet”, and “food dye” come up a lot, though.

Now, on to the world of telephone applications, In-App Purchases, and kids who can run their parents’ credit cards up super fast!

The Earliest Days

Apple released the original iPhone in June 2007. It did not include an App Store. By some accounts, Apple was lucky to get the built-in apps working in time for the phone’s release.

Releasing a Software Development Kit and a whole App Store would take another year: July 10, 2008, to be precise.

Steve Jobs famously said before that that the best way to create apps for the iPhone was to do it in the browser with HTML, CSS, and Javascript. Just don’t use Flash. It was a security problem waiting to happen with bad impacts on battery life and more. (See Steve Job’s “Thoughts on Flash” letter.)

Flash did not survive the smartphone revolution.

This didn’t stop people from figuring out how to create and distribute apps to iPhones in the earliest days. Some found ways to hack the phone to sideload apps, and to figure out the software APIs necessary to program against the thing. In fact, some of the earliest App Store games were originally coded before the API was officially released. The sideloaded games became legitimate games and were some of the most successful early efforts on the platform.

When the App Store opened, a Gold Rush period started that would last for a few years. Everyone wanted to get on the platform and new smartphone users downloaded and paid for lots of apps.

We’re getting to the Smurfs angle on this soon, I promise.

How to Pay For Apps

The App Store encouraged a different software business model than other digital platforms. It did not allow upgrade pricing, nor were there demos.

Those were two core business practices for software developers at the time.

Demos gave users a taste of their software first so they knew what they were doing before they bought the app outright.

Upgrade pricing allowed developers to offer new features to existing users without having to charge them the whole price of the app again. The upgrade could be half the price of the original software, or some other smaller percentage. (This was less of a problem once the race to the bottom caused all software prices to plummet, but that’s another story.)

The workaround for this situation with the App Store became the In-App Purchase (IAP). Apple introduced it in 2009, a year after opening the store. You could give the application away for cheap or free but then charge for certain functions.

They called it the freemium model.

You could give away your photo editor, for example, but a watermark with the application’s name would be added to the final saved file unless you paid the In-App Purchase fee to remove that default behavior. A set of filters you might want to use on your photos would be a separate purchase.

Future features could be purchased as IAP, as well, and eventually app bundles even became a thing.

It was an instant success, solving an important issue that developers and users had with the store. In the first year, Apple paid out a billion dollars to developers from paid apps and In-App Purchases.

Unintended Consequences and New Business Models

There is a downside to this success, though. The gaming world quickly picked up on it and found a way to make money.

In-App Purchases could be used to, in theory, buy additional levels to a game. Maybe you get the first three levels for free as the demo, but then you need to pay the 99 cents or the $2.99 for the rest of the levels. In later months or years, additional levels could be purchased as they are created.

Seems fair, right?

I’ve done it with a few games I’ve spent a lot of time in over the years. (Hello, Candy Crush.). If the game was free and I got a lot of entertainment out of it, it felt fair to spend a dollar or two to buy the next set of levels. If the developers make an enjoyable and addictive game, then they get rewarded. Win/win.

Of course, that’s not how reality works for the game makers with bigger money-making plans. Those game makers created in-game currencies that you could buy as an In-App Purchase.

If you wanted to buy more health for your character, you could get those hearts with the gold coins you bought with an In-App Purchase. If you wanted your character to have a more powerful weapon, that’s a thousand gold coins, which you can make an In-App Purchase for with a mere $10 charge to the credit card you already have on file.

Never underestimate the power of convenience. Having that credit card saved to your account was huge.

You’re not being so silly as to directly buy digital, disposable goods. No, you’re buying the in-game currency necessary to get the full experience of the game, including the digital and disposable goods.

Aside: This is why I’m often amused by people who pay money so their game character can wear different clothes, but then call NFTs silly wastes of money. It’s the same thing.

Things got worse, though, to the point where games would be designed such that they couldn’t be beaten unless you bought the power-ups with the gold coins you make an In-App Purchase for.

It’s a system that exists to this day. Think Fortnite with its V-Bucks that can be used to buy dance moves, game modes, and skins. To be fair to Fortnite, it does not allow purchases that directly affect the gameplay, itself.

Other game makers lack those particular ethics, though…

Enter The Smurfs

Capcom released the “Smurfs’ Village” app in Canada first on November 4, 2010. That was probably their test market — a smaller audience to work out any last-minute production bugs.

Capcom released the app worldwide a week later, on November 11th.

It was an instant hit. It only took a week to out-earn the “Titanic” of early iPhone games, “Angry Birds.”

Four months later, Capcom boasted of selling 10 million copies combined of “Smurfs Village” and another game of theirs, “Zombie Cafe.”

In particular “Smurfs’ Village” has captured the hearts of users worldwide, becoming the top-grossing app on Apple’s App Store in 55 countries. Under the iTunes Store User Reviews, over 90% of the game’s customers have given it a 5-star review, leading to its establishment as a top-selling brand.

Capcom press release

Less than a year later, in September 2011, Capcom reported 15 million downloads of the game. It also released a version for Android that month.

The game, itself, allowed users the chance to build out the Smurfs Village in the aftermath of an attack by Gargamel that left everything destroyed and the Smurfs scattered throughout the forest. Can you build it back better and stronger? Houses, gardens, fences, the works!

It’s SimCity, but with Smurfs. Or, if you remember the glory years of Facebook gaming, think of it as Farmville, but Smurfier. You do, after all, grow crops in Smurfs’ Village that must be tended to on a daily basis. That’ll increase DAU! (“Daily Average Users”)

The game was free. You could download it, play it every day for years, and never pay a penny for it. The business model is that the downloadable game was the wide end of a sales funnel. The “free” price tag keeps that funnel as wide open as possible.

The gaming company hopes a large enough percentage of users do eventually want to pay for something inside the game to make it worth their while.

The law of large numbers applies here: Even if only 1% ever buy an In-App Purchase, an installed user base of 10,000,000 starts looking pretty profitable.

One of those In-App Purchases with “Smurfs Village” was Smurfberries. Those are the coin of the realm, quite literally. You can pay Real World Dollars to buy In-Game Smurfberries that can be used to customize the appearance of your village, unlock new characters, grow your crops faster, etc.

It was quite popular:

“Everyone – and we mean everyone apart from maybe Crescent Moon – seems to be planning on releasing a freemium mobile game over the next couple of months,” writes PocketGamer.biz. “Call it the Smurfs’ Village effect if you like – Capcom Mobile is rumored to be making $4 million a month from Smurfberries – the revenues that can be made via this model are so incredible, especially compared to the relative cheapness of development, it seems worth the risk.”

Washington State Office of the Attorney General (May 2011)

This is where the trouble started.

A Loophole Even a Five-Year-Old Could Exploit

In designing any kind of system, there will be a trade-off between security and convenience. Sure, it would be convenient and easy to remember your password if it was the same as your ID, but it wouldn’t be very secure. You can set your password up as an incoherent random collection of 35 characters, but it wouldn’t be convenient to remember or type in.

When In-App Purchases started, Apple didn’t want you to have to type in your password to buy things very often, particularly when you just typed in your password to download an app a couple of minutes ago.

Even if the app was free, you still needed to type a password to download it. That created friction that lowered download numbers.

The trick Apple supported was to keep you logged in for fifteen minutes after you typed in your password. This way, if you opened the app, knew what you wanted, and quickly tapped on the button to buy the IAP, you didn’t need to type that password again.

It removed a barrier for users towards making an In-App Purchase. It opened up the potential for higher earnings for the app developers (and Apple, who took a 30% cut of every purchase), and made the process less annoying for the users.

Win/Win/Win, right?

As it turns out, though, a lot can happen in those fifteen minutes. Your darling sweet five-year-old Petunia with her new iPad might decide she wants more Smurfberries for her new Smurfs game because they look like fun. She’s five. She doesn’t understand money. And her mother just wanted a break and hoped the iPad would keep Petunia occupied for ten minutes.

If Mom installed the game and handed over the iPad, the kid would have a clear fifteen-minute window to download all the Smurfberries she could dream of.

Heck, if Mom had downloaded ANY new app within the last fifteen minutes, then her password is in the system. The kid could switch over to the Smurfs app and load up on Blueberries without thinking twice about it.

That’s what happened most famously with one eight-year-old in Rockville, Maryland who ran up a $1400 bill from buying Smurfberries.

Fourteen hundred dollars.

Turns out, kids can be quite tap-happy on their iPads.

From the original Washington Post report:

The Rockville second-grader didn’t realize the Smurfberries she was buying on the popular game by Capcom Interactive were real purchases, much like buying a pair of shoes from Zappos or movie tickets from Fandango. After all, lots of children’s games require virtual payments of pretend coins, treasure chests and gold to advance to levels.

But like a growing number of parents, Madison’s mom, Stephanie Kay, was shocked to find very real charges from iTunes show up in her e-mail box days later.

It also helped that one of the IAPs was $99 worth of Smurfberries. It doesn’t take too many taps to get to $1400 at that price point.

Yes, parents need to watch their children and teach them how to use devices like this, but every parent is guilty of using the iPad as a babysitter at some point. In the earliest days of In-App Purchases, it was still new to adults, too. Who saw that one coming?

The Business Plan From Hell

There’s also the larger question of whether it’s right to sell kids’ games — that are listed as being for kids ages 4 and up — with IAP for consumable in-game spending to begin with. What possible good could come of that?!?

To be fair to Apple, there were Parental Restrictions available to the parents in the device settings, even back then. Parents could stop all transactions that way.

But let’s be honest – have you read through all the settings on all the apps on any of your devices? Probably not.

Parents often disputed the charges and Apple often refunded their money, but this wasn’t a system that could last long.

Capcom tried to throw Apple under the bus, which was a novel concept in the Steven Jobs era and couldn’t possibly have made them any friends there at the time.

From a February 8, 2011 story in the Washington Post:

Pocket Gems and Capcom Interactive said they don’t want users to accidentally rack up charges. Capcom recently included a pop-up warning at the start of the game to remind users of the real cost of some features.

“We find consumer complaints of children inadvertently purchasing in-app content lamentable,” Capcom Interactive said in a statement. It said it does not try to take advantage of children, having been in the comics and gaming business for 25 years. But the iTunes practice of remembering passwords has created problems for Capcom game users, it said.

Ouch.

As mentioned in that article, Capcom put a notice on the Smurfs Village game’s listing in the App Store and then a pop-up at the start of the game to point out that the games were free but the additional purchases inside the game would cost money.

With that, they somehow slept at night.

Oh, and they also added a new level of purchase. This is when the $99.99 purchase level started. Prior to this, the top purchase was a mere $59.99. That pop-up warning covered them, right?

It’s “lamentable” that Apple set up this system, but Capcom was going to load up the truck while they drove around in it at top speeds.

No, seriously, think about the business plan here: Give games away to kids so they then spend limitless money inside the game on disposable digital trinkets. Capcom’s entire model was to prey on kids to spend their parents’ money.

It’s bad enough when they do it to adults, but on a game meant for kindergartners?!?

Complaining: Not Just on the Internet, But In the Courts!

It didn’t take long before the complaints started to file in.

Within days of the app’s release in November 2010, this pattern of children unknowingly charging their parents’ credit cards had repeated itself often enough that people were leaving scathing reviews on the App Store. The media had a field day reporting on it.

That’s when a parent in Washington State, who is also a children’s book author, filed a formal complaint with the state’s Attorney General’s Office. His son had spend a paltry $51 in Smurfs Village. I’m sure he had an incredibly good-looking mushroom house for that price.

On December 22nd, the AG’s office sent a letter to Apple. It’s a perfectly pleasant letter. They aren’t threatening Apple with anything. They lay out their case. They note that Capcom now starts the game for the first time with a warning that IAPs use real money. They note the options available to parents to turn certain permissions off.

But they thought Apple could and should do more. They suggested a pop-up warning similar to the ones Apple had for apps that had adult content — which was another issue outside the scope of this article.

They thought adding a button to the warning that would take you to the appropriate settings where you could disable IAP on an app-by-app basis would be helpful.

The Federal Trade Commission piled on in February 2011, when they said they were going to “review” In-App Purchases. The FTC said “that the practice of “in-app purchases” for certain applications on Apple iPhones, iPads, and iPods raised concerns that consumers may not fully understand the ramifications of those charges.”

That may seem crazy now, but 2010 was a different world. It was a brave new world that non-technical people were confronted with and often learned about the hard way.

Apple responded in March with the release of iOS 4.3. It required that you type in your password for every purchase. It closed the 15-minute opening through which kids did the most damage.

It made the App Store a little less user-friendly, but it increased a kind of security.

That seemed to satisfy everybody.

The FTC Wasn’t Satisfied

The Federal Trade Commission filed against Apple for “unfair acts or practices in or affecting commerce.” It covers several items, such as the 15-minute window, games being promoted as “free” but still having IAP, and the way the interface changed between versions of iOS that led to a confusing series of events.

There are more stories In the filing where children racked up thousands of dollars in bills on games that weren’t Smurf-related. “Smurfs Village” was not an isolated event. Other games were worse — their in-game currencies were called “bucks” and “coins.” Yikes!

Apple Pays Up

On January 15th, 2014, Apple settled with the FTC. They would pay out at least $32.5 million to parents whose kids ran up their bills.

If they didn’t pay out at least that much, the FTC had a backup plan:

“Should Apple issue less than $32.5 million in refunds to consumers within the 12 months after the settlement becomes final, the company must remit the balance to the Commission.”

Given all the coverage of the Smurfberries purchases in the media, it’s a bit of a surprise that there are no references to The Smurfs in the FTC’s victory lap here. They name other game publishers, instead:

In its complaint, the FTC notes that Apple received at least tens of thousands of complaints about unauthorized in-app purchases by children. One consumer reported that her daughter had spent $2,600 in the app “Tap Pet Hotel,” and other consumers reported unauthorized purchases by children totaling more than $500 in the apps “Dragon Story” and “Tiny Zoo Friends.” According to the complaint, consumers have reported millions of dollars in unauthorized charges to Apple.

My guess is that the media — particularly the non-tech outlets — liked the name recognition the Smurfs bought to the table. It wouldn’t tweak the emotional reaction as much to mention IAPs in “Dragon Story,” which is about as generic a game name as you could possibly come up with.

As the FTC points out, though, it was a problem with the larger Apple infrastructure in the earliest days of the App Store and the In-App Purchase functionality. Apple had already closed the infamous 15-minute window by the time the FTC got around to cracking down on Apple for having it.

Future Loophole Closures

In iOS 8 (September 2014), Apple added a feature called “Ask to Buy.” When set up properly, any time a kid tries to buy something, a parent gets a notification on their phone to approve or disapprove the purchase. This is part of the larger Family Sharing framework that allowed purchased apps to be shared amongst family members, too.

A couple of months later in November 2014, Apple replaced the “BUY” button for “free” apps that rely on IAP with a “GET” button with “In-App Purchases” in small text underneath the button. (Paid apps have their price on the button.) That wasn’t a specific response to this IAP controversy, but the European Union was making moves towards it and Google had made the same move a few months earlier.

There aren’t many apps that you buy directly anymore. Almost all of them are “free” to download and try before using an In-App Purchase to turn all the features on.

Smurfs as App Store Stalwarts

The Smurfs have been a permanent resident of the App Store ever since that first game.

When I look in the Apple App Store right now, I see seven games available. And while there are warnings and extra buttons and screens to try to keep kids from charging up insane bills, the mechanism of ridiculously expensive IAP in a game is still prevalent.

Smurfs Village

Yes, the original game is still around. It’s SimCity with more mushroom houses.

Papa Smurf takes you by the hand and points out which buttons to push to help you get started through your first job. It’s a handy way to learn the game, for sure, but there is one confusing point at which you buy items with the in-game currency or experience points. (I’m not sure which.)

You can also “buy” a pack of materials to help you in the game for $19.99:

Trust me — I looked very carefully before I bought my first blueberry patch to make sure it was using the in-game currency and not an IAP.

In order to play the game, you also need to check off that you read the fine print.

At what point do you wonder if your game is just too much? This “necessary” legal mumbo jumbo hasn’t even been updated in over 5 years.

They also ask for a month and year of birth to prove you’re 13 before you can play the game. We know how truthful people are with that information… It’s just depressing to me that I have to scroll so far down now to get to my year of birth.

Smurfs Magic Match

This is another one of those Match Two/Three games (like Candy Crush), where you match like items and they disappear. Clear the whole board and win! They try to cram a Smurfy story into it and have lots of little Smurf animations along the way.

It received a significant rebuild/update in November 2021 from PopReach.

And, of course, you can buy more coins inside the game for anywhere from $4.99 to $49.99. I question your sanity if you spend $50 buying coins in this game, just for the record.

If you do like to support Smurfy causes with $50, I have a Patreon you can join…

Smurfs and the Magical Meadow

Papa Smurf found a magical meadow in the woods and he’s packing up and moving there with all the Smurfs. This is Smurfs Village with a facelift, basically.

This one wants you to connect to Facebook so you can join in the social network of villages. If you do, you also get rewarded with more in-game currency.

But, wait! It’s not just any in-game currency. You can buy either coins or magic acorns!

You can, of course, buy coins ranging in price from $2.99 to $79.99

The Magic Acorns, though, are MAGIC! They have the eye-popping $99.99 option there:

(I’m most offended by how strawberry-like the acorns look…)

Don’t worry, though, as everyone has clearly learned their lessons from the past. When you start this app for the first time, you have to enter your age.

If you aren’t at least 13 years old, the ability to make In-App Purchases and connect to social networks is cut off.

Anyone in their 40s or older won’t be able to read that atrociously small lettering.

A smart 6-year-old would just enter a bigger number if they could read well enough to figure out what’s going on.

Smurfs Bubble Story

Point your ball shooter from the bottom of the screen at the board filled with colored balls above, match two or more, and they all disappear. It’s “Magic Match” but with a more likely chance that you’ll accidentally miss where you tried to shoot.

It feels like every kid’s IP eventually makes this game. It’s a fun game, but you’ve seen it dozens of times already. In the App Store right now, you can buy versions starring Angry Birds, Snoopy, and the characters from Inside Out. Keep scrolling and choose from literally dozens of other versions of the same damned game. Some feature dinosaurs, bears, witches, or panda bears, but they’re all minor knock-off variations of the same game.

This one is themed on the “Smurfs: The Lost Village” animated movie and was produced with Sony.

Just to muddy the waters, you can connect with Facebook to spam your friends with your high scores.

Yes, you can spend anywhere from $1.99 to $99.99 to buy more Smurfberries. Seriously, there are so many options on this one that you can scroll down to see more and more. These two screenshots do not show you every purchase that’s available.

Also, the game hasn’t been updated in quite a while — it was made to tie into a movie that came out in 2017, after all — and doesn’t quite fit the screen of my iPhone 12.

The Smurf Games

“The Smurf Games” is a collection of six mini-games starring various Smurfs — Smurf & Arrows, Smurf Sprint, Smurf & Slide, Smurf Jump Basketsmurf, and Smurfpoline.

You get two of those games for free, but the rest will cost you dearly. It’s $10 to buy the last four games as a bundle, or $3.99 each.

I played Basketsmurf. It’s a fun mini-game and I enjoyed trying repeatedly to top my own best score. It’s not worth $3.99 on its own, though. No way. Maybe I’d pay $5, total, for everything. I’ve played these mechanics before. I’m not impressed.

On the other hand, I like the model more. You pay for the games you want to play. You don’t spend money on extra points that you burn off to make a game easier or look prettier. You’re not going to run up a $1400 bill here.

There are also a couple of ads in the app for other games from Budge, the production company that made this app. Those do not show up during the games.

The Smurfs Bakery

Here’s another game that my daughter played a dozen different versions of when she was younger. You build deserts with the help of your Smurf friends, and then you tap all over the screen to “eat” the treat.

This one has a neat bonus: It’ll give you the actual real-world recipe to make the cake you created in the app.

As with the Smurf Games app, this one has levels you can do a one-time purchase to get. In this case, it has specific deserts you can make for $2.99 each. Or, buy all four and get them for $9.99. I don’t think you can change your mind after buying the first two apps and still get a break on the price for buying the last two, though.

No magic Smurfberries or $99.99 add-ons.

Budge Studios, the makers of both Smurf Bakery and Smurf Games, is based in Canada and specializes in children’s apps. They have licenses to a large number of familiar names, including DC Comics, Paw Patrol, Barbie, My Little Pony, and more. Bonus: They’re in Montreal, so you can speak French there! Here’s their Smurfs page.

Mergers, Acquisitions, and — a SPAC (or Two)

The rights to Capcom’s Smurfs Village sold in 2016 to an Austrian games company named “Bongfish.”

What better name for a kids’ gaming company than “bongfish,” am I right?

Then, in 2019, the rights moved to PopReach Incorporated, which controls the games to this day. The founder of PopReach was involved with “Smurfs Village” at its inception at Capcom, so it’s like the game came back home.

PopReach, created in 2015, is a company designed to buy up digital games and maximize their profits. They immediately move development to their studios in India where they can save money on salaries, and then use their bag of tricks/best practices to crank the profits up.

They’re not all evil, by the way. Sometimes it’s as simple as advertising the game or creating a better onboarding experience for new users so they stick around longer. It sounds like a bit of the low-hanging fruit and a bit of hard-earned experience blended together to bring more people in.

And then they crank up the Smurfberries.

That’s not the end of this story, though. If you like tales of financial showmanship and investment and tricky stock market games, you’ll enjoy this. If not, skip down to the next section.

PopReach, a Canadian company, entered the TSX Venture Exchange (think of it as the venture capital version of the Toronto Stock Exchange) in July 2020. At that time, PopReach said it was making $3 million (EBITDA) per year with its library of games. That number comes from a time before the current market slowdown, though.

By August 2021, PopReach signed a letter of intent to be acquired by a company called Federated Foundry, which had previously scooped up two digital advertising and push technology companies. Their mission statement?

“To pursue a strategy of acquiring, enhancing and optimizing technology assets in the digital media and ecommerce space.”

That’s exactly what PopReach’s mission statement was, though they limited their acquisitions to games and game companies, not the rest of the vertical. If you control both the games and the advertising, though, you can take control of all of the money-making angles of mobile app development. Win/win.

I’m surprised Smurfs Village doesn’t have billboards for Casper mattresses inside the game yet… Or maybe you can block those if you buy $99 worth of Smurfberries?

On April 28, 2022, the deal was finalized.

But, wait! It’s not that simple. Federated Foundry isn’t a real — sorry, “traditional” — company. Its real name is “2810735 Ontario”. It’s basically a SPAC.

CNN has a great definition of a SPAC:

SPACs, or blank-check companies, are publicly traded shell entities created to acquire or merge with a private company and take it public without the disclosures and regulatory requirements of a traditional initial public offering. SPACs typically have two years to find a company to acquire before the owners must return funds investors.

[italics mine]

That model became super popular for people with way too much money on their hands in the last couple of years of the recent prolonged bull market. It’s a model with a not-so-great track record.

This PopReach acquisition is more of a reverse merger. “Federated Foundry” is acquiring PopReach, but then PopReach is becoming the public center (and name) of the company and will make all the decisions. Federated Foundry goes away, and its initial investors now own stock in an actual profiting company they think will grow over time.

But, wait! There’s more! While doing research for this article, I saw a reference to a company named Mithrandir Capital Corp. It was the name of the company that turned into PopReach.

So I dug back into that. Turns out, Mithrandir was another SPAC. Technically, it’s a Canadian concept called a Capital Pool Corporation (CPC) – it’s on the SPAC spectrum. The rules are slightly different, but it’s the same idea — pool some investors’ money, take a shell company public, and then look to buy someone to make them a public company faster.

Mithrandir was created as a company on September 25, 2018, and went public with an IPO in October 2019 at a share price of a dime. (20 million shares were issued.)

It took the trading symbol of “GMER.P”, so I guess they knew which industry they wanted to work in, at least.

A month later (November 11, 2019), Mithrandir signed a letter of intent to scoop up PopReach. PopReach would complete the reverse merger and eat up Mithrandir at the end of June 2020. So when I said at the beginning of this section that PopReach landed on the TSX Venture Exchange in June 2020, that was really when Mithrandir’s deal with PopReach was completed and the CPC became the new company.

Believe it or not, this is the short version of the story. We could get into the options that the Agency that set this all up took and the intermediate company in between and all the rest, but that’s enough.

If you follow the venture capital world, Silicon Valley, or the app economy, I thought you might find this all interesting. The upshot is this: Smurfs Village is now owned by a company that’s a SPAC of a SPAC.

As of this writing, and after two SPACs, PopReach stock trades at 34 cents a share.

When the current bull market starts giving way to a new bear, will PopReach repeat the process once more? I wouldn’t be surprised at this rate…

Smurfs, SPACs, The App Store Economy, and $99 Smurfberries

I focus on European comics here, so the connection between The Smurfs and this story is irresistible. It was, however more than just The Smurfs at play here. This was a business model that exploded when the rules of the store were written.

One of the things I repeat every so often because it applies to so many situations: When you define the rules of the game, you define the behaviors that will follow.

You can often see why certain comics get nominated for certain awards based on how nominations are done. You can see how games make money on the App Store once the limits are put in place and certain business models are promoted.

We see that here: Apple laid out a plan for selling Apps on its phones. That led directly to things like $99 Smurfberry packages being sold. That led to new rules to stop the most egregious behaviors, yes, but I still question the sanity of anyone spending $100 on a game so that their virtual houses can look cuter or be built faster. That model wouldnt be disrupted for years until subscriptions became the new favored model.

Ultimately, the business model still works. There are enough whales who spend gobs of cash on these sorts of games that people will continue to make them. And the game producers will continue to optimize their games to draw in those whales.

I’m not here to tell you how to spend your money, but I do think this is a bonkers dumb way to do it. (Don’t take investment advice from me. The lawyers say that’s a dumb idea. So would my CPA.)

But when you look back at the history of Apple’s App Store, the story of $99 Smurfberries can not be overlooked.

It’s just another example of Smurfs showing up in the most unlikely places.

(Title image credits: Photo by Alexander Dummer on Unsplash)