Image: Reddit/BoneyBryce

The 'Pokémon Go' Endgame: Getting You to Walk Into Chipotle

Developer Niantic has plenty of experience with 'location-based ads,' and it's sitting on a gold mine with "Pokémon Go."

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Jul 12 2016, 3:37pm

Image: Reddit/BoneyBryce

Much of the news about the augmented reality smartphone game Pokémon Go currently focuses on how it's leading people out of their homes and into parks and to landmarks they might have otherwise avoided, but already there are signs of change.

In Florida, a brewery near a pokéStop (a predetermined site that allows players to restock on free items needed in game)set down a $0.99 lure module purchased from the game's in-game store that causes pokémon to show up around the joint for 30 minutes in the hopes of improving foot traffic. An outlet mall outside Phoenix did the same, and sweetened the deal by telling players on Facebook that they'd get a $10 gift card for proving they caught one of the imaginary creatures on site.

These kinds of tales remain in the background during this warm-and-fuzzy period of the game's rollout, but judging from developer Niantic's past, this may have been the end goal all along.

In many ways, Niantic's whole history has been leading up to this point. The company's roots go back to Google's 2004 acquisition of Keyhole, a startup focused on letting users interact with maps in creative ways, soon leading to the creation of Google Earth and the introduction of Street View. Niantic was formed from that foundation inside Google in 2010, and by 2012 it had launched a game called Ingress that bid its players visit real-world locations in order to conquer territories for the in-game factions. Ingress was essentially Pokémon Go 1.0, and it, too, got players into trouble for wandering into areas where they weren't meant to be.

"With these kind of ads, the physical location of the retail partner becomes an active location in the game so there are incentives for users in the game to visit those locations."

But Niantic was always deeply interested in getting players to go to specific places, particularly if businesses started paying to lure players into their stores. In 2014 Motherboard editor Emanuel Maiberg chatted with Niantic in an article for Kill Screen and learned about its partially implemented vision for advertising in Ingress.

"We're also experimenting with ads that are kind of location-oriented ads with retailers, Jamba Juice; Zipcar is a big one for us currently in Ingress," Niantic CEO John Hanke said at the time. "With these kind of ads, the physical location of the retail partner becomes an active location in the game so there are incentives for users in the game to visit those locations. It's in the early stages for that kind of a business model but I think it's a very promising one. Retailers want store traffic. They want consumers to be aware of where their locations are. They want consumers to be engaged with them, and I think these games are a powerful tool for that."

Pokémon Go is free to download and play, and so far, it appears to be making money only off of in-app purchases like the lures or extra poké balls for capturing the the imaginary critters. It helps that most of the prices are agreeable, with single items usually costing a dollar or less. The most expensive item is a pack of 25 eggs for increasing the experience points players earn, and it costs only a little more than $10 with the in-game currency. According to a SensorTower study discussed by TechCrunch, the game's been downloaded around 7.5 million times on both the App Store and Google Play and it's making around $1.6 million a day on iOS alone through these in-app purchases.

One of the in-app purchases available for the game. Screencap: Leif Johnson

But according to a brief mention in the The New York Times yesterday, an advertising model like that of Ingress might be on its way to Pokémon Go, as "Mr. Hanke said the company would announce sponsored locations for Pokémon Go in the future."

The trouble with Ingress is that it remains obscure even a few years after launch. Pokémon Go, on the other hand, is so popular that Forbes claims some businesses are actively asking for advice on how to become a pokéStop or a Pokémon Gym (where players meet up to battle) in order to use the in-game lures to benefit their business. According to Bloomberg, a pizzeria owner in Queens spent around $10 in lures, leading to a 30 percent spike in business compared to a typical weekend. There's no doubt about the power of the lures to attract for good or ill—early Sunday morning, four armed suspects robbed 11 teenagers in Missouri who'd been lured to a shopping center by the promise of catching new battle pets.

As things stand, though, your business essentially just has to be lucky to end up as a pokéstop, which may become a point of contention as Pokémon Go's popularity increases. (Consider England, where the game is still officially unreleased, and where one of the pokéstops is apparently a Plymouth sex shop.) I reached out to Pokémon Go's PR contact to learn more information about its plans in this regard, but he's so slammed with requests that I don't imagine I'll hear a direct answer soon.

But it's not hard to understand why businesses would be so eager to get a piece of this pie.

Image: Minkus27/Reddit

"Even though Pokémon Go is only officially open in three countries, the game is generating well over $1 million of net revenue for Niantic Labs," said Fabien Pierre-Nicolas, VP of MarCom at App Annie, in a statement from yesterday. "I can easily envision a run-rate of over $1 billion per year with less server issues, a worldwide presence and more social and player vs. player features," and that's just with the current in-app purchases.

The study also claims that Clash Royal, the second biggest mobile hit right now, is only pulling in $350,000 per day on iOS. As noted by "ZhugeEX," a popular video game industry analyst, SuperData Research analyst Joost Van Dreunen said in a statement that Pokémon Go has earned more than $14.04 across mobile platforms since its release a few days ago,which already puts it ahead of the $14.03 million that's been earned by Pokémon Shuffle Mobile since it was released last August.

According to ZhugeEX, who responded to me in an email, the complex nature of Pokémon Go's development and licensing make it tough to figure out where all that cash is going.

"The game is being developed by Niantic and published on the Google Play store and Apple App Store," he said. "These stores usually take a 30 percent cut from the game revenue, so that leaves 70 percent on the table. Niantic as the developer and publisher will no doubt take their share and the rest will be split between The Pokémon Company and Nintendo. Both TPC and Nintendo own the copyright for Pokémon, Nintendo themselves own the trademarks. Nintendo also own a 33 percent stake in TPC."

Daniel remained optimistic when I asked him if he thought a push toward advertising might hurt the goodwill Pokémon Go has built up.

"Advertising could do very well in the game, should The Pokémon Company choose to embrace that business model," he said. "It worked in Niantic's previous game, Ingress, which generated revenue through sponsorships of items and locations. These sponsorships encouraged players to arrange meet ups at certain locations and made the game more interactive for gamers as well as Niantic and sponsors seeing the benefits through a constant revenue stream. The Pokémon Gyms would be perfect for this, should they choose to take advantage, and could add a whole new dimension to the game."

Maybe, though, it doesn't end there. Maybe someday soon we'll be hearing about Pokémon specific to Taco Bell or Pokémon you can only find on a business' premises after you receive a code on a receipt. And if it comes down to finding pokémon at McDonald's, Arby's, Macy's, and Best Buy, would we still wanna catch 'em all?

Considering how poorly things sometimes work out with the existing system, it might not be such a bad idea.

Lead image: Reddit/BoneyBryce