What All Startups Can Learn From Pokémon GO

“Pikachu, I choose you!” is a phrase most millennials know. For those of you who don’t it’s the catch phrase of Ash Ketchum the lead character in the Pokémon TV show. Why is this important? Well it’s the first exposure the masses in North America had to the beloved Pokémon franchise. And this franchise has just released its newest (and most impactful) game yet, Pokémon GO.

Even if you aren’t a fan of Pokémon or Pokémon GO it’s definitely something to watch closely. Niantic (the team behind Pokémon GO) has done what most startups can only dream of: they’ve built a viral product that has high retention and a scalable business model. These points are so crucial for startups to succeed that it is worth diving into each one specifically. Hopefully you can take a thing or two from this and apply it to your own startup.

Creating a Viral Product

Niantic has captured and built a community around a generation of casual and hardcore gamers alike. They took something as familiar and loved as Pokémon and brought it to the real world using a little known piece of future tech called Augmented Reality (AR). This is something most people, myself included, dreamed about as kids watching Saturday morning cartoons. And this kind of impact causes virility.

A wild Pokémon in the real world thanks to augmented reality (AR)

Pokémon GO has already created both a viral product and a community around said product. Pokémon GO was released on July 6th and within 2 days (July 8th) it had already been installed on about 5% of Android phones in the US, almost double Tinder’s installs (around 2.5%). It has also been downloaded over 7.5 million times in the US from the Android and iOS app stores.

SimilarWeb’s July 8th chart of the Pokémon GO android installs vs Tinder

This is immediately apparent as you walk down the street in any metropolitan city. Everyone is out on his or her smartphones trying to catch Pokémon. As I walked home from work on Monday at around 9pm there were almost 200 people gathered in the park outside of a mall trying to catch new Pokémon and this is with a game that is not even officially released in Canada.

200+ people gathered outside Toronto’s Eaton Centre at 9pm catching Pokemon

All of this buzz and traffic is what startups strive to do and Niantic has done it in less than a week. Considering that there are hordes of people gathering right now to play by themselves, imagine the impact of upcoming updates that allow trading Pokémon or battling other trainers will add to this insane growth.

Nurturing a Habit

One of my favorite books is Nir Eyal’s Hooked. The book talks about habit-forming products which ultimately lead to huge retention of users. Think of apps like Instagram, Facebook, Twitter, Snapchat, Reddit, that make you come back for more everyday. Eyal says that all habit forming products lead users through a process called the “Hook cycle” consisting of four stages: Trigger (both external and internal), Action, Variable Rewards and Investment. If you’d like to read about the full model click here.

Pokémon GO has nailed all of these steps:

  • You get a nudge when you pass a Pokestop or a Pokemon appears (Trigger)
  • You take the action of capturing the Pokemon or Pokestop (Action)
  • You don’t know which Pokemon you’ll find next or what the Pokestop will give you (Variable Reward)
  • And you keep catching Pokemon “to be the very best” (Investment)

Habits are what make a product go viral, but more importantly return, and it’s something Niantic has done well. As of July 8th, Pokémon GO was well on its way to pass Twitter’s daily active users and already has a higher “Time on Site” of more than 43 minutes a day, which is higher than WhatsApp, Instagram, Snapchat, and even Messenger.

SimilarWeb’s July 8th chart of the Pokémon GO Android installs vs Tinder

Building a Scalable Business Model

Finally, what Niantic has also done really well is their business model. Most people will just see it as the freemium app where you can buy more potions, lures, poke balls, eggs, etc. This has already racked in about $1.6M a day making it the highest grossing freemium app on the app store. But the more exciting model to me is the Pokestops and Gyms.

Pokémon GO has these pit stops called Pokestops that players can stop at as they are walking around looking for new Pokémon. These Pokestops provide items like potions and pokeballs for free to players. The interesting part of this is that they are often landmarks in cities conveniently located outside of restaurants and stores.

If businesses are smart and capitalize on this (which some have started to do) they have a new way to get people into the stores. Just by dropping a Pokémon lure (essentially brings nearby Pokémon in the area to you) at the Pokestop outside of their store/restaurant they can increase their foot traffic ten fold as players hustle to get the benefit of the lure while the business gets the benefit of the increased foot traffic.

I even see it being possible in the future for companies to buy their own Pokestops for certain periods of time much like Snapchat’s geofilters that allows people to buy custom filter in a specific geographical area for their weddings, conferences, birthdays, etc. Snapchat’s custom filters range from as little as $5 to $1000+ based on the duration of the filter. Something that would we easy to replicate in Pokémon GO for business to leverage and in both cases the user wins. If startups can take advantage of Pokémon GO as a platform, and not just an app, they will be well ahead of their competition.

The vast world of Pokémon GO, filled with pokémon, gyms, and pokéstops

I know some people think Pokémon GO is just a fad but I think it’s the future of gaming and business. Putting the user first when building a product is key. That user is the one that will tell all their friends (and helps build the community without them even realizing it), come back to use it because they love it so much, and even drive business to cater to them.

I encourage all of you to try and be more like Niantic and work on building something that is able to engage a generation and be remembered as the game (or startup) of the decade.