Does Pokémon Go Have Staying Power?

This post was originally published on LinkedIn on July 16, 2016

Over the last week, Pokémon Go has become a nationwide phenomenon. According to SurveyMonkey, the game has over 21 million daily active users in the U.S., and users spend an average of 33 minutes per day playing the game. It immediately became the #1 downloaded and #1 grossing game in the U.S. upon launch. The major question surrounding the company now becomes whether Pokémon’s success is sustainable.

Sustainability of other top games

Every once in a while, a new mobile app reaches the top of the free download charts. These apps generate some press and receive millions of downloads, but eventually drop in the charts and disappear. A recent example of this would be Damn Daniel, which vaulted to the #1 position on March 12, 2016, remained there for a week, but then was out of the top 100 by the end of the month (and now is entirely out of the app store).

However, the story for apps that reach the top of the grossing charts is entirely different. The Top Grossing category lists the apps with the highest total revenue (price * quantity sold + revenue from in-app purchases). Few apps reach the coveted #1 position, and those that do, stay in the top 10 for a long time. Since the beginning of 2013, only five games have reached the #1 position: Clash of Clans, Clash Royale, Mobile Strike, Game of War: Fire Age, and Candy Crush Saga (other apps in the top 10 include popular Spotify, Pandora, Netflix, etc). Remarkably, since each of these games cracked into the top 10, not one has fallen out of the top 10… not even for a single day.

What made these games so successful?

Why is it that these games have been so successful at breaking in and remaining at the top of the app charts? A combination of strong retention driven by compelling gameplay and updates, a monetization design that comes from an understanding of the consumer psychology, and continuous user acquisition:

  • Compelling Gameplay: Successful games surprise and delight users through solid core gameplay mechanics and compelling content. Clash of Clans’ secret formula is a well-designed and easy to understand core loop that rewards players for being active and rewards them with progress every time they return. For Game of War, multiplayer is a big focus, promoting both cooperation and competition amongst users. In addition to strong game mechanics, content is also critical for long-term engagement. This can come in the form of a strong narrative, characters, or graphic presentation.
  • Frequent Updates: Strong retention is crucial to building a large base of users in any application. In order to keep the Candy Crush franchise relevant and sustain its base of 500 million MAU, King has launched several sequels. Supercell has taken a slightly different approach, by consistently updating its core titles with new content (characters, levels). As a major example, Supercell launched “Clan Wars” in April 2014, where users, as part of clans could team up and battle other clans around the world. This competitive dynamic added a critical level of engagement depth.
  • Monetization Design: Every game but one (Minecraft) in the top 100 of the grossing charts is free-to-play. Purchases in these types of games are driven by user desires to speed up or gain access to new levels and features, to access advanced features, or to ease the game experience. An analysis from Gamastura explains that monetization in Clash of Clans is all about the deep understanding of the psychology of consumer behavior. Most gaming companies have large teams dedicated to understanding and refining monetization techniques.
  • Continuous User Acquisition: According to reports, Supercell generated $2.3 billion in revenue in 2015, or $6.3 million per day. With this amount of cash, Supercell could afford to invest heavily to add new users and maintain the position of its games at the top of the app charts. This makes it very difficult for smaller companies with small cash balances to compete for mind share. In 2014, Supercell and King spent a combined $1 billion on marketing, mainly on app-install ads. In 2015, these companies started to spend aggressively on TV, with Machine Zone, Supercell, and King spending north of $200 million. Machine Zone uses more than 300 “channels” for its advertising campaigns, making it one of the most sophisticated ad buyers in the world.

What does this mean for Pokémon Go?

Pokémon Go has the potential to become a lasting cultural phenomenon. Sitting atop the grossing charts, the game already generates millions of dollars per day. A lot of the growth is carried from pent-up demand from the Pokémon brand. However, no brand is strong enough to create such a phenomenon on its own. The core game mechanics are working:

  • Compelling Gameplay: Most titles that have succeeded in the past have been based off bite-sized sessions. Pokémon Go players have more freedom and can play for as long or as little as they like. The game’s depth comes from the need to travel. In order to capture all the Pokémon, users must explore early and often. This keeps them coming back frequently and for long sessions at a time. In addition, each capture of a Pokémon is unique and personal, and each user session is different (catch different Pokémon, walk in different routes, meet different people). This creates freshness in the gameplay that most other titles cannot replicate.
  • Monetization: Pokémon Go is a free-to-play title which currently monetizes through digital currency. Similar to other top titles, Niantic added enough friction to the gameplay to create opportunities for monetization, but not frustrate users. Purchasing virtual currency can only help speed up your progress in the game. Going forward, players will see advertisements in the game in the form of “sponsored locations”. This is a massive opportunity for the company. Large brands like McDonalds have already expressed interest in advertising on the platform.

Pokémon Go is only one of six games to reach the #1 grossing ranking in the last 3.5 years and sits in an envious position. In order to capitalize on this growth, some areas of focus for the company should be:

  • New features and fresh content: Niantic CEO, John Hanke stated that his development team is prioritizing features that allow Pokémon to be traded amongst users (a highly sought after feature from core Pokémon fans). Other ideas for updates might include multiplayer, new or secret characters, the ability to battle friends, live streaming of battles, chat, etc.
  • Develop marketing capabilities: A lot of Pokémon Go’s growth has come from years of pent-up demand around the Pokémon IP. The company has also benefited from real-world virality and the realization of the fantasy of catching Pokémon in the real world. How long will nostalgia keep this original audience engaged? Over time, organic growth from this core group of users will likely decelerate. Niantic will need to develop performance and brand marketing programs to re-engage users or penetrate new audiences.
  • Stronger in-game tool tips: Currently, many of the tips are cryptic and users have to search online (Wikia) or ask friends how to play the game. This can get frustrating for users, especially casual players.
  • Reliable infrastructure: Users won’t tolerate continued outages, server issues, and app crashes; they will eventually abandon the game. It is no surprise that Niantic needs to invest heavily into its infrastructure.

If Niantic executes on the playbook from other successful gaming companies, Pokémon Go should be around for a long time.