How Pokemon Go Is Already Making Millions Daily

How Pokemon Go Is Already Making Millions Daily

Beyond the famous IP, the mobile game is a hit because it’s exploring new monetization strategies from augmented reality to location-based marketing

Pokemon Go is a phenomenon in the mobile game industry. Sure, past pop culture hits like SongPop and Draw Something also racked up big user numbers quickly, but the velocity of Pokemon Go’s rise is unprecedented.

Here’s a look at the numbers: five days after launch, the game had an estimated 21 million daily active users (DAU) in the U.S. across Android and iOS, and was bringing in about $1.6 million in daily revenue on iOS alone. iOS has about 45 percent of the U.S. smartphone market between just itself and Android which means, based on a rough calculation, Pokemon Go’s average revenue per user, per day (ARPDAU) is about 17 cents. That rivals the revenue potential most top-performing midcore games whose average ARPDAU is between 10 and 20 cents. In short: it’s a surprisingly high amount for a casual game that hasn’t had the opportunity to hone its monetization techniques.

In fact, Pokemon Go seems to have all the draw of a casual game like Shooty Skies and the monetization of a polished midcore like Clash of Clans — and it’s just getting started. With the initial launch limited to the U.S., Canada and New Zealand and new monetization features in the works, its most lucrative days lie ahead.

The poke-basics

Niantic Labs, the developer of Pokemon Go (henceforth PoGo, as its fans affectionately call it), is making money from two sources: players and businesses.

Image via Giphy

For players, PoGo involves moving around the real world searching for fictional Pokemon and then flinging Pokeballs to capture them. PoGo isn’t aggressive about monetization, giving out many items for free. But players have the opportunity to accelerate gameplay with in-app purchases: more Pokeballs, extra incubators for Pokemon eggs and lures to attract Pokemon.

For businesses, the most valuable items for sale are lures. With a lure, a user can make Pokemon appear for 30 minutes per use at Pokestops (the semi-permanent locations that give PoGo users free items like Pokeballs). Pokestops tend to be placed on public monuments like parks or on businesses. Businesses lucky enough to have their own Pokestop can download the game to buy and place lures, which tend to bring in more humans than they do Pokemon. A business open 12 hours a day can spend under $15 to bring waves of potential customers. With PoGo out for just over a week, reports are pouring in of businesses using the mobile game to drive sales and foot traffic.

Catch ’em all (the dollars, that is)

Putting down $10 per day for a 75 percent increase in sales, as L’inizio’s Pizza Bar in Queens, New York reports, is a screaming deal. But it may not last for long.

Internet businesses long ago showed that advertising makes more money when people are individually measured. All the data is there for Niantic Labs to do just that: if a player visits a Pokestop or gym, Niantic will know. And if they’re visiting because that location was created or purchased by a business owner, Niantic will likely know that, too. PoGo is doing something no other mobile game has ever done: causing massive numbers of people to get up and move around in a patterned, fairly predictable way. The potential financial upside is enormous.

Image via Twenty20

Niantic has already told The New York Times that it plans to add sponsored locations for businesses. From there, it’s a short step to beginning to charge per player visit to a specific location. This would be a much more direct business model than, say, a business paying Facebook for Likes — which can already cost around 50 cents per Like. It’s easy to imagine Niantic making $1 or more per real-world visit from one of its players to a business, with the price bid upon by the businesses themselves.

Niantic has even more monetization strategies up its sleeve. Besides offering sponsored listings for businesses, the company has an upcoming wearable, the Pokemon Go Plus, that’s already sold out. Nintendo is also likely to loop in its lucrative Amiibo toys-to-life business, as predicted several months ago.

A new AR strategy or a fluke?

Before PoGo, the most notable location-based game was Niantic’s own Ingressa massive multiplayer AR game and the predecessor to PoGo. Ingress reported about 1 million DAU worldwide. Even if PoGo’s U.S.-based DAU drops by half to 10 million in the next two to three months, its scale will be unprecedented.

With that in mind, many in the industry warn that nothing can be learned from PoGo because it can’t be duplicated. Even Ingress, with one million players, took Niantic founder John Hanke nearly two decades of experience in mapping, GPS and game design to create. Ingress needed to be re-skinned with Pokemon, one of the world’s most widely recognized brands with the backing of Google and Nintendo, to create a smash hit.

“The gameplay behind Pokemon has always been about the player navigating the world and collecting creatures — it was really easy to transplant that into an AR game,” says Adrian Hon, the founder of Six to Start, which makes the popular AR running game Zombies, Run!. “Unfortunately, there are few brands that are quite as suitable. It’s certainly heartening to see that it’s so popular, and it might make us experiment with new location-based ideas. But no amount of amazing game design will get us 20 million daily active users in a space of a single week.”

Still, it’s unlikely that Niantic and its partners will be the only ones trying to ride off Pokemon’s success. Many in the industry are already arguing for AR over VR as the possible future of gaming.

If there’s anything that can be learned at this early stage, it’s that PoGo has the potential to give concrete form to location-based monetization models that have either been theoretical or only seen at limited scale in smaller apps like Foursquare. As AR matures, PoGo will be an important model for the genre, acting as a backbone for new games and concepts. And this should be exciting for mobile developers, who have watched the free-to-play industry evolve from small and simple to an intensely complex business.