Gotta Catch ’Em All: How Pokémon GO Could Change the Way Apps Make Money
If you’re not familiar with Pokémon GO, the recent app sensation launched by Niantic with Nintendo, congratulations on your happy, fulfilling, and distraction-free week.
For almost everyone else, you’ve probably seen people talking about the game in your social media feeds and wondered what the fuss was about.
Truthfully, there’s nothing particularly innovative about Pokémon GO’s app or game design.
The app has been fraught with technical difficulties in the days after its launch. It’s glitched so often that an app with less nostalgic inertia might have been unable to come back, having lost the passionate early adopters that make launches successful.
And the game play interface to catch Pokémon is the same basic interface you’ll find if you play “basket toss” — a mobile game where you use your finger to toss crumpled up paper into a waste basket.
Despite these difficulties, Pokémon GO has already added $9B to Nintendo’s market value. It already has more downloads than Tinder, the popular dating app, and more daily active users than Twitter.
Why Is Pokémon GO So Popular?
The app has one unique feature most other mobile games don’t: It augments reality and takes place in the real world.
Delivering on my childhood dream of wandering around and capturing Pokémon to become a Pokémon Master, the game has little value if you stay in your home. You have to get out and physically find opportunities to play.
When your GPS tells the game that you’ve passed near a Pokémon (which have been randomly placed on the map), the Pokémon will appear and you can try to catch it. Once caught, you can “power up” that Pokémon and use it to battle for control of “Gyms” also placed throughout the physical world.
With the resurgence of this game and its inextricable ties to the real world, many people can’t help but wonder: Will Nintendo try to monetize the app beyond their basic shop — and can businesses get involved?
The Benefit for Brick and Mortar Businesses
A constant challenge for brick and mortar (B&M) shops is encouraging local consumers to physically come in to the store. In the era of Foodler and Amazon Prime, B&M business owners are always seeking new ways to bring people in.
Right now, some B&M businesses are already reaping the rewards of Pokémon GO. Some of these Pokémon GO stops and gyms are at restaurants and stores, such as Pach’s (a local breakfast place in Tampa) and Datz (a popular restaurant and bar). In order to get supplies from the PokéStop or battle for control of the gym, you have to physically be there.
This could be the beginnings of a new diversified marketing mix for B&Ms. Right now, Nintendo likely isn’t charging stores to have gyms or stops at their locations. In fact, as far as I know, these businesses weren’t even asked for permission. (I’ve been unable to reach someone at Nintendo for comment.)
However, there’s already been a noticeable increase in foot traffic at locations noted in the game. Some areas, such as the park in the photograph on the left that was taken late last night, have seen hundreds of people converging on marked areas.
Most B&M business owners would pounce on a new opportunity to bring new customers — and their friends — into their establishment. But there is a potential cost to consider.
Creating and Capturing the Right Value
At the end of the day, building a company is about attracting and retaining customers of unique economic value, not just any customers— as some businesses who eagerly bought into promotional models such as Groupon learned the hard way.
Pokémon GO has a similarly attractive double-edged sword: The game thrives on social interaction. My family and I bumped into dozens of people in Tampa while we captured Pokémon, and all of them greeted us warmly and pointed us in the direction of creatures they just caught. At the breakfast pictured in the headline image for this article, my friends and I were constantly talking with each other and helping each other out (even though it looks like we’re staring at our phones ignoring each other).
The problem with this opportunity is not all business models support attracting customers who will stay there for extended periods of time. For example, many restaurants find economic efficiencies from turning tables over as quickly as possible, so an app that encourages people to hang out for long periods of time may actually be counter-productive.
However, if a business can create a model where customers who hang around are valuable (such as lounges, bars, and other businesses that organize around social activity), they may find that they want to pay Nintendo to put a gym at their location — and Nintendo should find some game mechanic that gives them that opportunity.
Multiple Revenue Models
Currently, Nintendo doesn’t monetize Pokémon GO other than the in-app store where you can purchase additional items that make the game easier to play.
The app industry has been exploring a number of different monetization models. Ads, freemium models, and “power up” models have all been tested. What no app has been able to do with any great success — despite the early efforts of companies like Foursquare — has been able to create a game model that drives real world behaviors like Pokémon GO.
If app developers can create experiences where physically being somewhere and accomplishing a task triggers that delightful flood of dopamine, and local businesses are able to create business models that extract value from idle customers, this may be a very interesting marketplace.
Making More Money May Solve Other Problems
While some have already been debunked as hoaxes, we’re already hearing stories of people finding dead bodies or even being robbed as criminals deploy “lures” (which are supposed to attract more Pokémon to your location, but also attract other Pokémon hunters). By charging for the placement of PokéStops (the only place such lures can be deployed), Nintendo may also be able to better control for the safety of the surrounding environment.
Integrating directly with the real-world experience of gamers may also help app developers acquire and retain users who aren’t as passionate about games in general. I’ve been shocked by the enthusiasm with which my wife — who never watched Pokémon nor plays many games — has taken up Pokémon GO. “It’s fun, the characters are cute, and it’s something you and I can do together,” are the reasons she gave me. “It’s like geocaching, except more social because it doesn’t have to be secretive.”
In order for the game to retain her as a user, there has to be a non-competitive benefit to playing. She’s not going to memorize the Pokémon types and optimize her lineup with ground-type Pokémon to withstand electric-types when she battles other players. She’s embarrassed enough that I know that.
By integrating more closely with real-world activities that drive revenue for Nintendo and local businesses, they may also be able to create a game dynamic that enables other types of passive game players to enjoy the experience — which could be a win for everyone involved.
Because when you’re competing for local customers, you gotta catch ’em all.
If you have any thoughts on how apps could drive more value for B&M businesses — or if you know where I can find Mewtwo — write a response!
