Niantic Labs is riding a rocket, generating an estimated $200 million in revenue in its first month with Pokémon Go. It grew faster to 10 million downloads (in just seven days) than hits like Clash Royale, Candy Crush Saga, and Angry Birds 2. It is on a path to be the most successful mobile game of all time in the $36 billion mobile game industry, and it just became the top mobile game in the most countries world.
This success is a remarkable achievement that was years in the making. John Hanke, CEO of Niantic, spoke at our GamesBeat 2016 conference last week where he signaled the thinking behind the creation of Pokémon Go and future plans for the game. All eyes are on him. What he does next can make the difference between creating an even bigger cultural phenomenon or screwing up a good thing. Hanke hasn’t asked my advice. But I’ve been absorbing what he said, and I have thoughts on where this could go next, and where it should go.
Some observers are saying that Pokémon Go is already running out of steam. I beg to differ on that. The Pokémon brand has been around for decades. Big swaths of the world still haven’t seen Pokémon Go. Niantic released the game in 15 Asian countries last week, and it is now No. 1 in 45 countries, according to SimilarWeb. Those people aren’t tired of the game yet. The original goals of Niantic — to create an experience that encourages you to go outside, socialize, and discover new places — are fresh and appealing.
It isn’t necessarily going to run out of steam so soon, particularly if Niantic is smart about how it communicates this fundamental benefit for players that other video games don’t have. That day when it slows down will eventually come, but Niantic has other challenges of hyper-scale growth to deal with first. Above all, it shouldn’t screw up the good thing with aggressive monetization that pushes players away. I see no sign that this is going to happen.
As simple as Pokémon Go seems as a game, Niantic has been very shrewd about designing it. The startup learned how to make a fully populated location-based game with Ingress, which launched in beta form in 2012 and has more than 15 million downloads. That mobile game was more like a cult hit, with dedicated users submitting the locations for game destinations (dubbed PokéStops and Gyms). Most public monuments are locations within the games.
Hanke said that crowdfunding by fans enabled Ingress to go from a few hundred thousand locations that were seeded by Niantic and Google’s staff to tens of millions of locations. That help from the fans made it possible to play Ingress in more than 200 countries. And that set up the world to be ready with locations for PokéStops and Gyms so that Pokémon Go could be played all over the world from the start.
Hanke had the foresight to see that a brand like Pokémon could draw a far bigger audience, and he cut the deal to make that happen. The company also spun out of Google and took investments from The Pokémon Company and Nintendo. And, for all of the complaints about servers crashing, it also had some foresight in rebuilding the Ingress code from the ground up to handle much more capacity.
“You usually get it wrong the first time,” Hanke said at GamesBeat 2016. “You realize all of the architectural mistakes you made. It’s often the case to put it aside and do it again, learning from what you did the first time…. I’m super glad that we did it because the scale that Pokémon Go hit would have absolutely crushed our first-generation technology. There would be no way for us to handle the influx of users.”
The next time your game crashes, you can get mad at Niantic. But the company did prepare its infrastructure for a popular game. It just didn’t prepare for an insanely popular game, because that would have been an insane business decision. (Todd Howard of Bethesda told me something similar about preparing for the success of the mobile game Fallout Shelter).
Niantic has been adding lots of countries, which means that it isn’t standing still in adding more capacity. To me, that means that the server problems aren’t so severe that they’re paralyzing the company. It should absolutely deliver a better-quality experience to users, who are dealing with long load times. It should also figure out a way to accommodate the third-party solutions that make the game more fun to play. That would create a larger overall economy.
We can easily predict some things that will happen next. Niantic will build out the rest of the world. And it could add events. The Anomaly events in Ingress, where player factions battle to take over a site, started at just 45 people. Now they can draw 10,000 people to a city. But Pokémon Go events could get out of hand. The 2016 Pokémon World Championships are taking place August 19 to August 21 in San Francisco. But The Pokémon Company put out a warning saying the event is not open to the general public and Pokémon Go will not appear at the event.
At this point, Niantic might have to rent an 80,000-seat stadium and bring in a bunch of temporary cell phone towers to accommodate the masses that would show up for a Pokémon Go event. I know many people want the game to live up to the original announcement trailer, where players can team up to battle the evil Mewtwo. If Niantic can surmount this event challenge, it could create massive physical world events, with player-versus-player and faction-versus-faction battles, that could prove massively engaging for fans. Hanke said the company has only scratched the surface, and esports could be in the future.
Tons of copycats will enter the market. But, as venture capitalist Mitch Lasky said, the success of Pokémon Go may not be easy to repeat. I’ve seen a false rumor that a Harry Potter Go game is coming next, but I’m not sure that would work. With no additional innovation in gameplay, it might simply grab a smaller slice of the Pokémon Go crowd and just cannibalize the first game.
Niantic should add a lot of employees and do all that it can to fully staff Pokémon Go so that it can create regular updates and fixes on a global scale. It should add those features that Ingress had that Pokémon Go doesn’t, and it should add some more creatures and gameplay features that other Pokémon handheld games have, like Pokémon trading or leaderboards. It should also add a new team to work on something new because nothing lasts forever. In fact, Niantic is working on a game dubbed Endgame. But it should not spread itself thin by creating a bunch of games that clone its own success.
Nintendo will soon launch the Pokémon Go Plus device that will let players play the game without a smartphone. That will likely take off. I like the idea of a next-generation augmented reality game launching with a new kind of AR glasses. But it seems like that’s a long-term project, as the costs of such glasses are pretty high right now.
In the near term, adding more sponsors makes sense. McDonald’s sponsored a few thousand locations in Japan in conjunction with the Pokémon Go launch there. Merchants would be more than willing to pay sponsorship money to get players to come to their locations. Niantic should avoid banner ads at all costs, as well as any kind of ad that slows the game down or interrupts the experience. But fans might very well engage with a rewards program where they get discounts for visiting sponsored sites and purchasing food or merchandise. That’s a huge pot of money so long as implementation isn’t too complicated.
Examples for Hanke to look at include The Pokémon Company itself, which has kept fans happy for decades. And Rovio rode the popularity of Angry Birds to billions of downloads — only to stagger as the cultural phenomenon died down. In the meantime, we should remember that this whole Pokémon Go explosion is just 37 days old.
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