Market Insight

Early success for Pokémon Go demonstrates the power of brand on mobile

July 11, 2016

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  • Location-based & augmented reality game Pokémon Go launched on July 6, 2016 in just three countries: USA, New Zealand, Australia on iPhone and Android.
  • Five days later it topped both the top grossing and top free download app charts in all three countries.
  • It uses a location-based game engine run by former Google subsidiary, Niantic, previously used for its game Ingress.
  • Despite its inclusion in the beta, Japan was omitted from the initial launch.

Our analysis

The Pokémon brand has propelled Pokémon Go to a chart-leading position extremely quickly. But to succeed long term the Pokémon franchise must demonstrate it has successfully adapted to the mobile platform and to mobile audiences’ ongoing expectations. If the game does not tailor its experience successfully for mobile, then the Pokémon Go audience will decline and fail to become a real mobile hit. In effect, the strong Pokémon brand, means it is far too early to know if Pokémon Go is a star for the long term.

Twenty years after the original Pokémon game’s Japanese Gameboy release, and despite the relative decline of the handheld game console market, the Pokémon company generates enormous revenues from its brand. In 2015 alone it enjoyed $2.1 billion revenue. If it can build Pokémon Go into a successful ongoing mobile franchise there is tremendous potential to boost merchandise revenues significantly by appealing to the vast mobile audience a mobile game can reach with new Pokémon merchandise.

The timing is perfect. The millennial audience which grew up with the original Pokémon games on Gameboy, Gameboy Advance or Nintendo DS are now in their late 20’s which is the perfect demographic for a mobile game that requires users to spend a lot of time outside. Plus smartphones are now ubiquitous, affordable, powerful, and include a rich range of sensors and good location support.

Brand alone cannot explain Pokémon Go’s uptake, because it is neither the first mobile Pokémon game, nor is it the first location-focused mobile game. In late 2015, Pokémon Shuffle launched globally, but it was a spin-off puzzle game rather than a mainstream Pokémon title and received mixed reviews. Ingress and Shadow Cities, among others, both showed the potential for mobile location as a game mechanic. Instead, IHS believes it is the combination of brand, interesting location-based game design, and a mainstream Pokémon focus which underpins this initial success.

Early signs are good that the Pokémon Company understands the difference between smartphone-based mobile games and other mobile or gaming platforms. It has wisely partnered with an expert in mobile location apps through its choice of Niantic. Until late 2015, Niantic was a Google subsidiary, originally created inside Google by Niantic CEO John Hanke, who had previously founded Google Earth. Niantic’s other mobile apps include Foursquare-style app, Field Trip, and location-based game Ingress.

Together, Niantic and The Pokémon Company have adapted Pokémon Go’s business model and game play to be different from console titles such as the older Pokémon games.

Notably, unlike classic console titles, Pokémon Go:-

  • Is free to download. Like most mobile apps, Pokémon Go has no barrier to adoption. This contrasts with the significant 'buy to own' up front cost of traditional console titles.
  • Has ongoing updates to keep mobile audiences engaged. Initially Pokémon Go lacks the player-to-player trading of the original Pokémon games, but CEO John Hanke has confirmed this is planned in a future update. Smartphone app stores make it seamless to push game updates to the entire user base.
  • Plays to smartphone strengths. Pokémon encourages users to visit real locations to gain free items at “Pokestops” or train Pokémon at “gyms”. The locations are a subset of locations used in Ingress (among others, they exclude locations tied to Ingress’ paid sponsors). Pokémon Go also uses the camera, gyroscope and accelerometer to deliver a gimmicky augmented reality (AR) mode option.
  • Opts for a mainstream-friendly mechanic to catch Pokémon. Original Pokémon games required turn-based battles to catch new Pokémon. Instead, Pokémon Go asks players to throw a ball at a Pokémon in real time. Such a simple design widens the appeal of the game.

There are also significant differences between Pokémon Go and Niantic’s original location-based game, Ingress, which highlight different design philosophies as well as Pokémon Go’s greater emphasis on monetisation.

Unlike Niantic’s earlier location-based game, Ingress, Pokémon Go has:-

  • An in-game store on day one. Pokémon Go’s initial revenue comes via in-app purchases of coins and game items. For the first two years Ingress had no user-facing in-game store, likely because when Niantic was a part of Google it had less pressure to generate revenues than do most companies.
  • Augmented Reality option to boost word of mouth marketing. Ingress talked the talk on AR as it featured in marketing videos for the game, but Ingress had no clear AR feature inside the game itself. Pokémon Go offers the option to superimpose a Pokémon on top of the real world – using the smartphone’s camera – and then makes it easy for the player to take photos of this AR experience and share them on social media. Every player then becomes an advocate for Pokémon Go. 
  • No in-game advertising. Ingress generated revenue through advertising sponsorships of items and locations. Item sponsors included: retailer Lawson; insurance company Axa; or telecom company Softbank. Ingress' location sponsorships encouraged footfall at those locations, sponsors included: Zipcar (UK) and Vodafone (Germany). Advertising could be added later to Pokémon Go if the Pokémon Company is willing to innovate with its brand strategy. Intriguingly, the Pokémon Go’s gym game mechanic encourages longer dwell times than for Ingress portals which makes it very suited a sponsored location business model.
    Update on July 14: In an interview with the Financial Times, Niantic's John Hanke confirmed IHS' analysis of the game's future roadmap. Sponsored locations will be coming to Pokémon in a future update.
  • A geographically restricted launch. The Pokémon Go beta only operated in four countries: Japan, USA, New Zealand and Australia. The latter three countries are the only official launch countries. This is a mistake. Many potential users are now frustrated by the limited launch countries. Even worse, Pokémon Go is already gaining an illicit audience internationally, but users risk malware from unauthorized third party app distribution, and the Pokémon company are losing out on monetization opportunities because of the lack of app store support for these international users using illicit downloads intended for other country’s app stores.
  • No invite system to manage initial user growth. Ingress, like most Google launches, ran an invite system for one year. This had twin benefits for Ingress: it encouraged word of mouth marketing – which Pokémon Go does not need – and invites ensured user numbers did not exceed the ability of the game servers to cope. With a frustrating and yet easy to bypass geographical launch, and enormous brand strength, Pokémon Go servers have are struggled with unexpected demand in the first week.
  • No in-game communication. Ingress offers person-to-person messaging and team-based messaging in game. Likely to avoid complications from younger players, Pokémon Go has no equivalent.
  • Less reliance on Google accounts. Ingress required a Google account to play. Pokémon Go allows users to choose whether to create a specific Pokémon trainer account or use Google. This removes a barrier for initial game set-up, for those potential users without Google accounts.

Pokémon Go has the potential to be the next major mobile game franchise. To succeed, Pokémon Go will need to evolve as much as the creatures within the game, and continue to adapt to the mobile audience. Both Niantic and The Pokémon Company must manage the day to day game operation and game roadmap with care, attention and intelligence.

But Pokémon Go is even more significant as a sign of the potential for other game brands to do well on mobile. Nintendo, Sony Playstation and Microsoft Xbox have a tremendous opportunity if they fully embrace mobile rather than keeping smartphones somewhat at arm’s length from their established console businesses, and instead offer their best franchises on smartphones.

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