Case Study: Making Money From Free Apps – Pokémon Go

 

Who could have guessed that the Pokémon brand would be at the heart of the biggest digital success story of the summer? Within just a fortnight, Niantic’s nostalgia-packed AR sensation garnered over 30 million downloads worldwide, stimulating a $14.5 billion (approx. 50%) boost in Nintendo’s share price. By August, total downloads had edged over the 100 million mark, meaning there are more Pokémon go players in the world than there are people in Germany.

All the evidence suggests this game is making players fitter, bringing community groups together, and strengthening bonds between parents who caught ‘em all in the nineties and their children, many of whom are encountering the franchise for the first time. Ask a stock market trader; ask a sociologist; ask an AR developer – this is gaming app innovation at its best.

Like many other leading mobile gaming apps, Pokémon Go is free to download – so how are its makers cashing in?

Sponsored locations
pokemon go

Pokémon Go’s Japanese debut on July 22nd bore one crucial distinction from previous launches elsewhere – it featured the game’s first sponsored locations, in the shape of over 3,000 McDonalds restaurants, now doubling up as Pokémon gyms.

Based on the apparent success of this corporate tie-in, we expect to see McDonalds signing on as early location sponsors in several other territories.

Niantic and Nintendo face a balancing act here on two fronts. First, they must introduce this commercially driven aspect to the game without dissuading large numbers of its more marketing-sensitive players. Second, they must exercise caution in increasing the number of PokéStops and Gyms – allow too many and suddenly they’re not so special.

Other brands beside McDonalds are almost certain to use sponsored locations to attract footfall and sales over the coming months. The possibilities here are huge – not just for major names but for SMEs too. Several canny business owners have already piggybacked on Pokémon Go’s success by alerting the public to nearby Pokémon locations, and it’s hardly a leap of imagination to foresee others doing the same and paying for the privilege in the future. This would depend on Niantic extending their sponsored locations offer beyond major corporate partners.

More in-app purchases

Pokémon Go has already established a roaring trade in in-app purchases, to the tune of an estimated $3 billion over the next two years. The model is simple – the player pays real money in-app in exchange for PokéCoins, which can be used to purchase in-game items including extra PokéBalls, Pokémon lures and lucky eggs. The player gets an enriched experience, whilst the game publisher enjoys a spectacular profit margin with no physical products changing hands.

In-app purchases are the key revenue stream for many of the world’s highest grossing gaming apps, including Candy Crush Saga and Clash of Clans. We would be hugely surprised if Niantic choose not to greatly expand the inventory of in-app purchases on offer to Pokémon Go players in the near future.

Premium add-ons

Over the summer months you may have noticed Pokémon Go players wandering the streets with Pokéball-style devices strapped to their wrists. This low-energy, low-complexity device is called a Go Plus, and its job is simply to flash and vibrate when an in-game event – such as a Pokémon appearing – happens nearby. The Plus is currently out-of-stock in the UK (they’re currently selling on ebay for over £40 a pop), but don’t be surprised if you see more premium Pokémon Go add-ons arriving on the scene in the near future.
 

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