How Pokémon Go will level up local advertising

TK Kurikawa / Shutterstock.com

For all the headlines that Pokémon Go is generating, the massively popular mobile game is merely in an incubation phase. Once the game developer, Niantic, focuses on a monetization strategy, Pokémon Go will really start flexing its muscle — from both a gaming and advertising standpoint.

As you’ve certainly heard by now, the app uses augmented reality to send players with their mobile phones on a quest in the real world to find, train and do battle with the Pokémon made famous by Nintendo 20 years ago through video and card games. Pokémon Go sends players to far-flung locations to find Pokémon, acquire goodies at PokéStops and do battle in Gyms.

Pokémon Go is so popular that, within two days of its launch, the app had surpassed dating app Tinder in Android device installs and was generating more downloads and revenue than any other iPhone app in the United States. More recently, The Guardian reported that daily active users of Pokémon Go in the US had overtaken that of Twitter.

The game has created an incredible amount of commentary surrounding it, ranging from its social implications to its value for improving the mental and physical health of those who play it. And while some pundits have questioned the game’s staying power, I suggest you ignore the naysayers and prepare yourself to capitalize on the popularity of Pokémon Go.

Here are three reasons why I think Pokémon Go will get bigger — and what the phenomenon could mean for local marketing.

1. It’s already a revenue generator and economic gold mine

Players are creating revenue through in-app purchases through PokéCoins, which can be used to buy useful tools that improve a player’s performance. According to App Annie, a business intelligence firm that watches apps and digital goods, Pokémon Go could earn a run rate of more than $1 billion annually from in-app purchases.

The game’s popularity has already added billions to Nintendo’s market capitalization. But as impressive as those figures are, I also see incredible potential for Pokémon Go to generate even more revenue through advertising, which would make Pokémon Go a rare game that can generate revenue from in-app purchases as well as ads.

Through strategic partnerships with businesses, Niantic could reap revenue in any number of ways. They could charge businesses a fee to become a branded PokéStop or Gym or permit businesses to create mobile wallet offers that players download as they pass by a business while searching for Pokémon.

So long as the branded experiences are not obtrusive, the advertising potential is strong. Indeed, John Hanke, chief executive of Niantic, confirmed yesterday with the Financial Times that sponsored locations are coming soon to Pokémon Go, and Bryan Menegus of Gizmodo reported that Niantic is working on a branded relationship with McDonald’s.

In the meantime, businesses are figuring out ways to capitalize on the game’s popularity, ranging from restaurants hosting Pokémon Go parties to businesses offering special deals for players in order to generate foot traffic.

2. The game enjoys a strong base of engaged users

The Pokémon brand enjoys strong recognition, having existed since 1996 and permeating popular culture through video games, a card game, an anime series and other media. Pokémon Go capitalizes on pent-up demand from long-standing Pokémon gaming enthusiasts who made Pokémon one of the best-selling video game franchises of all time. In addition, because of its unique game mechanics, Pokémon Go is also attracting users who have never played a Pokémon game.

No wonder Pokémon Go is such a popular download. But downloads tell only part of the story. More than 60 percent of those who have downloaded the app are playing it daily. As of July 8, the app was being used for an average of more than 43 minutes a day, a figure that exceeds usage time for Instagram, Messenger, Snapchat and Whatsapp. And according to TechCrunch, as of yesterday Pokémon Go had “topped Twitter’s daily users, and it sees people spending more time in its app than in Facebook.”

You can see why brands are knocking on Niantic’s door.

3. Niantic gets it

Niantic knows something about locations, user bases, gaming and branding. John Hanke, who was involved in the development of Google Earth and Google Maps, launched Niantic in 2010 with the charter of building content on top of Google’s mapping technology. Six years later, he’s head of a company that has suddenly become a treasure trove of user data.

Before Pokémon Go came along, Niantic had cultivated a user base by developing a game called Ingress, which also relied on players exploring physical locations. Niantic relied on its users to crowdsource gaming locations that eventually became PokéStops and Gyms.

By cultivating relationships with brands with brick-and-mortar locations, Niantic may very well become a crucial data amplifier, or publisher/distributor of brands’ location data where users are looking for them. Niantic has already harnessed its strong knowledge of users and location-based technologies to build Pokémon Go. The company operates with an entrepreneur’s mindset because Hanke is one.

Play and learn

If you operate your own brick-and-mortar locations, you absolutely need to watch how Pokémon Go evolves. Better yet, get involved. Play the game at your own location. Figure out if you’re lucky enough to be a PokéStop or Gym (or be close to one). Understand the user base and the ways you can capitalize on the game’s popularity. And treat Niantic like an up-and-coming location data powerhouse.

Even if you don’t capitalize on Pokémon Go, you’ll be one step closer to mastering the intersection of location marketing and augmented reality, projected to be a $120 billion market by 2020. Now is the time to play and learn.