Pokémon Go Isn't Just a Game; It's a Commerce and Payments Machine

Pokémon GO has become such a viral marketing phenomenon that it’s been overlooked as a lucrative business. After all, it took less than a day for Pokémon GO to become the most downloaded app in the US, Australia and New Zealand. But the app is also estimated to be making an average revenue per daily active user at $0.25, which is not only twice the average for casual games but outpaces Candy Crush Saga.

Here, we’ll take a look at its genius business model which merges several hot themes in technology today: mobile, VR, big data and gamification.

The money-making machine of Pokémon GO

In 2016, in-game mobile gaming revenue in the US is expected to reach $1.99 billion (up from $1.51 billion in 2014). Pokémon GO is well-positioned to cash in on in-app purchases.

In-app purchases

According to some recent estimations, the game is generating revenue of $1.6 million per day by selling virtual storage devices for the Pokémon for $1, or luring to hunt down the monsters.

David Gibson, an analyst at Macquarie Capital Securities in Japan, commented that "As users build their Pokémon inventory, spending money becomes needed to store, train, hatch and battle. Moreover, Gibson added that in-app spending in Australia, for example, was being driven by a large number of users rather than fewer but bigger spenders.

User data

One of the interesting assumptions around the major source of revenue from Pokémon Go is related to data access settings. On July 12, US Senator Al Franken addressed a letter to John Hanke, CEO of Niantic, expressing concerns over the data privacy policy of the company, paying attention to the vast data mined from users’ devices and profiles.

As Senator Franken states, From a user's general profile information to their precise location data and device identifiers, Niantic has access to a significant amount of information, unless users – many of whom are children – opt-out of this collection.

Pokémon GO'S privacy policy states that all of this information can then be shared with The Pokémon Company and ‘third-party service providers,’ details for which are not provided, and further indicates that Pokémon GO may share de-identified or aggregated data with other third parties for a non-exhaustive list of purposes.

Finally, Pokémon GO s privacy policy specifically states that any information collected – including a child's – ‘is considered to be a business asset’ and will thus be disclosed or transferred to a third party in the event that Niantic is party to a merger, acquisition, or other business transaction.

Having access to the stream of user data and knowing a lot about a user's personality from device usage and gaming habits is just an unimaginably valuable asset that, if used smartly, can serve as a roadmap for the next Pokémon GO once the craze with the first one slows down.

As cybersecurity expert Adam Levin commented, The game maker wants to know your information because they want to come up with other games that might appeal to you. They’re always looking to get intel for what’s next.

Time is money

Data suggests that 7 out of 10 players that have downloaded the game are returning to it the next day. Compared to the average rate, most apps only see 3 out of 10 players return. Adding millions of new users every day, Pokémon GO was reported to reach more than 15 million downloads on Apple Store and Google Play (~7.5 million times in the US alone).

The game is so addictive and engaging that it has outpaced the world’s largest social media apps with more average usage time. Indeed, Pokémon Go hit more than 43 minutes of daily usage, leaving WhatsApp (30 minutes), Instagram (~25 minutes), Snapchat (~23 minutes) and Facebook Messenger (~12 minutes) behind.

Pokemon GO Plus accessory

Another stream of revenue and an opportunity for users to throw more money at Nintendo and Niantic is through the purchase of the wearable accessory Pokémon GO Plus. Pokémon GO Plus is a wearable device with a Poke Ball on top that allows users to play the game without having to use the phone the whole time. With millions of users obsessively glued to their phones every day, a significant number of them will likely pay for the $34.99-dollar device.

Businesses and individuals are cashing in on the craze

Pokémon Go became a large goldmine not only for investors (Alphabet, Nintendo and Pokémon Co.) and creators (Niantic) but also for a range of other businesses too.

Imaginative restaurant owners, for example, have been spending in-app money to lure Pokémons to their locations, bringing potential customers in. L’inizio Pizza Bar, a New York pizzeria, saw its sales surge 75% over the weekend after paying $10 to use the Lure Module.

Some individuals even decided to turn a Pokémon GO adventure unto a job, asking $20/hour for a position of a Professional Pokémon GO trainer.

My services are simple: I will walk around in 1–4-hour shifts signed into your account capturing every single Pokémon I come into contact with, activating every Poke Stop I pass and walking nonstop to help hatch your eggs, the ad reads. I’ll even send you hourly updates while you’re at work/class/on a hot date informing you of any really exciting things I’ve come across for you.

Some particularly savvy players are even selling advanced level accounts to cash in.