The sensational success of the smartphone app game Pokémon GO took many by surprise, including consumers, businesses and parents across the world – but what are the main lessons for businesses?
Since its launch on 6 July, the streets have been filled with avid Pokémon trainers clocking hours and hours on the augmented reality game.
For anybody not raised in the 1990s, Pokémon involves hunting animated creatures and trapping them inside ‘Poké Balls’ to make them fight each other. With Pokémon GO, these creatures are interspersed with the player’s surroundings, meaning they can appear randomly in any real-world location.
According to statistics from App Annie, Pokémon GO was even faster than Clash Royale to hit #1 top grossing app on both iOS and GOogle Play and is generating well over $1M of net revenue a day for Niantic Labs. Apple announced that the app was downloaded more frequently in its first week than any other app. It has even been referenced in a rather cringe worthy political pun by Hillary Clinton, the Democrat candidate for US President.
The popularity appeared to be translating into economic fundamentals: Nintendo’s share price rose hugely as the mass appeal of the game became apparent, more than doubling in less than three weeks.
Hard-headed businesspeople were sceptical, however.
“The first question I asked is how they will monetise it,” says Raj Sabhlok, President at Zoho. “In the early days of the internet: they didn’t have a model or a way to monetise it out of the gate.”
A pertinent question indeed; Nintendo’s share price dropped 17.7 percent this week as it said that the success of Pokémon GO would have little impact on profits.
This left the shares up 60 percent since the release of the game, but does reveal that markets had made a basic mistake: assuming that popularity automatically meant profit.
A basic lesson here is that having a monetisation plan for an app is crucial. App Annie expects that if developer Niantic Labs gives Pokémon GO a worldwide presence, fixes the server issues and adds more social and PvP features, it could make $1 billion a year.
Within the game, players spend money by buying Pokécoins, at an exchange rate that hasn’t been impacted as badly by the UK’s Brexit vote as many others. The Pokécoins allow users to buy items and power-ups in the games that are not necessarily essential but make the game more rewarding.
In this sense, Nintendo and Niantic Labs have learned from companies such as King, the maker of Candy Crush Saga. Since its founding in 2003, King has achieved the largest ever IPO for a mobile or social gaming company in the US (listing in 2014 on the New York Stock Exchange) and was acquired in February 2016 by Activision Blizzard.
5 top app development tips from Pokémon GO
1. Have a plan for monetisation
2. IP is key
3. Market testing can be crucial
4. Make sure it's secure
5. Get your servers ready
Candy Crush Saga is free as a download, but the in-app purchases are where the real money is for King. An analysis by the Guardian in February 2015 found that players spent £865m on in-app purchases in 2014.
Pokémon GO obviously has some unique advantages. As Alexandra Kaufman, Content Marketing Writer at App Annie, says, not every app can be Pokémon GO.
For example, the strong intellectual property owned by Nintendo (the characters and mechanics of the Pokémon universe) is something that most companies will not have access to.
“Pokémon GO taps into the nostalgia of millennials who spend a lot of time on their mobile phones. Millennials grew up with the Pokémon and Nintendo has not allowed the brand to have a serious mobile presence until now,” writes Forrester research analyst Julie Ask.
Kaufman suggests this can be emulated, however.
“If your mobile game can be adapted to include a brand or even a celebrity you can increase your app’s monetisation potential,” she writes.
Forrester’s Ask also highlights the “soft launch” of Pokémon GO as a factor in its success.
“Launching in a smaller market resembling your target audience offers time to test user response and identify any final bugs in a controlled environment. It also gives you a chance to test monetisation and server stability,” she writes.
This is in reference to Pokémon GO’s initial, quiet release in Australia, rather than the far larger market of the US.
What about what not to do? Anecdotally, a major complaint and reason for people abandoning the app has been the huge power consumption it requires. But some of the biggest issues around Pokémon GO have centred on privacy and security concerns.
Ed Macnair, CEO at CensorNet, highlights how the app was rather greedy with the app permissions it requested. This involved the game being given access to players’ Google accounts. Niantic said that this was unintentional and would be created.
However, Macnair comments that this “raises an important issue about app permissions and how much attention we pay to them.”
“In the event of a hack targeting the creators, criminals will potentially be given access to a treasure trove of data – followed by the inevitable brute force attempts thanks to the cache of usernames and passwords they’ll be in possession of.”
Other concerns raised by security companies focus on the fake versions of the app that were released to app stores.
"The lesson here is that app developers need to be taking more precaution such as code obfuscation and application integrity verification to protect their software and prevent attackers being able to obtain code and reverse engineer it."
Another issue were the high server requirements resulting from the game’s unexpected popularity.
Albie Attias, Managing Director of King of Servers, an IT hardware supplier, said that ensuring the scalability of servers is “integral”.
“Although the app’s success has been somewhat unprecedented, the servers have been struggling to handle the sheer volumes of traffic that the game has generated and despite this being due to incredibly high traffic levels, even less popular apps can encounter the same problem.”
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