Pokémon GO, the smash-hit location-based mobile game that boosted Nintendo's share value by 50 percent, is about to become very profitable for advertisers.
Niantic Labs, the developers behind the massively successful title, is planning to let retailers and various enterprises to sponsor places on its virtual map.
CEO of Niantic, John Hanke, finds that embedding "sponsored locations" is a great way to bring the game an additional income. Pokémon GO currently contains in-app purchases for virtual items and power-ups.
Pokémon GO players have to navigate the real-world environment and use their smartphones to find and collect the cartoon creatures at "gyms" and "pokestops." The adorable creatures are placed on a special version of Google Maps.
After the game was released in the United States and Australia, market analysts speculated on the potential of the title to produce hefty amounts of cash.
An analyst at Jefferies, Atul Goyal, explains that there is more than one way Nintendo could monetize the appeal of Pokémon GO.
"The potential for paid advertising or paid deals that encourage players to come to a particular building or store is a huge opportunity," Goyal notes.
Niantic has experience in creating games that make the most of networks of virtual "portals" that appear on real-life locations.
The title is dubbed Ingress, and names such as Duane Reade, Jamba Juice and Zipcar paid to have sponsored Ingress portals in the U.S. in order to attract additional customers.
Hanke says that the paid advertisements could become a part of Pokémon GO, as well. He mentions that Niantic has two parts in its business model: in-app payments, which are already live, and sponsored locations. The latter means that companies pay Niantic to code them as locations "within the virtual game board."
Niantic has taken a leaf out of Google's search advertising book and charges advertisers on a "cost per visit" basis. This resembles the "cost per click" charged by Google. As a side note, Niantic was part of Google's parent company Alphabet, from which it separated last year. Before the move, Niantic gathered $30 million in venture funding from Nintendo and Google.
Hanke shieds away from revealing if any ventures are negotiating with his company for sponsored locations.
Despite the immense popularity of Pokémon GO, it is hard to estimate how much extra profit the sponsored locations could bring.
David Gibson from Macquarie Securities in Tokyo points out that Nintendo still is a conservative company, which puts great price on appeasing its fans. He notes that Niantic should think twice before showering its fans with too much commercial stuff.
In the U.S., some retailers are already seeing the game affecting their business in various ways.
A number of restaurants are warning Pokémon "hunters" that in order to play the game at their premises, they have to purchase something.
Meanwhile, others are flourishing. It appears that the sales of a pizza restaurant in Queens jumped by a whopping 75 percent right after gamers bought $10 in-game power-up, luring them to its location.
We will keep you posted as soon as we find out more about the developments of your favorite location-based mobile game. Stay tuned!
