Terrance Rogers
Terrance Rogers

Pokémon is taking the world by storm. For many, it’s been an addictive game that brings back just the right amount of childish nostalgia, but for others, the game is a zombie-inducing virus that’s infected their friends with the mindless obsession to “catch em’ all”. Here at The Harbus, we conducted a woefully non-scientific poll to see where Harvard Business School students stood on this phenomenon. Given people’s reactions, you would have thought we were asking students about their political choice for the White House.We’d like to help some of the non-believers better understand what this game is about, and why it’s so successful. Let’s start with a little Pokémon Go 101.

Pokémon Go was developed by Niantic – a 2015 spinoff from Google – in partnership with Nintendo and The Pokémon Company, who receives 30% of Pokémon Go’s revenues. Developed for iOS and Android devices, Pokémon Go is a mobile phone application that uses augmented reality to create an environment where players can “catch” pocket monsters (i.e. Pokémon) in their local surroundings.

When you start the game, you are given a starter Pokémon, and after catching a few Pokémon to level, you join a team (Red, Blue or Yellow). You can check-in at “Pokéstops”, which are typically at local stores or historical landmarks. With each Pokéstop you gain the items needed to catch more Pokémon. Certain locations on the map have places called “gyms” where you can use your Pokémon to “battle” other users. When you win at these gyms, you take the gym from an opposing team. The Red and Blue teams are the most active in the game, so a bitter rivalry has already started to form across the country between the two camps. As you win gyms and collect more Pokémon, you earn points to level up your “Pokémon Trainer”, and you also start to find stronger and rarer Pokémon. The game has another interesting angle that makes it even more addictive. While checking in at those “Pokéstop” locations, you may get an egg with a random Pokémon inside of it. You then have to walk a certain distance to hatch it: 2km, 5km or 10km. The mix of collection and competition has helped make this game a huge success, but how successful is it?

Originally launched in the United States, Australia, and New Zealand, the game has been downloaded over 100 million times across Apple and Android devices, and sales for the game have reached over $200 million. This success even translated to an initial $7.5 billion jump in Nintendo’s market value that, while having decreased slightly, demonstrates investors’ confidence in this game’s ability to help Nintendo further leverage the Pokémon brand in the future. Their investment thesis might not be so far off when you look at how much time users spend playing the game.

Shortly after launching, users were spending more time on the app than on Facebook. Based on app store intelligence firm Sensor Tower, in the game’s first week, the average iPhone user was spending more than 33 min per day on Pokémon Go compared to 22 min per day on Facebook and 18 min per day on Snapchat. In the game’s early days, the number of active daily users even surpassed Twitter, and on Android, more people now have Pokémon Go than Tinder, arguably the most popular dating app on the market. It’s not intellectually honest to assume that these numbers will continue to stay at these levels, but they are still impressive.

Another surprising fact is the demographic makeup of the players themselves. Based on SurveyMonkey intelligence, which surveyed for over one million iOS and Android users, 63% of users are female compared to only 37% male users.  Additionally, 78% of users are estimated to be 18 years of age or older, while 55% of users make more than $50,000 per year. Adult users are instrumental in helping drive the success of this game.

Pokémon Go has been successful due to a number of factors. One of those factors is nostalgia.  Similar to companies like Disney, The Pokémon Company has a strong set of ageless characters that can be revitalized at any moment. The original Pokémon Game Boy titles came out 20 years ago, and after being a huge success (over 31 million copies sold worldwide in 1996), Nintendo continued to sell new versions of the game and other types of properties. As we evolved into boring grown-ups, our urge to “catch em’ all” never went away. The only thing that has changed is global smartphone penetration and our increasing disposable income. Combine these with a little friendly competition between friends, and you’ll find yourself going the extra mile, literally, to catch more Pokémon.

Game mechanics have also played a huge role in its success. The game is designed to have a short learning curve and a large, immersive (basically endless) world. Some of best games make it easy to learn for new gamers while at the same time not making the game too simplistic (i.e. Mega Man, Super Mario Brothers, etc.). The beauty of Pokémon Go is that as more players go outside to play the game, more people see others playing it. One curious observer downloads the game, and then someone else sees that person playing the game. The virality loop continues. At this stage, Niantic barely has to spend anything on marketing because the game has become so viral.

I’d also be remised if I didn’t mention their exploitation of behavioral economics to make money.  Freemium games – games that are free to download, but encourage in-app purchases – like Pokémon Go make money by giving impatient users a way to speed up gameplay and obscuring the amount that the user is actually paying. In the game, users can spend real money to buy “gold coins”. Studies show that, similar to credit cards, users are more likely to spend virtual currency because they are not directly seeing their account balance decrease.

Readers that don’t play the game are now probably wondering why someone would ever pay real Harriet Tubmans to get further in a game. One popular example: lures. Lures can be plugged into a Pokéstop to help attract more Pokémon to that area for 30 minutes. These lures help speed up the game for busy millennials, so for $0.99, players can get 100 coins which helps them buy one lure. Other items that cost money do similar things to speed up the game, and when used together, allows users to catch a ton of Pokémon in a short period of time.

(courtesy of the good folks at Vox Media)

Now, all of this is great, but what can Niantic do to make sure Pokémon Go continues to be successful in the future? Over the next 3-6 months, Niantic needs to create innovative partnerships with businesses and governments around the world, build a stronger and safer technology infrastructure, and develop a more meaningful user-to-user experience.

Companies like McDonalds have already realized what this could do for foot traffic in their establishments, so they have been trying to set up a partnership with Niantic to make each of their restaurants is a distinct Pokéstop. Niantic should focus on partnering with large and small businesses that have free Wi-Fi. Everyone could win in this scenario. Companies would get additional foot traffic, players would get to let their data plans breathe a little bit by using Wi-Fi, and Niantic could get extra money from eager businesses. Volunteers from the Hillary for America campaign have even started to use the game to register more voters. The partnership possibilities can only be capped by our own collective imaginations.

The next key to future success comes down to the reliability of the technology. No one could have predicted this type of success for Pokémon Go, but growth has been slowed down by the errors users have encountered when logging into the game and connecting to the server. Based on DownDetector.com, a website that tracks site outages, Pokémon Go users encounter hundreds of issues each day. I’ve seen this failure first-hand. Not being able to log on can easily kill a Pokémon trainer’s spirit for the day. Niantic should invest heavily into making sure players can get on when they want to.

Lastly, Pokémon Go is missing a huge opportunity that the older Pokémon games exploited – enabling players to trade Pokémon and battle people directly. This would increase player engagement and encourage people to strike up conversations with other Pokémon Go enthusiasts. If Niantic does these things, Pokémon Go will be here to stay.

But… What about Pokémon Go at HBS? I’d like to leave you with one of my favorite Pokémon Go player responses, taken directly from our survey.

“Everyone at HBS wants to be the very best, for many that means Baker Scholar for me that means I’ve gotta catch em all.” – Stefan Coburn

Well said, Stefan. Well said.

Do you have a different opinion? Let us know us know http://bit.ly/2aSswgF.

Terrance Rogers (HBS ‘17) worked in New York City and London for 5 years before coming to Harvard Business School. Born and raised in Georgia, he’s a proud public school kid who’s passionate about figuring out how to use business and public policy to improve people’s lives. You can follow him on Twitter @terrance_rogers and Instagram @bigtrogers.