Jackson: Pokémon Go through the lens of the Kauffman Index

Editor’s note: This post was republished with permission from the Ewing Marion Kauffman Foundation’s Growthology blog.

Summer 2016 has been marked by the dominant cultural touchstone that is Pokémon Go. The highly addictive game for mobile devices has all the markings of a fad. It’s fun, it’s silly, it’s competitive, and it’s nostalgic. It also had ludicrous growth in its first weeks.

While the short term legacy of Pokémon Go is likely a spot next to Beanie Babies and Rock Band, the story of how the game came to prominence provides good examples of how and where we think of business growth and entrepreneurship.

Below, I’ll take a look at Pokémon Go and its impact through the three types of Kauffman Index business activity measures.

Photo credit: Beth Kanter

High Growth

While Pokémon the brand is owned by Japanese entertainment giant Nintendo, the company that developed the game is Niantic Labs. Niantic, led by CEO John Hanke. Niantic reached an agreement with Nintendo and The Pokémon Company to begin developing Pokémon Go in late 2015.

How did a basically anonymous game developer with a very short track record become the creator of perhaps the most popular mobile game ever?

The success is in part the result of a number of coinciding lucky breaks.. Nintendo is not a company known for taking big risks and Niantic could have been stonewalled before their pitch to Nintendo even started. However, Niantic was lucky as the Pokémon Company CEO was an experienced player of their previous game, Ingress.

In addition to luck, Niantic fits the archetype of a certain type of firm that is more likely to grow than others. Niantic is a recent spinout of the Google family of companies (Alphabet), located in the Bay Area, in the tech industry, and has a founder with experience as a successful entrepreneur. All these qualities are suggestive of a company that has a better than average chance to grow.

The other interesting aspect of Niantic and their ability to sustain growth from Pokémon Go is the reliance on in-app purchases. Currently, Pokémon Go is bringing in over $1.5 million in revenue from player purchases from Apple devices alone. This is an unprecedented amount, and reports claim that revenues from Pokémon Go purchases nearly equaled those from all other gaming apps. Can Niantic keep up this blistering pace? It seems unlikely. Other gaming apps have succeeded with less revenue from in-app purchases, but it will be interesting to see how else Niantic and Nintendo continue to monetize Pokémon Go. Already, Nintendo has agreed to a partnership with McDonald’s Japan, which will pay to host 3,000 in-game gyms for players to engage with.

Main Street

Not only has Pokémon Go been a sensation for the corporate outfits that developed and invested in it, but it has also been a boon for ordinary companies outside the video game market. Pokémon Go has been a revelation in terms of getting people out and about, as one part of the game relies on your ability to cover certain distances to acquire Pokémon. Players have flocked to public parks in their community to find new Pokémon. At the National Mall and Memorial Parks in Washington D.C., park officials note that “hundreds if not thousands” have visited in their quest to find more and different kinds of Pokémon. Parks, historical districts, and other walkable areas often have the sort of landmarks that the game designates as Pokéstops, where players can stock up on items. As well, restaurants, cafes, bars, and other businesses have tried to attract players with lures or organize events based upon the game.

Startup Activity

The entrepreneurial journey of Niantic is at the same time familiar and unique. Founded as an internal startup of Google in 2011, Niantic’s only notable activity other than Pokémon Go was the game Ingress, which has been called a sort of prototype for Pokémon Go. Ingress debuted in the App Store in 2013, and also took advantage of the augmented reality feature that has captured the world’s attention in Pokémon Go. As the first player in the augmented reality meets gaming field, Niantic was taking a chance in an unfamiliar space, but one where they felt they have a unique ability to succeed. Niantic CEO John Hanke joined Google in 2004 after Google acquired his previous company, Keyhole Inc. Keyhole’s main product was the geospatial technology that would be the foundation for Google Earth and Google Maps, now bedrock assets in Google portfolio.

Niantic is also a prime example of what the Kauffman Index labels opportunity entrepreneurship. This style of entrepreneurship, contrasted against necessity entrepreneurship, describes the case when a prospective entrepreneur notices a market opportunity or chance and attempts to seize it and the profits it may yield from employment, rather than unemployment. After joining Google, Hanke launched Niantic to marry his expertise on geospatial design with a focus on next generation gaming. Whether Hanke had a grand vision of designing the next video game sensation, or just wanted to see people get outside and explore their surroundings, Hanke and Niantic have demonstrated how entrepreneurship works as an outlet for smart and talented people to bring their vision to life.

What Can Others Learn from Pokémon Go?

Pokémon Go has obviously captured public imagination this summer. But is it just an instance of a company in the right place and the right time with the right Pokémon?

I think every company that reaches these kind of dizzying highs has had a lot of luck on their side. But I think others have the capability to learn from this kind of collaboration. One of the reasons Pokémon Go has become such a powerful cultural experience is the nostalgic feel. Millennials (myself included) are able to relive their childhood fascination with the familiar game in a new and convenient way. The free-to-download app also helps explain its rapid expansion, but the ubiquity of Pokémon, with a 98 percent of millennials knowing who Pikachu is and 90 percent knowing what Pokémon Go is, allows gamers and non-gamers to latch on to something familiar. As well, Pokémon Go enables a built-in sense of discovery that the player is in charge of finding new Pokémon and leveling up.

I’m curious to see how other companies, startups and established companies alike, try to take advantage of this kind of opportunity. Is there room for combining other types of rich, nostalgic intellectual property that perhaps needs a refresh, with new and exciting technology? Already the movie industry is saturated with sequels and reboots of movies and stories from successes of generations past. Could we see virtual reality breathe new life into films and make them more of an experience than something you consume? Can the Internet of Things use once-popular toys such as Easy Bake Ovens to gain a foothold in homes? While these uses, much like Pokémon Go, may not be economy-altering advances that raise productivity to levels of previous periods of prosperity, it doesn’t have to be. These technologies are in their most nascent stages, and the original acceptance by consumers and companies can be the hardest step. Perhaps these sort of collaborations can be the foothold innovative new technologies use to grow into more important and impactful parts of everyday life.

Chris Jackson | Courtesy of the Kauffman Foundation
Chris Jackson | Courtesy of the Kauffman Foundation

Chris Jackson is a research assistant in Research and Policy for the Ewing Marion Kauffman Foundation, assisting in the understanding of what policies and environments best promote entrepreneurship and education in the pursuit of economic growth.

Find Jackson on Twitter: @chrisjack_son.

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