Nintendo and Google Aren’t the Only Ones to Benefit from Pokémon Go Fever

Headset developers, mobile advertisers and even a company like McDonald's have to be pleased with the incredible reception for the augmented reality game.
By Eric Jhonsa ,

As you might be aware, a certain iOS/Android game involving Japanese anime characters has gained a strong following over the last few days.

Though it only launched a week ago in the U.S., Australia and New Zealand, Pokemon Go has already topped 15 million downloads, according to app analytics firm SensorTower. The firm also estimates the average Pokemon Go iOS user is spending 33 minutes per day on the app, more than the 22 minutes claimed by Facebook and the 18 claimed by both Twitter and Snapchat.

All signs suggest Pokemon Go will also see a very enthusiastic international reception. The game arrived in Germany today, and quickly shot to the top of the app store charts there. Launches in other major foreign markets are on the way.

For those wondering, Pokemon Go lets users create digital avatars that roam around and catch/collect Pokemon characters. What's unique is that the avatars roam around in the real world, with the game using GPS, mapping technology and a phone's camera to direct users to real-world locations where Pokemon characters can be "found," with their drawings superimposed on a phone's camera view upon discovery.

As such, Pokemon Go is a textbook example of an augmented reality app ... a spectacularly successful augmented reality app that has been producing huge crowds at some of the locations where characters are "placed."

Not surprisingly, Nintendo (NTDOY) , which develops Pokemon console games, has a stake in Pokemon Go developer Niantic and owns a 32% stake in Pokemon licensing/marketing firm Pokemon Co., has seen its shares soar -- its ADR shares are up more than 50% since the game's release.

Alphabet (GOOGL) - Get Report also financially benefits from the game: It, too, has a stake in Niantic, which was originally a Google spinoff, provides the cloud infrastructure services underpinning the game and gets a 30% cut on Android in-game purchases, just as a Apple gets a 30% cut on iOS in-game purchases. But for a company of Alphabet's size, Pokemon Go can't be expected to have a major top-line impact. Especially as some of the initial fervor dies down.

But there are other reasons for Google, as well as some other tech giants, to take heart in Pokemon Go's performance. For starters, it shows that well-made augmented reality apps can have mass-market consumer appeal. Google, which is still working on its Glass augmented reality headset in spite of its early setbacks and PR issues, has to be pleased with that.

As must Microsoft (MSFT) - Get Report, which recently began shipping development kits for its HoloLens augmented reality headset, and hot start-up Magic Leap, which has raised huge sums to develop a "mixed reality" headset promising to show digital objects that are indistinguishable from the real-world objects surrounding them.

Himax Technologies (HIMX) - Get Report is a potential AR headset play. The company supplies micro-displays for Google Glass and reportedly HoloLens, and is up 15% on the week. However, for now, the majority of Himax's revenue still comes from selling display driver chips for TVs, monitors and mobile devices.

Meanwhile, various small businesses and retailers have seen Pokemon Go provide a boost to foot traffic. This has happened both organically, via businesses being turned into places where users can collect Pokemon or battle other users, and by the purchasing of "Lures" that temporarily increase the rate at which Pokemon are "created" near a location.

Niantic CEO John Hanke says his company plans to strike deals with retail establishments that turn them into sponsored locations for catching Pokemon. Uncovered game code suggestsMcDonald's (MCD) - Get Report will be among the first partners. Chances are that retailers won't be as enthusiastic about striking deals once the foot traffic fueled by the game's current hype cycle slows, but either way, Pokemon Go provides a template for future augmented reality-driven retail partnerships.

Looking further down the line, augmented reality apps with access to a user's location data open up a number of possibilities for local ads, commerce services and brand promotions. Possibilities include offering promos for businesses that a user is walking past and (based on his/her data) could be interested in, and letting users receive information and discounts for an advertised product when their cameras detect a billboard for the product. Such promos could benefit not only developers, but also owners of major mobile ad networks, such as Google and Facebook (FB) - Get Report.

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A couple months from now, Pokemon Go probably won't be burning up the airwaves and smartphone battery lives the way it is today. But as a demonstration of what a creative, well-designed augmented reality app can accomplish, it could have a big long-term impact on the mobile tech landscape.

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