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Can Pokemon GO Monetise?

While there is no doubt about the success of Pokemon GO in terms of installs and retention, how is the business model going to perform? Monetisation expert blogger Ramin Shokrizade goes under the hood (and does a lot of walking!) to find out.

I’ve had press in both the UK and USA asking me this question but since I am currently in the UK I had a delay playing the game myself. If you caught my last article here on Gamasutra, I claimed that there was immense consumer demand for hyper social games that connect them to other people:

“If, as the Huffington Post article posits, consumers will largely choose Connection over legacy/analog addictions, then there are annually trillions of dollars just sitting on the table. Why aren’t we grabbing that money?”

My talk on “The Current State of Mobile Game Development” (sorry no video for the first 10 minutes) at the West Game Development Forum in April in Saint Petersburg explained why we were experiencing layoffs and revenue declines at a time of unprecedented consumer demand for social games. I explained that this was because we were not making social games. If anything, we are making anti-social games. I confused a lot of people by saying that Tinder was my favourite game at the moment because of its social mechanisms, reward mechanisms, and heavy use of user generated content. When confronted with “So now games have to compete with Tinder?” I respond at 32:47 in the video with:

“They do have to compete with Tinder. I make no reservations when I say that our primary competitor in the space is not other games, it’s Tinder. So that’s the bar we need to match. Can we make a game that’s more fun than Tinder? That’s the benchmark...The key is how social we can make our games. If our games continue to set barriers between other players so that they are completely anonymous and can’t interact, then that’s going to prevent them from being social. But when we can actually start making friends in our games, real life friends, especially the way Tinder does where the people you are interacting with are in your local area...can you imagine what it would be like if you were playing with the people who live right down the street from you? And you have the option of saying yes I want to meet that person, and that other person says yes I want to meet you, then now you’ve just made a friend in your gaming space?

That would totally revolutionize gaming. We have the technology, but we are being slow in adapting that technology. It’s being used very successfully in the dating space but not in the gaming space.”

Pokemon GO installs exceeded the number of Android Tinder installs in just five days.

So now the first game that truly brings people together in real space has hit the market. As predicted, trillions of dollars are just sitting there for them to collect. Even with a minority stake in the project, Nintendo’s stock value went up 7.5B USD in two days. They may lose some of that over time as the shock of success wears off, but the world and our industry will never be the same. That was just one quick handful from all that cash sitting on that table. Consumer expectations have permanently shifted, and that table full of money is becoming easier to see.


Can Pokemon Go Monetize?

They key to monetisation is not your monetisation model. It’s having a product that meets consumer demand. When I’m hired by a company to “monetise” a product, the first thing I do is make sure the product meets consumer demand. Typically it doesn’t in current state. I recommend how to make it meet consumer demand, and/or I recommend cancelling the project. I’m just as proud of the projects I’ve cancelled, saving companies close to a billion dollars, as the products I’ve recovered. I don’t list them on LinkedIn but they are just as important.

But to really understand why Pokemon GO works, let’s look under the hood. I’m in the UK where access is still rationed, so before I could get logged in I went on a Pokemon GO tour with my 18 year old neighbour Thea. We walked around lovely and historic Royal Leamington Spa for 5 kilometers so that we could test most or all of the functionality including egg incubation. Later when I was able to log in I clocked an additional 30km in one day while interviewing other players in the local parks, pubs, shops, and Pokemon gyms.

Pokestops are places where you can get balls needed to throw at wild Pokemons, and other odd things. They tend to be most concentrated in parks and in major urban walkways near shops. They reset every few minutes so if you can’t be bothered to walk much you can find an area with 3 or 4 of them and just kind of do a little circle every time they respawn. Eggs drop often if you don’t have the full 9 you can carry, so you will spend 90+% of the time with all 9 eggs if you are visiting pokestops regularly.

Eggs are interesting in that you have to put them in an incubator and then walk some distance to hatch them. You get one unlimited use incubator that costs nothing to use, but can only do one egg at a time with it. You can buy additional incubators but these only last 3 uses each and are expensive.  Eggs require 2km, 5km, or (rarely) 10km to hatch. The 10km eggs give the best rewards by far. So there is a lot of incentive to exercise with this game because some really rare Pokemon pop out of eggs and they give a lot of XP when they mature. Pokemon from eggs are also auto-captured. We ran into one high value Pokemon on our walk and it took us some 30 or 40 balls to catch it.

This was in the middle of a park where dozens of people had come to play the game. Most of the Pokestops were buffed up with Lures that players had used on them. When you click on one of these buffed up Pokestops, it actually gives the name of the person that put that lure, so you know who to thank! Where this one particularly valuable Pokemon had spawned, there were over a dozen people there trying their hardest to catch it. Most Pokemon give in after one or two balls are thrown their way.

In addition to lures you can drop on Pokestops (these are the ones that shops are using to lure in customers), there is also incense which can increase the chance of Pokemon just appearing next to you. You can buy these and sometimes they are given as rewards for levelling up.

Any Pokemon you capture gives you XP which can raise your trainer level. Getting to level 5 lets you fight in gyms, but the most important part about levelling up is that the quality of Pokemons that spawn around you is based on your trainer level. You also get 100 stardust for each capture, and this is used to power up Pokemons. This isn’t much, so it’s best to save it up until you have a really good Pokemon worth boosting. If you get enough of a certain kind you can also evolve that kind, but currently that mechanic is a bit confusing because if you find 20 of one type and hit evolve on one, it only evolves one and it might not be your best one. Evolving and boosting is not the same thing.

So what is going on here? If you’ve read my Supremacy Goods or How Pay to Win Works papers, you know that selling the rewards in a game undermines the value of that game not only for that one person, but for everyone. I go into a lot of depth as to the group mechanics of this in my Group Monetisation paper. But here in Pokemon GO you have to earn everything. Sure you can buy more lucky eggs (these boost XP for 30 min), incubators, balls and lures. But all of these things still require you to leave your house and explore your world or they don’t do you any good. Players tend to cluster at the Pokestops near their home/work/school and if they do this regularly they get to meet all the other players in those neighbourhoods.

So none of this feels intensely like pay to win to the consumer. When I was in the park I noticed that almost every Pokestop (there were dozens) in the park had an active lure on it but it was many people dropping lures. People were sharing the responsibility for dropping lures and I think that made them feel better about doing so. For every lure they dropped, 5 other people were dropping lures that directly benefitted them. To get the most benefit from all those lures, you probably had to do several laps around the park. Our phone battery was ready to give up the ghost after 5 km but for most people that’s a good hour or more of walking which is great exercise. People I ran into were recommending I get spare batteries and turn off the camera while I played so I could play even longer before charging up but I did 30km in my first day on my own phone even without those pro tips. I just had to return home for a recharge every few hours.

An hour is enough time to drop a lot of lures, incense, balls and maybe even work a bunch of incubatored eggs. It’s difficult to overstate just how much fun it is walking through the park with a friend trying to hit as many Pokestops as possible and get all the Pokemons. When your battery runs low you head home and can then decide who to evolve and how to spend your stardust in the comfort of your home.

On the downside, we have two serious cases of reward removal in Pokemon GO. These are not immediately obvious so I had to play for a while to see them, and reward removal is a bit subtle. I describe reward removal in detail in my popular Top F2P Monetisation Tricks paper for those that want to understand it better. Basically it is the process of giving the player a reward but then taking that reward away or not letting them use it. The goal is to frustrate the consumer and create a “contest of wills” between developer and consumer. Everyone has a breaking point and if you make the consumer uncomfortable enough they will either spend or quit. For more information on the psychology at play, check out my Secrets of F2P: Threat Generation paper. In the case of Pokemon GO, the game is so much fun that the players will put up with a lot of discomfort before considering quitting.

The worst area of reward removal is how the eggs and incubators are handled. You get one incubator that you can use over and over, but you get 9 total eggs. If you had 9 incubators you would advance your eggs (a key source of XP and quality Pokemons) 800% faster. That’s a huge difference, enough to make this a straight up pay to progress/win mechanic. Also, a player is going to feel bad when they realize they have to walk 9 times as far to hatch the same number of eggs if they don’t spend money.

Because of the cost and discomfort, the internet is already flooding with memes of cell phones attached to ceiling fans, as a way of effortlessly and quickly maturing eggs. By trying to monetise through discomfort, Niantic is going to push players to attempt these methods or even pay a third party for devices that no doubt will reach market soon to auto mature eggs. This will also undermine the exercise and social aspects of the game which are key to its success.

The other way that reward removal is applied is in the inventory management system. Inventory space could be infinite but it is capped at a very low number to create discomfort in the player. Every time the trainer levels up a bunch of new goodies are earned, often putting the inventory space “over the top”. When your inventory is full you don’t get any rewards from Pokestops, not even eggs. Forcing the player to decide which of their valuable items to destroy on a regular basis generates a lot of player discomfort, which is the objective of reward removal.

So here is what my final report card looks like for Pokemon GO’s monetisation system:


1. While it is heavily pay to progress/win, it’s not immediately perceived that way by players,

2. It makes excellent use of group monetisation techniques,

3. It never runs out of things to buy. Things like lucky eggs (which boost XP gain by 100% for 30 minutes), balls, and lures don’t become less valuable over time.


1. Intense use of reward removal in the egg/incubator system in a way that will make 3rd party vendors very rich but drain money away from Niantic,

2. Intense use of reward removal in the inventory system that will make players increasingly uncomfortable as they advance in the game.

Without the two uses of reward removal, I would have rated the business model for this product as “Superior”. Sadly, I have to drop it two steps to “Above Average”. For those that suggest Pokemon GO’s popularity will wane, I’m not seeing any reason for this in my evaluation of the product. Its ability to monetise will certainly wane due to the critical flaws listed above.

Yes people in rural areas are going to have limited access to Pokestops, but I think they will be tempted to “go to town” or the park just to play the game until their phone runs out of power. If it was me, I would go with a friend and make it a Pokemon GO date. It’s really more romantic than it sounds...

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