Pokémon Go, Now with More SMB Marketing

Tech Vision is LSA’s series that spotlights emerging tech. Running semi-weekly, it reports on new technologies that LSA analysts track, including strategic implications for local commerce. See the full series here

Say the name “Pokémon Go” and most people think about hordes of tweens roaming the streets and public parks in the summer of 2016. Though the hordes have spread out and the media attention has moved on, the game is actually thriving. August was its biggest revenue month in 3 years.

That revenue is primarily in-app purchases. This involves player payments for in-game items to accelerate leveling up. This model goes beyond Pokémon Go and drives the thriving mobile gaming sector, fueled by the behavioral economics of microtransactions (all those dollars you’ve likely spent on Candy Crush).

But a less-dominant and headroom-advantaged revenue stream that the game also employs is sponsored locations. This is when a multi-location brand like McDonald’s can pay to have its restaurants be the physical venue for in-game waypoints like the Pokestops and Gyms where all those hordes congregate.

The idea is pretty logical as the gameplay can work up a hunger. For multi-location brand advertisers, it can drive more tangible foot traffic (and direct attribution) than awareness-based advertising. It’s organic to the gameplay, and particularly fitting to verticals like QSR, coffee and convenience stores.

The latest is this week’s news that Pokémon Go maker Niantic will extend the offer to SMBs on a self serve basis. Previously it worked with larger advertisers like McDonalds and Starbucks which involved formal partnerships. It now sees the opportunity to tap into a longer-tail SMB opportunity.

This happens as an offshoot of a new program called Wayfarer, which lets players vote on locations for Pokestops and Gyms. Using a similar system, businesses can select locations in a more on-demand fashion and for a price. That price is $30 per month for a Pokestop and $60 per month for a Gym.

The former includes the ability to change a Pokestop’s image and description once per month. The latter lets you schedule raids for one hour per month and change the Gym’s image and description 2x per month. To not oversaturate the experience, SMBs can have one stop or gym per location and 30 per chain.

These options essentially offer graduated levels of in-game promotion and potential for foot traffic. For example, raids — as the name implies — often require several players working together to defeat a boss (more footfalls). And the offer notably lets SMBs schedule these raids during slow business hours.

Beyond getting players to a location, these offers also provide promotional tools to keep them there. That includes deals and promotions that are specified in the app. Niantic claims that it will roll out additional features in the future, such as letting SMBs host “mini-games.” These could further boost dwell times.

Though this is all attractive, we’ll take a devil’s advocate position on SMB self-serve. As LSA Insider readers know, this is always underestimated by tech companies addressing the SMB long tail for the first time. Will this challenge mitigate Niantic’s revenue opportunity, not to mention a low ($30-$60/month) ARPA?

As for the timing, Niantic said at an event in San Francisco this week that it will start accepting applications today for U.S. businesses, with other countries rolling out later. Sponsored locations should start showing up in December and early tests with SMBs in Montana and Connecticut have shown positive results.

Altogether, Niantic CEO John Hanke characterizes the SMB sponsorship offers as additive to the gameplay, while supporting local economies. The company has a long-running penchant for altruism in its mission statement to get kids out of the house. This adds fuel in also supporting SMBs. We’ll be watching.

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