Pokémon GO and the April Fools’ joke that made billions

Niantic EC-1 Part 2: The Spin-out

It’s the morning of March 31st, 2014, and the Google Maps team is about to release its April Fools’ Day gag to the world.

It wasn’t the first time this team had goofed around with an April Fools’ day joke. Google, as a whole, goes wild on April 1st. Maybe it’s for the resulting publicity. Maybe it’s to make the brand seem a little more fun. Maybe it’s to give employees a creative outlet that doesn’t seem so mission critical. It’s probably a mix of all three.

Google has used the first of April to “launch” everything from morse code keyboards, to AI-powered garden gnomes, to a translator for talking with your pets. They’ve “announced” that the company would be switching to Comic Sans as the default font across all of its products, and once spent the day suggesting that, despite whatever you might be searching for on YouTube, you probably meant to search for Sandstorm by Darude.

Most of the gags come and go (excluding Gmail, of course, which everyone thought was a joke thanks to its April 1st launch timing.) In most cases, everything is reset back to normal and everyone moves on.

This one would be a bit different. Within the next few hours, the wheels would be in motion for the product that became Pokémon GO.

This is Part 2 of our EC-1 series on Niantic, looking at its past, present, and potential future. If you haven’t read it, you can find Part 1 here. The reading time for this article is 31 minutes (7,900 words)

The joke that inspired it all

By April 2014, Niantic was still over a year away from its spinout of Google. At this point, it’s still Niantic Labs, an “autonomous unit” operating under Google’s roof.

They’d launched Field Trip, which proved to the team that there was something to this idea of focusing around real world points of interest, but didn’t seem to keep people coming back. They’d followed up with their first game, Ingress, which had a dedicated following but hadn’t made them very much money.

“Niantic was trying to figure out what was next, and what we should do.”

That’s Masashi (or “Masa”) Kawashima. He runs Niantic’s operations in Asia, having joined to grow Ingress in Japan at a time when the country was around 25th on the list by playerbase. Nowaday’s it’s number one or two, depending on which phone platform we’re talking about. His passion for Niantic’s games runs deep; he rarely stops smiling when talking about them. Every question I ask is answered with a story, and each one is packed with a million details. At no point am I tempted to stop him.

John Hanke (left) and Masa Kawashima (right) in 2015. Photo credit: Yennie Solheim Fuller

“We were brainstorming,” he continues, “but we just hadn’t found a good idea yet.”

The inspiration they needed would come from an old friend.

For April Fools that year, the Google Maps team had filled their virtual rendition of the world with Pokémon. Zoom around the map, look for Pokémon. Tap a Pokémon to catch it, adding it to your Pokédex. Catch all 151 and the company would send you a Google business card with your name on it under the title of “Pokémon Master”.

The interactive integration into Maps was fun, but it was the accompanying announcement video that caught Masa’s eye.

“It was real people, looking for Pokémon in a field,” says Masa. “They were in the desert, looking for sand Pokémon, or at the ocean, looking for water Pokémon. I saw that video and just went ‘Oh!'”

This was it. This was their next game.

He ran to Niantic Labs boss John Hanke to show him the video. John loved it, so Masa started looking into who had created the Pokémon gag for the Maps team. Google wouldn’t go anywhere near a mega property like Pokémon without the many necessary stamps of approval from rights holders, so whoever made all this clearly had the right connections.

Masa didn’t have to look far.

The engineer who led the April Fools’ Day project was a young man named Tatsuo Nomura, and Masa already knew him. They’d worked together years earlier, when Masa was a webmaster at Google Japan.

Tatsuo is a geek’s geek. I’ve bumped into him a few times over the years and, every time I can recall, he had at least one gaming icon or another hanging from his body to silently shout his interests to the world; a Zelda pin on the strap of his bag, or a tiny plush Eevee dangling from his hip. You can still find his name on the original blog post announcing the April Fools’ joke. His name signed the personalized letters accompanying the aforementioned “Pokémon Master” business cards Google sent out.

The rarest Pokémon card? Photo credit: Google

“I caught up with Tatsuo that night,” Masa says. He told Tatsuo what they were brainstorming, and asked how they might be able to move things forward.

As luck had it, Tatsuo was heading back to Japan for some interviews with the local media about Google Maps’ April Fools’ joke. Along the way he’d be meeting with Takato Utsunomiya, producer on dozens of Pokémon titles (and nowadays the COO of The Pokémon Company.) They only talked about the Niantic concept briefly, but it was enough to get the ball rolling.

Within weeks, Masa, John, and Tatsuo (still officially a part of the Google Maps team) were together on a plane to Tokyo. They’d be meeting with the President of The Pokémon Company, Tsunekazu Ishihara, and other key executives.

“Masuda-san was there,” says Masa, beaming. Junichi Masuda is a founding member of the Pokémon team; he’s been composing music, building tools, and directing new Pokémon titles from the very beginning.

“We pitched on how [our companies] could make a harmony,” says Masa. “How we could make this dream together.”

In the end, Masa says, it was “a nice pitch”. They didn’t leave certain of where things would go next, but did end by asking Ishihara, Masuda, and the others in the room to spend some time playing Ingress.

They didn’t have to ask twice. Some of them had started playing even before the pitch. At least one of the executives had already gotten super into it.

“Three days later,” says Masa, “I got an email from Mr. Ishihara.”

“He’d become some really high level” Masa says proudly. “He’d shoot me a bunch of really hardcore questions, like, you know, ‘if I insert the resonator from north to south, is there any sort of millisecond difference?'”

By June of 2014, The Pokémon Company was at Google’s US headquarters figuring out how to make Pokémon GO a reality.

Ingress, but simpler

It’s not uncommon to hear Ingress players suggest that Pokémon GO is just a simple, cartoony version of their preferred game.

The jab makes sense, in a lot of ways. While Niantic’s two games have much in common — you play by moving around a map, interacting with real world points of interest — Pokémon GO is a helluva lot simpler than Ingress.

In Ingress, you’re hacking portals, coordinating efforts to take over massive chunks of the world, and trying to keep up with a rich, complicated Sci-Fi storyline as events unfold between the two warring factions. It’s a game perhaps best learned next to a friend who already plays.

In Pokémon GO, you catch Pokémon. The game has gotten a bit more complicated over time, but the original goal was to make it as simple as possible.

Early Concept art for Pokémon GO. They’d later opt to make the player’s on-map avatar look a bit older, figuring it’d make older gamers more willing to play while kids wouldn’t really care. Courtesy of Dennis Hwang/Niantic.

That call, says Masa, came from Ishihara before work even began. After months of playing Ingress, Masa says that Ishihara found Ingress’ approach “too narrow, too niche, and too hard for players.” But if they could simplify it for a more casual audience, they’d have a hit on their hands.

So that was it: they’d build Ingress, but simpler. Instead of walking around to pick up energy needed for in-game actions, you’d pick up Pokémon. Instead of hacking portals and working with teammates to control territories, you’d spin Pokéstops. Whereas Ingress might challenge a new player to walk a few blocks to find their first objective, a player’s first Pokémon would basically spawn at their feet. Work officially began.

The leap of faith

As the end of 2014 approached, Pokémon GO was well underway. They had The Pokémon Company on board, and their shared vision was starting to come together.

But Niantic Labs was almost out of runway.

As covered in Part I, the team had already decided to spin-out of Google and form a new company. They were knee deep in negotiations with Google, figuring out exactly how a spin-out would even work. Google would give them a few million for a stake in the new Niantic, Inc. But if they were going to finish Pokémon GO, Niantic would still need to find more money. The problem? Few VCs seemed to want any part of it.

Meanwhile, the Niantic team was shrinking. Even if the team could raise all the money they wanted, not everyone was about to leave Google for a job with this little startup. People have kids, and debt, and mortgages to pay. By the time the spin-out was through, the team would drop from around 80 employees to less than 40.

And they still had to tell The Pokémon Company what was happening.

“Pokémon GO was really the future of Niantic,” says Masa. “After the spin out, we’re going to be a very small and risky company. [They] are thinking that they’re working with Google, a big company, a global company. But if it’s this unknown company? Just kind of small, maybe 40 people? They might stop working with us.”

Masa pauses, some of the stress from that time seemingly bubbling back up and breaking his smile for the first time I’d noticed.

“We must make Pokémon GO happen to survive,” he says. “In order to do that, we needed Tatsuo.”

Tatsuo Nomura speaking at TechCrunch Tokyo in 2016. Photographer: Tomohiro Ohsumi/Bloomberg via Getty Images

Even this far into the process, Tatsuo — the man who inspired it all with his Google Maps April Fools’ joke, and who’d forged the connection with The Pokémon Company that let it move forward at all — wasn’t officially a part of Niantic Labs. He was still part of the Google Maps team. With the spin-out looming, work visa details complicated the conversation. By the end of the year, they’d ironed them out enough to bring Tatsuo on board.

“[Tatsuo] was the strong bridge between The Pokémon Company and us,” Masa continues, “He had grown up with Pokémon. Mr. Ishihara was impressed. It’s 20 years since Pokémon appeared in the world, and he’s starting to see this first generation of Pokémon kids becoming engineers and building this thing. From the bottom of my heart, I think he feels that this seed has grown, and now it’s [producing] this fruit.”

With Tatsuo signed on, it was time to go back to The Pokémon Company. Time to figure out if this project, “the future of Niantic”,  could even continue.

“Their first reaction was just ‘… What?'” Masa says, emulating the perplexed stares he saw that afternoon.

“But then,” he continues, “Ishihara-san just said ‘… Is there any way we can help?'”

Very early concept art, meant to show what Pokémon could look like in a realistic environment. Courtesy of Dennis Hwang/Niantic

After all their worries that The Pokémon Company would pull the plug, it ended up taking the completely opposite approach. Not only would The Pokémon Company continue working with Niantic, but they’d help to make sure Niantic had the money to pull off this spin-out.

Nintendo, which owns a substantial stake of The Pokémon Company, would help, too. After the meeting with Ishihara, the Niantic team traveled to Kyoto to meet with Nintendo’s President and CEO, the late Satoru Iwata. In his time as president, Iwata had led the charge behind the Nintendo Wii — a console that used motion controls to get its players moving and exercising — so he got what Niantic was going for with Pokémon GO.

“He felt a lot of empathy towards us,” says John, “and this whole notion of games that have a good impact on society. He was really proud of what he had done with the Wii, and was really proud of what they’d done with Wii Fit.”

“That meeting was pivotal,” he continues. “We absolutely needed it. We were pretty far along in this process, and we were not getting any VC to step up as a lead at that point. And they said they would do it”.

Iwata quickly committed to investing in Niantic. It was one of the final decisions he made as the leader of Nintendo; in July of 2015, Satoru Iwata died of complications from a bile duct growth.

Between Google, The Pokémon Company, and Nintendo, Niantic raised $30M to get this spin-out done and finish Pokémon GO. The deal was “tranched”, meaning Niantic wouldn’t get it all at once. They’d get $20M upfront, and the other $10M if the game hit certain milestones and proved to be a success (spoiler: it did.) It’d be enough money to let them move forward, but it was deliberately staged in such a way that they had to keep moving to stay alive.

The months that followed were a flurry of paperwork; they were wrapping negotiations with Google, finalizing the investments, and figuring out just how many employees could (or would) come with them. Employees turned over unvested Google equity in exchange for a stake in Niantic.

In October of 2015, Niantic Labs officially spun out of Google and became Niantic, Inc.

“We have our game. We have our IP. We have our 30, 35 person team,” John says. “Let’s go ship Pokémon GO, and by god, we need to do it in 24 months, because that’s when our money runs out.”

John Hanke (left) and Tsunekazu Ishihara (right) at the announcement of Pokémon GO in 2015. Credit: The Pokémon Company

The launch

In spinning out of Google, Niantic had lost roughly half of its employees.

When you lose half your team, you don’t just lose half your productivity. A huge chunk of your knowledge base goes with them, and the effects ripple out. Pokémon GO was already 2/3 done, but now much of the crew that laid down that codebase was gone, having stayed at Google.

John Hanke estimates that less than half of the 35 or so people who came over in the spin-out were engineers. The rest had their own key roles, like design, marketing, and events — but in terms of engineers that would be coding the game? “Maybe 15 people,” John says. That’s a small dev team to be building a game like Pokémon GO. And they had to keep Ingress running, too.

But they got it done, to a point.  They’d end up shipping the game just 9 months after spinning out of Google, leaving themselves ample time to course correct if necessary.

Even focusing on that early vision of a simpler Ingress, they had to shelve some things for later. Signature features from the Pokémon series, like trading and battling Pokémon, would have to be built out down the road. User confusion during play-testing had the team changing things down to the last minute. Huge parts of the game, down to things as fundamental as how players would find nearby Pokémon, would need to be completely rebuilt from scratch in the coming months.  But the core of the game was ready.

On July 6th, 2016, Pokémon GO launched.

Everything immediately broke.

Overwhelming demand rammed headfirst into Niantic’s first draft get-it-done server architecture, and the game went down hard. If you played Pokémon GO in its early days, you probably remember: if you could even sign up for an account in the first few days, you were one of the lucky ones. Once you were in, you might get a few solid minutes of walking around before the servers choked and the game kicked you out. Most early players spent more time staring at the game’s loading splash screen than actually playing.

Pokémon GO’s first loading screen, and its first error screen. Early players spent a whole lot of time with them.

Niantic’s engineering team had thought to roll out the launch country-by-country (starting in Australia, New Zealand, and the US) to limit how many users could sign up at once, but the servers still couldn’t keep up. Every time the team thought they’d got it under control, they’d roll it out to a few more countries. Every time they rolled it out to new countries, everything broke again.

Masa grabs a pen, and starts drawing a graph on a huge whiteboard nearby.

“This is the line of what we expected,” he says as he streaks the pen across the bottom of the board. “This was our ‘worst case’ scenario,” adding a line just a few inches above. “What happened was more like this,” he says, reaching his arm to its fullest extent, the line barely staying contained on the board.

At its peak, traffic was about 50x any of Niantic’s worst case projections. Rather than figuring out what to add to the game next, Niantic suddenly had to focus on just keeping the game working.

The launch schedule shifted. Take Japan, for example. As the birth place of Pokémon, it was inevitable that demand in Japan would make all of the other launches seem like a warm-up. Niantic intended to launch Pokémon GO in Japan on July 16th, making the announcement at a massive gathering of 15,000 Ingress players in Tokyo.

They flew John out to make the announcement, but the servers just weren’t ready. John had to limit his announcement to just reiterating that Pokémon GO was coming to Japan “soon”.

Server issues continued to plague the game for weeks post launch, coming to an end only after Niantic called in an assist from an old colleague: Google CEO Sundar Pichai. While Niantic was no longer a part of Google by this point, Google is an investor. Perhaps equally important, the entire thing is running on Google’s Cloud engine. A worldwide craze floundering on their engine isn’t a very good advertisement for potential customers.

The Google Cloud team worked with Niantic to figure out the scaling issues, with Google firing up “many tens of thousands of cores” to keep GO stable. In a blog post outlining the efforts, a director at Google Cloud calls it the “largest Kubernetes deployment” its engine had ever seen.

An image from the Google Cloud team’s breakdown of just how hard Pokémon GO’s servers got hammered

On July 22nd, the game finally launches in Japan. Things got a little shaky when everyone in Tokyo got off work in the evening, Masa tells me — but for the most part, it’s stable.

Pokémon GO takes over the world

The launch of Pokémon GO was, for lack of a better term, absolutely bananas.

If you lived in any major city when GO was released, I don’t have to tell you that. It was like a virus had hit the population, the symptoms of which included staring intently at your phone, wandering aimlessly around parks for hours on end, and shouting “THERE’S A SNORLAAAAAAX!” before sprinting away.

For months after release, you couldn’t step outside without seeing someone playing the game. Businesses put signs on their windows to encourage players to come in, offering special deals to anyone who came in and showed their Pokedéx. There were “pokécrawls” where thousands of players met up and hiked across their cities. People around the world were rocking Ash Ketchum hats and Pikachu onesies.

A street in Fremont, California, where the word “LOOK!” was painted at cross walks to remind players to look up off their phones. The O’s are Pokéballs.

As with anything involving hundreds of millions of people, it had terrible moments. Crowds took over landmarks. There were stampedes. People fell off cliffs, and got hit by cars.

And there were privacy scares. An early build of the game asked iOS players signing in with Google accounts for “full account access”, which some took to mean Niantic could read your email. It couldn’t — but it was still a broader request than the game needed to make. Google confirmed that the game had only accessed data it needed (like user ID and email address details) and Niantic patched the game to instead request the “basic account info” it needed.

But none of that seemed to stymie the world’s interest.

But why? Why was it so popular?

It’s hard to pin the explosive fervor for the game on any one thing; it’s more like a storm of factors swirling together into something absurd.

There’s the fact that the game requires people to play in the real world (often in groups), leading others to wonder what the hell they’re all doing and maybe checking out the game for themselves.

Then there’s the underlying, fundamental concept. It’s just so easy to explain: “you’re catching Pokémon, but, like, in real life.” That’s all it took. If you had touched a Pokémon game before or grew up with the animated series, you were probably poking around the App Store to download it by the end of that sentence.

And then there’s the almost-too-perfect timing. The year GO launched also happened to be the 20th anniversary of the 1996 debut of Pokémon. Many of the people who’d grown up playing Pokémon picked it up to scratch that nostalgic itch, and, perhaps, introduce their kids to the series. It had the absolutely ideal timing for bridging generations.

Mash it all together, and you get a craze like the world has never seen before.

Even when the servers were on fire and completely failing, people seemed to just sort of stick with it. The concept just made too much sense. If it didn’t work now, people would try again in a couple hours. People seemed willing to hang around for what this game could be. Or maybe they just didn’t want to miss some rare Pokémon that could be right outside their house, if only they could log in.

And when the servers finally stabilized? For weeks, for months, it was just, well, nice. Strangers helped each other find Pokémon, sharing tips and rumors and bonding over the ones that got away. You could drop into a new city on any day, go to the biggest park on the in-game map, and find a couple dozen people who’d be happy to hang out. The height of GO’s popularity was a short-lived but oddly magical period of time.

But the game’s technical troubles weren’t over quite yet.

GO Fest goes down

One year after the launch of Pokémon Go, Niantic had mostly worked out the game’s kinks. They’d tweaked some things about the way the game itself worked, and had added about 80 new Pokémon to the game. The world’s fever for the game had broken; the stampeding mobs were mostly gone, but plenty of people were still playing. On any given day, GO was still hanging out in the iOS App Store’s Top 20 grossing games, with the game’s in-app purchases proving to be a solid revenue stream.

It was time to return to a concept they first tapped with Ingress: live, real-world events.

Pokémon GO had a bigger userbase than Ingress, so it needed a bigger event. Niantic would take over an entire park in Chicago, fence it off, and sell around 20,000 tickets for $20 a pop. It’d be sort of like a music festival — just, you know, without the music. Attendees would get the opportunity to catch Pokémon that didn’t normally spawn in North America, and would be the first in the world to face off against “Legendary” Pokémon — massive, ultra powerful monsters that take up to 20 people working together to capture.

It’d be called GO Fest.

The crowd at GO Fest 2017

“We felt like we had really turned a corner in terms of shipping features and demonstrating the ongoing success of the product, and we had the first GO Fest.” says John. “You were there, right? That was a tough day.”

was there, covering it for TechCrunch. “Tough day” is a gentle way of putting it. Like a living incarnation of Pokémon GO’s launch a year before, everything broke the second it was meant to begin.

Logistical issues led to lines that stretched the block. With only a dozen-or-so entry turnstiles for many thousands of people, there was still a queue outside hours after the event kicked off at 9 am.

And then came the connectivity issues. Have you ever been to a massive concert and tried to use your phone in the middle of the crowd, only to find that nothing works? Your phone might swear that you’ve got perfect signal — and yet, no pages will load, and no messages will send.

Now imagine that, except that entire massive crowd — literally everyone there — is trying to use their phones to play the same data-intensive game. A game known to be sort of wonky on a stable connection, no less.

The problem was (at least) two fold. For one, phones tend to perform worse when you put more phones around them. More phones = more noise washing out the signal, and more bodies holding those phones means more obstruction between the phone and their respective cell towers. For two, most of those cell towers, even if you could connect to them, aren’t built to handle a sudden influx of thousands and thousands of people all trying to pull down data. Niantic had thought to roll in a few temporary cell towers, but they weren’t nearly enough.

No one at Pokémon GO Fest could actually play Pokémon GO.

The crowd booed, chanting “WE CAN’T PLAY! WE CAN’T PLAY!”. People threw things at the stage. People lined up to shout at the information desk. People sued.

Even as someone who was mostly just there to observe, it was uncomfortable. Niantic employees behind the scenes were scrambling to do anything to fix it but, at this point, there was nothing that could be done. They were battling against the physics of wireless technology, and against decisions that had been made months ago.

At 2 PM, Niantic threw in the towel. John Hanke took to the stage to announce that everyone would be getting a refund of their tickets, along with $100 in in-game currency. A class-action lawsuit would later lead to them reimbursing in travel and hotel costs up to a total of up to $1.5M.

And in a surprise (and surprisingly effective!) move to placate the crowd, Niantic made one final announcement: it would expand GO Fest’s in-game presence by two-miles in every direction, allowing attendees to spread out across the city and split the work load across more cell towers. Anything meant to happen in-game at GO Fest that evening would now happen (exclusively for those with GO Fest tickets) all across the surrounding blocks of Chicago.

John Hanke sitting on the edge of the stage at GO Fest 2017, where he spent a few hours shifting between signing autographs and listening to unhappy attendees

Players spilled out into the surrounding neighborhood, turning the area all around the park into an on-the-fly Pokémon GO party. For the first time all day, people were able to play the game. Spots that correlated with in-game locations would have dozens of players hanging around them; when Niantic surprised everyone by releasing the first Legendary Pokémon that evening after all, that number ballooned up to the hundreds.

John Hanke tells me it was one of his most challenging days as a leader. But he says, ultimately, it was good for the team:

“People grew from that experience,” he says. “To take a hard punch, and stand back up and keep on going. I think everybody felt like they got knocked on their butt that day, but managed to convince themselves to keep trying, to keep standing there at the customer support line, dealing with irate customers coming up one after the other, keep trying to get the network going again, to keep scrambling how to reconfigure the game design to spread it around the city, to take the pressure off the cell sites.”

“People came out of that feeling like yeah, you can throw some really bad, hairy shit at me,” he continues. “I’ll make my way through it and it’ll be okay.”

Niantic returned to Chicago the next year to try again, a mea culpa of sorts. They got rid of the gates and turnstiles (you needed a ticket to make things work in-game, but anyone could enter and walk around), battle hardened the cell network, and spread things out over a larger park region. It went much, much more smoothly.

Niantic tells me that there will be a GO Fest in 2019. They declined to say where, but noted that they’d announce it very soon.

Pokémon GO today

“Dead game!”

Just about any time we write about Pokémon GO, someone posts that in the Facebook comments. It’s an easy one.

But is Pokémon GO dead? Nah.

The ridiculous and overwhelming popularity seen at launch is long over, obviously. You don’t see mobs of hundreds of GO players wandering aimlessly down the street anymore. That’s probably for the better.

But it still absolutely has a sizable playerbase, especially in large cities. Rather than wandering aimlessly, today’s GO players plan their days in Discord channels built just for their city. They post memes and plan meetups in local Facebook groups, and tune into the YouTube channels of GO players with massive followings. The more hardcore players tear apart the game mechanics, analyze the stats, and share their findings on The Silph Road (the name being a clever mashup of China’s ancient Silk Road trade routes and “Silph Co.”, the fictitious company behind the game’s many different types of Pokéball.)

I reached out to the head of The Silph Road, a player who goes by the name dronpes, for his insight on the state of things. On Pokémon GO’s community today, he writes:

Every community is different, but we certainly see a huge number of very active local community groups around the world even as we approach three years past launch – well over ten thousand of them. Meanwhile, we still see millions of players following the latest game news regularly on the Silph Road’s website and Reddit community. These numbers have been very consistent for a long while.

Niantic’s revenue shows that people are still playing, too. App Store analytics firm SensorTower estimates that Pokémon GO made nearly $800M in 2018, a number it says is up 35% over 2017.

Why? Because by 2018, Niantic finally caught up with its ambitions. By launching a game like Pokémon GO while spinning out of Google, Niantic gave itself some damned big boots to fill. In 2018, it seemed to grow into them.

2016 was spent just trying to keep the game stable, and making small tweaks to fix what they could as they started growing the post spin-out team. Remember: they only had around 15 engineers, and they also had Ingress to keep running.

2017 brought the first big bundles of new content, but mostly focused on adding more of, or modifying, what was already in place. Things like new Pokémon, or an overhaul of some in-game systems. They introduced raids, which repurposed much of what Niantic had built for the in-game gyms to let players work together and catch strong, rare Pokémon. There were lots of things to keep the existing players happy, but not a ton that might bring in new players or bring old ones back.

But by the very tail end of 2017 and throughout 2018, Niantic was building fast. The game got a dynamic weather system, spawning different Pokémon based around the real-world weather around you. It got a much more realistic augmented reality viewing mode called AR+. It got “Field Research” quests that encouraged you to do more than just catch whatever happened to be nearby, and an “Adventure Sync” system that rewarded you for walking even when the game was closed.

Dynamic Weather: In December of 2017, the real world weather around a player began impacting what would happen in Pokémon GO

Perhaps most importantly, Niantic finally got to revisit the features it had to drop for the sake of just getting the game out: Pokémon trading, and player-versus-player battles.

Both of these features are absolute staples of the series. Without them, Pokémon GO would never really feel like a true Pokémon game. Complaints about their absence were immediate, and some players just got tired of waiting. Their introduction alone likely brought many players back.

Alongside trading, Niantic introduced a “friendship” system. If you wanted to trade, you needed to be physically near each other, and you needed to be friends. The more you interacted with these friends in-game — battling together, or sending each other postcard-like “gifts” from around the world— the more your “friendship” increased. Trades would cost you points (or “Stardust”) — but the better friends you are with someone, the less a trade would cost. You’d also get a huge cache of the XP required to level up your player each time your friendship increased.

While the idea of “leveling up friendship” might seem goofy, it’s mighty strategic on Niantic’s part for a couple of reasons.

First, the system helped keep trading from breaking the game. Niantic didn’t want to encourage a Pokémon “gray market,” so to speak, wherein players would be finding each other online and trading real money for the digital monsters. If that happened, being the best in your town would just mean having the biggest wallet.

So they built a trading system that heavily relied on established relationships. If you wanted to trade for the rarest Pokémon, it’d cost both players a ridiculous amount of points — the amount you might in earn days, or even weeks, of play. Want it to be cheaper? Work on building your friendship level with that player. After 3 months of doing that, the same trade would cost just 4% as much. It complicates things just enough to make it hard for anyone to spin trading into a business, while still making it straightforward to make lots and lots of trades with the locals you play with regularly.

Second, it evangelized the playerbase. The more friends you have, the bigger your potential trading network. The more people you traded friend codes with and interacted with every day, the more XP you got. Have a friend traveling somewhere you know has Regional Pokémon that don’t spawn in your country? Maybe they’d be willing to check the game out and bring one back for you.

In what is perhaps its craftiest move, Niantic thought to make super old Pokémon extra lucrative in trades. If a player had held on to a Pokémon from the year the game launched, it had much greater (or even guaranteed!) odds of becoming “lucky” when traded. “Lucky” really just means their graphics are a little more sparkly and they’re easier to power up, but it was one more thing for the power users to collect. You know who’s most likely to still have a lot of Pokémon around the time the game launched? People who joined early but quit within a few months. Why not go ask them to fire the game back up so you can be friends?

Niantic says it’s seen over 190 million in-game friendships as of March 2019.

As for the battling system? It might be a bit more niche, but it keeps the hardcore players interested. They’ve spent all this time capturing and powering up Pokémon for a reason, right? Dronpes tells me that there’s even a small-but-growing tournament scene amongst GO players. He writes:

With the launch of player-vs-player battling a few months ago, a new element has begun to emerge in the community as well: competitive tournaments. From our estimates, less than 1% of players actively engage in the brand new tournament scene, but it’s continued to grow rapidly and provide a competitive outlet for many of the game’s most dedicated players. Over 1,600 communities hosted a monthly tournament last month (in-person), with tens of thousands participating in the one to three-hour in-person competitions seeking to prove they’re the very best.

Meanwhile, Niantic has a bunch of ways it can, and does, re-kindle the game whenever the playerbase seems to be getting bored. Some examples:

  • Introducing more Pokémon into GO: The Pokémon universe has seven “generations” of monsters, each a huge set originating from a different title in the series. All together, that’s about 809 Pokémon. In the two and a half years since launch, Pokémon GO has rolled out roughly half of those.
  • New shinies: At its core, the Pokémon series is about catching every Pokémon. The tagline is “Gotta catch ’em all”, after all. But what is a player to do once they’ve “caught’em all”? They hunt for the really rare ones: the shinies. Shinies are just the same Pokémon with different color schemes. A Magikarp that’s gold, instead of orange; a Dratini that’s pink, rather than blue. You might tap on hundreds or thousands of any given Pokémon without seeing these palette-swapped variations, making them some of the highest-tier trade fodder for collectors. Niantic rolls out a new shiny every few weeks.
  • New Legendaries: the biggest, baddest Pokémon — the “Legendary” Pokémon — don’t spawn randomly on the sidewalk. Instead, you primarily acquire them through “raids”, which are massive, cooperative battles that require up to 20 players to win. Niantic introduces a new legendary every few months, and it’s not uncommon to see groups of 50-100 people moving from raid to raid.
  • Community Days: Once a month, Niantic throws a worldwide “community day” event focusing on a single Pokémon. For three hours, spawns of that Pokémon are dramatically increased, and the odds of seeing that Pokémon’s shiny variation are temporarily spiked. Sometimes they roll out a surprise limited-time variations that can only be caught on Community Day, like a Squirtle with sunglasses. Players show up to the parks and malls en masse, because no one wants their Pokédex to be missing that easy (but fleeting!) catch. For a few hours each month, it looks like the launch days again.

All of these are super repeatable, and relatively low effort compared to building out all new features. At the rate Niantic is going, even if The Pokémon Company stopped introducing new Pokémon tomorrow, Niantic could be rolling out new Pokémon for the next 3+ years. And The Pokémon Company won’t stop introducing new Pokémon any time soon, of course; they’re set to debut the eighth generation into the core series this year.

In 2019, GO continues to generate mountains of revenue for Niantic. While the company hasn’t shared official numbers, SensorTower tells me that it estimates Pokémon GO made over $77M in January alone, and over $75M in February. Thats up 88% and 44%, respectively, over what they estimate it brought in during the same months a year before.

How GO makes money

Pokémon GO is free. Pokémon GO also makes a small mountain of money every day. 15 years ago, that idea might seem contradictory. In a post-App Store world, it’s almost standard for popular mobile games.

Pokémon GO pulls this off by combining two revenue streams: in-app purchases from players, and “sponsored” in-game locations.

For a mobile games company, Niantic (at least thus far) doesn’t try too hard to cram the in-app purchase stuff down your throat. Yes, you can easily drop $10 or $20 in the game in an afternoon. You can also play entirely for free without much issue.

They sell things like:

  • Pokécoins: The in-game currency, used to buy everything else. The more you buy at once, naturally, the less each coin costs. You can also earn Pokécoins without buying them (albeit only about 50 cents worth per day) by keeping your strongest Pokémon in the in-game Gyms for other players to battle.
  • Avatar items: Hats, glasses, tops, bags, etc for your avatar. Many of these have to be unlocked by completing certain achievements before you’re able to buy them, so it’s almost like buying the right to show off. These work out to be about 50 cents to a dollar.
  • Usables: The stuff you get for free in-game, like Pokéballs, healing potions, and revives. 100 Poké balls, for example, would cost a little over $4. You usually don’t need to buy them if you’re anywhere near a Pokéstop, but when you do, you do.
  • Lucky Eggs: Doubles the amount of XP you earn for 30 minutes, effectively making everything you do twice as worthwhile. A single egg costs a little less than a dollar, but you can buy in bulk.
  • Storage: You can increase the number of items and Pokémon you can carry, though both categories have a cap. Increasing either category by 50 slots costs a little less than $2.
  • Incense: Increases the number of Pokémon that will spawn nearby, but only you can see them.
  • Lures: Like incense, but for everyone around a Pokéstop. Place one on a Pokéstop and it’ll last for 30 minutes (or more, during special events), with flower petals raining down on the stop to indicate to everyone around that it’s actively lured. Everyone can see who lured the stop, so they know who to thank. During community days, when lots of people are playing, the map is just filled with falling petals.  Costs about a dollar.
  • Raid Passes: To get Legendary Pokémon, you’ll need to battle in big co-operative group raids. To do that, you need raid passes. You get one free pass each day. After that, it’s about a buck a pop. Oh, and remember shinies? Legendaries have shiny forms, too. Get your heart set on one of those, and you might be blasting through a few dozen raids (and thus raid passes) before you even see one.

Meanwhile, Niantic also works with certain mega-chains (think McDonald’s, Starbucks, or Sprint) to create sponsored in-game locations tied to their real world stores. Spin a Starbucks PokéStop, and Niantic gets paid. Niantic doesn’t share much info about the sponsorship side of its business, but, anecdotally, the number of sponsored locations seems to be tapering these days.

Pokémon GO tomorrow

I ask John Hanke where he sees Pokémon GO as being in its life cycle.

“Well, where are we, three years in at this point?” he responds. “So… 3%?”

Even as someone who enjoys Pokémon GO, the idea that it’s got another 97 years in it seems pretty out there. He elaborates:

We think of computer games as having this finite life cycle because the tech platforms have had a finite life cycle. Super Nintendo had a five year run, then it was done, so all those games were obsolete and you have a new platform and you have new games. But that physical media distribution, and a physical platform which goes obsolete, that whole paradigm is now over, at least for mobile.

Now you have a continuously evolving technology stack, where the hardware and the software continuously evolve and get better, right? And so you ship some iteration of your game every two weeks, so your game is continually evolving with the technology and the operating system stack. And you have major new feature releases along the way so there’s no reason that can’t just go on indefinitely.

You could argue that Pokémon before Pokémon GO — yes, the game was built for the original Game Boy, it was built for the Game Boy Advance, it was built for the Game Boy Color, and then for the […] DS. But it was essentially the same game. So you could say that that game is 20 years old in a sense.

Consoles are about to enter this same mode as mobile. You go to cloud consoles — if you believe thats going to happen, as I do — then your cloud console hardware is going to just invisibly get better continuously. Every six months, when they put new servers in the data center, your game is going to look better, and get a better frame rate. You’ll be playing it three weeks later and it’ll just be better than it was three weeks before that, just like mobile games are today.

So you’ll enter this era where games just continue to evolve, rather than thinking of them as having these finite life times. […] We’ve already seen cases of people passing on these games one generation, from parent to kid. But I think we will definitely see those kids passing on the game to their kids. Absolutely that will happen.

So perhaps Pokémon GO won’t always look like it does today. Perhaps it evolves dramatically over time, building on new technology as it becomes available. John continues:

There’s some feature stuff that we still want to build that I think are pretty fundamental. But beyond that, there’s the experiential improvement of making the game more like the trailer that we introduced before the game came out. I don’t know – the whole experience of finding Pokémon, of capturing them, the process of dueling your Pokémon against opponents, the process of fighting at gyms. There’s ample room for all that to become much richer, more fun, more natural than it is today. It’s not all about just adding new functions, it’s about taking everything and evolving it.

The vision for the game is that Pokémon inhabit the world like real species inhabit the world. You play the game today, it kind of resembles that, but it’s not exactly that. The Pokémon sort of spawn, and you and I see the same thing, but it’s not really a fully shared environment. You don’t see a field of like, 17 squirtles. You see a squirtle, and I see a squirtle.

If it were a truly shared state, and we did see everything together, and any change you made in the world and I saw and vice versa, how do we render that? How do you have that experience with phones, or glasses? It’ll be fun to evolve that experience and make it more lifelike, more natural, more immersive as the technology affords.

As we’ll dive into in Part III, everyone at Niantic seems to be anxiously awaiting new technology that would let its games and products get closer to the ones they want to build. Things like new wireless tech with lower latency and higher capacity, or augmented reality glasses that would let them stay in the real world but move beyond the phone. They’re happy to build products within the limitations of today’s tech, but their sights are on what they hope is coming down the road.

The next steps

Three years in, Pokémon GO has reached some degree of equilibrium. The absurd, game-breaking rush of players at launch has moved on, but it still has a dedicated playerbase around the world. The game has made over $2 billion in top-line revenue, and Hanke says the company has been cash flow positive since Pokémon GO’s debut.

After dipping from around 80 employees at Google to less than 40 at the time of spin-out, Niantic now has roughly 450 employees. They’ve finally found the momentum to launch massive, game-defining features roughly once a quarter. The company seems to have found its footing.

Now it’s time to start the next thing(s).


Niantic EC-1 Table of Contents

Also check out other EC-1s on Extra Crunch.