Executive Summary:
Pokémon Go is an augmented reality-based game that is available for Android as well as iOS mobile devices.
Pokémon Go makes money from selling digital goods, advertising, organizing events, and selling hardware. The game operates on a freemium business model.
What Is Pokémon Go?
Pokémon Go is an augmented reality-based game that is available for Android as well as iOS mobile devices.
It is based on the popular Pokémon franchise, which was released by Nintendo back in 1996 and could be played on its Gameboy device. The cartoon series was released a year later.
Instead of the handheld gaming device that is the Gameboy, players take advantage of their phone and its camera to play Pokémon Go.
The mechanics of Pokémon Go are similar to the classical game, meaning it allows players to catch and train Pokémon as well as engage in battles with other trainers.
Currently, there are around 780 Pokémon that can be caught. They all have varying degrees of availability. Legendary ones, for example, only appear during certain times or in specific locations.
The team behind Pokémon Go also organizes different virtual and in-person events where trainers meet up and can hunt Pokémon together.
Users can also engage with each other by becoming friends or sending stickers and other virtual gifts, which can be purchased with PokéCoins.
Who Owns Pokémon Go?
Pokémon Go is owned by Niantic Inc., a San Francisco-based game developer that was spun out of Google in 2015.
Since Niantic is a private company, its ownership structure is not being disclosed to the public.
Google, Nintendo, and The Pokémon Company Group invested a combined $20 million into the firm during its first round of funding, a Series A announced in October 2015.
The Pokémon Company Group was spun out of Nintendo, which continues to own around a third of it, to manage the Pokémon IP.
Given how crucial that IP was to Niantic to make the game work in the first place, it can be assumed that both Nintendo and The Pokémon Company Group were able to acquire a significant stake.
The same can likely be said about Google, too. The search giant, in 2004, acquired a startup called Keyhole, which it used for its Maps product (released in 2005).
That startup was founded by John Hanke and Phil Keslin who then incorporated Niantic within Google back in 2010. Feel free to check out the really unusual and fun story of how Niantic and Pokémon Go actually came to be here.
Niantic has since gone on to raise 4 additional rounds of funding according to Crunchbase. The company is now valued at $9 billion.
How Does Pokémon Go Make Money?
Pokémon Go makes money from selling digital goods, advertising, organizing events, and selling hardware.
Let’s take a closer look at each of those revenue streams in the section below.
Selling Digital Goods
Pokémon Go players can purchase various digital items in the game’s dedicated Shop section that aid them in their quest to finally catch ‘em all.
The Shop offers dozens of different products, including:
- a remote raid pass to be able to join Raid Battles remotely
- incense, which will lure Pokémon into the player’s area for 30 minutes
- lucky eggs that double the XP that a player earns for 30 minutes
- boxes, such as the Starter Box or Expert Box, which entail a variety of different items
… and many more. All of these items can be purchased using an in-game currency called PokéCoins, which are available within the app.
The pricing of PokéCoins depends on the location you purchase them. In the United States, for example, 100 PokéCoins cost $0.99, 550 will be $4.99, 1,200 will put you down $9.99, and so forth.
As you can see, Niantic incentivizes players to purchase more coins by providing them with bulk discounts.
This is particularly lucrative for the Pokémon Go developer since the marginal cost of selling an additional unit of coins is essentially zero because we are dealing in bytes and not atoms.
However, one has to take into account that not all of that goes into the pockets of Niantic directly. Instead, both Apple and Google take a 30 percent cut from each in-app sale Pokémon Go generates.
Advertising
Advertising has been a core revenue pillar of Pokémon Go right after it was first launched back in July 2016.
Just a week into the game’s release, Gizmodo reported that Pokémon Go was working with McDonald’s to create so-called sponsored locations.
It was later revealed that a total of 3,000 McDonald’s restaurants in Japan had been turned into stops for fighting (= gyms) or to collect virtual supplies.
McDonald’s Japan, as a result of the partnership, saw a 27 percent increase in sales for July 2016. Niantic, 9 months later, disclosed that it managed to drive 500 million visitors to sponsored locations.
Its advertising partners, at least back then, would consequently be paying $0.50 per visit. So, Niantic generated $250 million (= 500 million x $0.50) off of those visits alone.
Niantic and Pokémon Go have since worked together with a variety of other heavy hitters including AT&T, Gucci, Starbucks, and Sprint. And sponsored locations can now also be purchased by small businesses to increase their foot traffic.
Interestingly, Niantic offers two different formats. A standard location, which is a PokéStop, and Gyms that are denoted as premium locations. For small businesses, TechCrunch reported that a standard location costs $30 per month while a premium location is twice that.
Sponsored locations aren’t the only form of advertising on Pokémon Go, though. In 2021, Niantic introduced a new ad format called sponsored balloons.
Players, by clicking on a balloon, can earn free rewards. In exchange, they have to consume an ad that is normally around 30 seconds long.
Pokémon Go then makes money from this ad format whenever a user clicks on the promotion. The advantage for advertisers is that rewards are only handed out after the ad has been consumed (as in viewed) or sometimes clicked on.
And since Niantic gives players the option to opt out of seeing sponsored balloons, it can ensure that only dedicated players will see that ad format, which is a win-win-win for all parties involved.
Events
After Pokémon Go became a worldwide phenomenon in 2016 when it was launched, owner Niantic wanted to find a way to keep the community engaged and growing.
One of the ways it tried to achieve that was by organizing events such as the Pokémon Go Fest, which has since been renamed the Pokémon Go Tour.
The events are organized in various cities across the globe, both in the United States and beyond. In 2023, for example, an event takes place in Las Vegas, Nevada.
Niantic consequently makes money from those events by issuing tickets to be able to attend them. Tickets cost around $30 and can be upgraded, which allows buyers to earn more XP or make their Pokémon eggs hatch faster.
Hardware
The last revenue stream that Pokémon Go has established is the electronic hardware it sells to consumers.
More precisely, it offers a device called the Pokémon Go Plus, which can be worn on your wristband while on the move.
Users can connect the Plus device to a smartphone via Bluetooth. Once a Pokémon or item is in proximity, it starts to blink and vibrate.
The Pokémon Go Plus device costs around $39.00 and appears to be sold by Nintendo. However, it can be assumed that Niantic could receive a portion of the sales.
The Pokémon Go Business Model Explained
Pokémon Go is a textbook example of a game running on a freemium business model. This means that the game itself can be played at no cost.
However, if players want to boost their progress, they can do so by paying for additional features or items – PokéCoins, in this case.
Pursuing a freemium strategy isn’t anything unique in the world of gaming, though. Titles like Candy Crush or Fortnite have ridden that model to billions in annual revenue as well.
But why is the freemium model so powerful in the context of gaming? Firstly, it allows game developers to onboard as many users as quickly as possible.
The 2016 hype surrounding Pokémon Go was only made possible because the game was free to download and play. The more players are active, the more engaging the overall experience becomes.
In the case of Pokémon Go, this is exemplified by the battles that players can have with others. Niantic also offers a global leaderboard, which incentivizes players to keep up with their competition.
User growth can also foster a greater sense of community. The Pokémon Go events, for instance, regularly attract hundreds or even thousands of attendees.
This is where the second key advantage comes in. Increased engagement inevitably leads to a greater willingness to purchase additional items to remain competitive.
Additionally, it opens up new monetization avenues for the game operator. In the case of Pokémon Go, advertising has become a key component of its revenue mix. Events also derive greater revenue the more people play the game.
Advertising, in particular, is greatly reliant on massive user bases. A company like McDonald’s wouldn’t commit resources (both human and capital) to promote themselves on Pokémon Go if only a handful of people showed up in its stores.
It has to be noted that Niantic allows players to use their Facebook or Google accounts when signing up. Therefore, it gets access to additional user data, which it can use to serve better-targeted ads.
However, Niantic needs to be cautious in dialing up monetization. Freemium games only work if users that aren’t willing to pay still can achieve sensible progression. Plus, this also makes the game more enjoyable for the players that do pay for items since they can stand out easier.
Also, since Pokémon Go likely attracts a lot of minors, it needs to ensure that its ads are compliant and that it isn’t tricking them into purchasing tons of paid items. To Niantic’s credit, it has actually implemented various controls like the Niantic Kids portal that allows parents to monitor their child’s behavior.
It remains to be seen how Niantic can continue foster user engagement, especially considering that there are only a limited number of Pokémons to be caught. The launch of special events, both in-person and virtual, or features like P2P battles have helped to extend the game’s lifespan – and actually turned it into a money-printing machine.
What Is the Revenue of Pokémon Go?
As mentioned above, Pokémon Go is owned by Niantic Inc., which itself is a private company and is thus not obligated to disclose revenue figures to the public.
Luckily, various tracking software tools have provided the press with estimates on how much the company could be making from its popular app.
Here’s an overview of how much revenue Pokémon Go generated since it was launched:
| Year | Revenue | Source |
| 2016 | $832 million | Sensor Tower |
| 2017 | $589 million | Sensor Tower (same as above) |
| 2018 | $816 million | Sensor Tower (same as above) |
| 2019 | $774 million | Sensor Tower (same as above) |
| 2020 | $1.12 billion | Sensor Tower |
| 2021 | $1.30 billion | Sensor Tower |
As you can see, Niantic has been able to not only recover the game’s revenue from its record-breaking first-year slump but has since increased performance substantially.
Not even the Covid-19 pandemic seemed to have an impact at all on its income. The majority of its revenue likely comes from selling digital goods like the PokéCoins.
