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July 13, 2016 7:30 am

Advertisers set for a piece of ‘Pokémon Go’ action

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A "Pidgey" Pokemon is seen on the screen of the Pokemon Go mobile app, Nintendo's new scavenger hunt game which utilizes geo-positioning, in a photo illustration taken in downtown Toronto, Ontario, Canada July 11, 2016. REUTERS/Chris Helgren©Reuters

'Pokémon Go' has spawned a huge social phenomenon

The developer behind Pokémon Go , the smash hit location-based mobile game that has dominated US and Australian app stores and sent Nintendo shares soaring 50 per cent, is planning to allow retailers and other companies to sponsor places on its virtual map.

John Hanke, chief executive of Niantic, which developed Pokémon Go in partnership with the Japanese games group, said “sponsored locations” would provide a new revenue stream, in addition to in-app purchases of power-ups and virtual items.

Players of Pokémon Go chase the cartoon creatures at “pokestops” and “gyms” plotted on a customised version of Google Maps, navigating to their real-world locations using their smartphones. Since the game’s launch in the US and Australia last Thursday, speculation has surged over the game’s future power as a cash cow to retailers and other cravers of footfall.

“There are several ways that we see the potential for significant monetisation of Pokémon Go by Nintendo, and one of them is certainly the potential for paid advertising or paid deals that encourage players to come to a particular building or store. It is a huge opportunity,” said Atul Goyal, analyst at Jefferies.

Niantic’s previous game, Ingress, involved a similar network of virtual “portals” mapped to on-street locations. Brands including pharmacy Duane Reade, café chain Jamba Juice and car-rental service Zipcar have reportedly paid to create sponsored Ingress portals in the US, in the hope of driving customers to their stores. In Japan, where Ingress is particularly popular, Lawson convenience stores and Tokyo Mitsubishi Bank paid for similar in-game promotions.

In an interview with the Financial Times, Mr Hanke hinted that similar advertisements would soon be coming to Pokémon Go.

Alongside in-app payments, “there is a second component to our business model at Niantic, which is this concept of sponsored locations”, Mr Hanke said, where companies “pay us to be locations within the virtual game board — the premise being that it is an inducement that drives foot traffic”.

Advertisers are charged on a “cost per visit” basis, similar to the “cost per click” used in Google’s search advertising, he said.

Niantic was spun out of Google parent Alphabet last year before raising $30m in venture funding from the search company and Nintendo.

More on Pokémon Go

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Real-world winners
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Currency movements may curb some optimism for Nintendo’s profitable characters

John Gapper: Scary world for Nintendo
Investors are going crazy about Pokémon Go but they should calm down and examine the reality

Podcast: Is Pokémon Go a lasting craze?
Chris Nuttall asks Hannah Kuchler and Leo Lewis what all the fuss is about

While he would not comment on any such sponsorship deals that had been struck for Pokémon Go, Mr Hanke said: “There will be things that we say about that in the future”.

Despite the huge social phenomenon spawned by the launch of Pokémon Go, and reports of a brewing tussle for the rights to make a new Pokémon film, analysts are reluctant to put hard numbers on what the game could mean in terms of advertising deals and other tie-ins.

David Gibson, an analyst at Macquarie Securities in Tokyo, said that despite the current Pokémon fever, Nintendo remains a conservative company, adept at managing its fans. “It knows not to upset players by putting too much commercial stuff in there too soon,” said Mr Gibson.

Some US retailers have already found that the chance positioning of a pokestop on their premises has driven a rush of footfall — whether welcome or not.

While some restaurants have put up signs warning Pokémon “hunters” that they must buy something before they can play the game in their stores, others have capitalised on the opportunity.

According to the New York Post, one pizza restaurant in Queens saw business increase 75 per cent after buying a $10 in-game power-up that lured Pokémon to its location.

“The amount of people has been astonishing,” the owner of L’inizio Pizza Bar told the Post.

However, the app’s popularity and the crowds of players it brings to unexpected locations have also caused some problems.

Police in the US and Australia have urged players to be aware of their surroundings, amid reports of injuries and even robberies. Some pokestops have popped up in locations seen as inappropriate, including Holocaust memorials in Auschwitz, Poland and Washington DC.

Pokémon privacy
 

Niantic has faced criticism from privacy campaigners for demanding full access to players’ Google accounts when they sign up. US senator Al Franken has written to Niantic asking it to clarify its privacy protections, saying he was “concerned about the extent to which Niantic may be unnecessarily collecting, using and sharing a wide range of users’ personal information without their appropriate consent”.

An updated version of Pokémon Go app for iPhones was released on Tuesday that required more limited access to players’ Google accounts.

Niantic said its earlier request for full access was an “error” and that it only took “basic” information such as users’ names and email addresses.

“Google has verified that no other information has been received or accessed by Pokémon Go or Niantic,” Niantic said.

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