Nintendo must prove it can turn ‘downloads into dollars’ with Pokemon Go in pursuit of mobile monetisation

Augmented reality, mobile game Pokemon Go has fired a warning shot across the bow of rival developers, showing that the hype-blazing power of its franchises can make it a force to be reckoned with in mobile gaming - but can it subsidise tepid Wii U consoles sales, seeing only 12.8m global console sales since launch in 2012?

No doubt by now you’ve seen images of the newly released Pokemon Go by now. It literally interweaves the original 150 Pokemon with the real world by using clever GPS overlay technology – the game tasks users with exploring their local area to ‘Catch ‘Em All’.

The procedurally generated encounters with the colourful catalogue of Pokemon beasts, that can then be battled and traded with other players, has captured the imaginations of players and sparked innumerable memes on social media.

This virality feeds into downloads, and hopeful revenues for Nintendo. App analytics company SensorTower estimates that the App Store and Google Play culminated 7.5m US downloads since launch (5 July). It is also officially available in Australia and New Zealand so the real figure will be higher, taking it above Tinder and Twitter's userbase. The research estimated that on iOS US alone, the game was making $1.6m per day in the week following launch.

A global rollout is imminent (with it still to release in its home market Japan) but pre-empting this, Android and Apple users have exploited download loopholes to play the game early. On Nintendo’s new potential cash cow, Joe Smith, a senior strategist at 101 London, who regularly works with UK video game retailer Game, said: “As with most successful mobile games, Pokémon Go uses a freemium model, where the game is free to play but users are given the option of in-app purchases. Typically, over 90 per cent of users will never spend real cash but for those that do want to buy Poké Balls or Lucky Eggs, Nintendo can make a healthy profit.”

He added that the “merging of physical and digital worlds is why the story has really captured the attention of more than just Pokémon fans. It’s a sign of what’s to come in the world of gaming and beyond”.

An additional revenue stream is physical merchandise, Smith outlined that ‘Pokémon Go Plus’, “a device that allows you receive notifications about nearby Pokémon without holding your phone,” has fully sold out.

Nintendo's move to mobile represents a significant strategic shift from the Japanese firm, “[It’s been] reluctant to build games for platforms it doesn’t own, but that strategy appears to be changing, [with] plans to release new mobile games based on their Fire Emblem and Animal Crossing franchises. It will be interesting to see how those worlds translate into the mobile format."

He concluded that “there’s huge potential with franchises like Mario, Zelda and Donkey Kong” but in the shorter term the company must master turning “downloads into dollars”.

Nintendo's chatapp MiiTomo launched in March, marking the company's debut on mobile. At its peak it accumulated over 10 million global users - but clearly suffered from a short shelf life. As of May, SurveyMonkey Intelligence reported that weekly users fell to 2.5m, hinting at a longetivity problem. Some fear Pokemon Go could suffer the same fate.

Pokemon Go’s performance won’t make or break the bank argued Evan Lucas, an analyst at IG, who said said that it was one of three titles Nintendo’s short term mobile ambitions rested upon, the other two being Fire Emblem and Animal Crossing.

On Monday (11 July) Nintendo stock surged by 25 per cent, with the game’s success adding billions of dollars to the company’s value. Reflecting on this, Evans said: “There are in-app purchases and the reaction in Nintendo’s share price in Tokyo suggest the market believes the monetisation of PokémonGo is assured considering the usage and the uptake.”

He encouraged scepticism however: “The true earnings effect will be unknown for some time. What is also concerning is the app’s lifespan; does Pokémon Go have longevity?”

Nontheless, it looks like Nintendo is onto something: “If the Pokémon Go experience is anything to go by; rehashing software games into app versions is likely to be a hit,” he concluded.