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Pokémon GO: A Cautionary Tale

On July 25, Nintendo announced it had seen no major financial gains from the Pokémon GO venture. Stocks plummeted and the company took a $6.7 billion hit in market value. The rub: the whole hullabaloo could have been averted by a quick Google search.

The augmented reality (AR) game Pokémon GO defined the summer of 2016. When the app dropped on July 6, tens of millions of gamers and Pokémon fans downloaded it to their smartphones. Within weeks, the viral game set five Guinness World Records for mobile games. Among the honors: highest revenue generated by a game in its first month ($206.5 million) and most game downloads within a month (130 million). Investors snapped up Nintendo shares at a furious clip. The stock price more than doubled by July 19.

There was a catch. Nintendo, the creator of nearly every Pokémon video game since the 1990s, didn’t produce Pokémon GO. Investors didn’t seem to notice as the Pokémon GO craze took on a life of its own.

Across the globe, adults and children alike roamed late into summer nights, some on foot and some behind the wheel, all buried in their phones. The game offered players a new experience, one in which the field of play was the actual world. Gamers used superimposed maps on smartphones to track and “catch” animated Pokémon.

The accidents started immediately. Two players deeply engrossed in the game walked off a cliff. While they survived, not everyone was so lucky. A Japanese truck driver playing the game whilst driving killed a pedestrian. Every day brought new stories in the media, but they only seemed to stoke Pokémon GO’s popularity.

Investors were in the midst of their own viral frenzy as Nintendo stock skyrocketed. Shares surged 120 percent in July 2016, adding $23 billion to Nintendo's market value. Analyses and op-eds dove into the phenom. The Financial Times even hypothesised that investors were speculating not merely on Pokémon GO, but on future Nintendo app releases, which might also blow up.

This was, of course, a flawed premise. Though the game maker had a 32 percent stake in the venture, the short-term outlook for Nintendo shareholders and the company itself was not bright. Pokémon GO was made by a privately held company called Niantic, which few knew anything about.

On July 25, Nintendo announced it had seen no major financial gains from the Pokémon GO venture. Stocks plummeted and the company took a $6.7 billion hit in market value. The rub: the whole hullabaloo could have been averted by a quick Google search. Nintendo eventually saw increased revenue from Pokémon GO’s long-term success, but those who bought high in 2016 did not see a quick turnaround. "Can't catch 'em all," read a Buzzfeed News headline.

Niantic, which has seen a 270 percent leap in valuation since 2015, continues to own the AR market.

Pokémon GO remains the company’s flagship app, achieving always-viral status in the mobile games market with a string of key technology and gameplay upgrades. Even a global pandemic couldn’t slow down Pokémon GO. The game shepherded quarantined masses through the Covid-19 pandemic with design shifts that allowed for more indoor and distanced play. The result: Niantic's 2020 revenue was its highest yet.

While global stock markets plummeted in early-to-mid 2020, Niantic held steady and then soared, ending the year with $1 billion in revenue, accounting for about 85 percent of the AR mobile games market share. The company then announced it was taking AR to the next level, building a state of the art “planet-scale augmented reality platform.”

Niantic’s current valuation: the game maker scored $245 million in its latest round of fundraising in 2019, resulting in a valuation of $4.3 billion. The company was valued at $150 million before the Pokémon GO’s release in 2016.

Photo by David Grandmougin on Unsplash

Daniel Bukszpan's reporting and commentary on finance, technology, and politics has been published in Fortune, The Daily Beast, CNBC.com, and other outlets. He lives in Brooklyn, New York.

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