How Will 'Pokemon Go' Make Money? "Sponsored Locations"

Pokemon Go has already changed perceptions about what a truly mobile augmented reality experience can be, but can it also reinvent how that experience is monetized? Of course.

Niantic Labs claims the game is already racking up more than $1 million and Nintendo’s stock sky-rocketed following the launch, adding $9 billion in market value, and researchers at App Annie say at this rate, the game could be worth more than $1 billion by the end of the year.

But there is more money yet to be made. The Financial Times reports Niantic Chief Executive John Hanke as saying “there is a second component to our business model at Niantic, which is this concept of sponsored locations.”

What if, instead of shooing away unsolicited visitors to a store just looking for Pokemon, businesses could actually pay Niantic to advertise their store or location as a hot spot of different Pokemon? That’s exactly what Hanke is proposing, and he has some experience already with this model.

The company’s first augmented reality app, Ingress, found sponsors in the U.S. pharmacy chain Duane Reade and the German telecommunications Vodafone, which were willing to turn their businesses into hot spots of activity in order to generate more foot traffic.

Some owners are already discovering that their business, stadium, or zoo are natural Pokemon hotspots, and are taking advantage of the coincidence by charging users for admission.

Buried deep within the game’s code, Niantic already appears to have planted the seeds for these sponsored locations. A savvy Reddit user discovered the McDonald’s name and logo amidst the code, suggesting the fast food chain could be a future partner of the game:

Pokemon has a long history with fast food, although it’s not all good: anyone who grew up in the late ‘90s will remember the much sought-after Burger King Pokémon toys that became quite controversial when a 13-year-old girl choked to death on one of the plastic Pokéballs, and the chain was forced to go through an expensive recall. Thankfully, the augmented reality game doesn’t present any immediate suffocation hazards for children, just spacial awareness challenges for adults.

However, Hanke says he is concerned about how this model, as well as a more traditional advertising campaign, would be introduced to the game. Consumers may find they are turned off by any advertising that’s too blatant if the company isn’t careful, and with the existing server issues, Niantic can’t risk losing more players.