Pokemon Go debuted on iOS and Android last week, and quickly became one of the hottest apps on the market. Within five hours, it hurtled to No. 1 on the download charts for iOS users, according to data-tracking intelligence firm Sensor Tower.
As the name implies, the app is based on the popular Pokemon franchise that reached its heyday in the 1990s and spawned a series of successful video games. But the app that’s taking the world by storm today differs markedly from the classic Pokemon games on the Nintendo GameBoy.
In Pokemon Go, players set out in the real world to catch the elusive fictional beasts, physically going to locations where the Pokemon may be hiding. It uses augmented reality technology, which means opening the app will show you a real map of your neighborhood and location — replete with Pokemon Gyms, PokeStops, and other areas with Pokemon waiting to get caught overlayed atop the real geography.
But Pokemon Go appears to be far more than just another game wanting you to spend more on in-app purchases than student loan payments. The user-generated data is the gamechanger.
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Monetizing. The “freemium” model in the gaming industry, the idea of giving the game away and making money through in-app purchases, is a relatively new concept. But when it works, it works. For the 12 months ended in June, the top two grossing mobile apps on iOS — Game of War-Fire Age and Mobile Strike — hauled in an average of $1.58 million and $1.23 million per day respectively, according to Statista.
Mia Nagasaka, an analyst at Morgan Stanley MUFG Securities, estimates Pokemon Go grossed between $3.9 million and $4.9 million on the first day.
The data goldmine. But could it be that the real payday for Niantic, the game’s developer, will come from user-generated data? Pokemon Go, it seems, is tailor-made for users to collect Pokemon — and for its developers to collect data. Specifically geospatial data, which is data attached to a certain geographical location at a certain time.
And there’s no shortage of commercial applications for it, says Vincent Conitzer, a professor of computer science at Duke University.
Take location-aware advertising. “If you know I’m currently in NYC, you can send me ads for, say, events or restaurants in NYC on my mobile, next to my search results, on social media, etc.,” Conitzer says.
Not only that, but “if you can track my precise location as I’m driving, in principle you might offer me cheaper insurance if I drive less” or in safer locations, at safer speeds, and during safer times, he says.
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Malls and retailers could also use geospatial data to adapt their layouts to foot traffic patterns, while it could also inform responses to things like natural disasters, traffic and protests, Conitzer says.
Of course, seeing images or even livestream video of these areas would help response efforts. In Pokemon Go, users have to point their cameras towards the wild Pokemon, aim and flick on their screens.
Niantic moved this week to alleviate concerns that it was not accessing users’ personal data from their Google accounts, saying it only retrieves the account user’s ID and email address — despite requesting full access — and would modify the app to limit its access.
The company did not immediately respond to a message seeking comment about its use of images taken when users use their cameras to capture Pokemon.
In either case — and setting Pokemon Go itself aside — privacy issues abound when it comes to mobile apps.
Anshu Prasad, partner at the consulting firm A.T. Kearney, says that people don’t seem to realize the “latent value” they’re providing by “giving apps control of various different pieces of the computer that’s sitting in their phones in their pockets all day.”
Nils Tracy, head of technology, media and telecommunications at Height Securities, acknowledges that privacy tradeoffs are routine when it comes to using apps. But while you may give up some privacy, the scales tip back in your favor in the long-run as society is rewarded with better products, services and technology, he says.
“The thing people miss in the privacy debate is that this data is valuable for uses like the Tesla (ticker: TSLA) Autopilot, virtual reality in real estate, and Google Maps-type features. So it’s actually a good trade-off because the data goes to produce new and better consumer tech,” Tracy says.
Watch ’em all? The extent of the privacy tradeoff in Pokemon Go isn’t clear right now, but it would be surprising if there wasn’t some sort of proverbial barter going down every time you hunt a Jigglypuff, Tracy says.
“It doesn’t record video to your phone, but the capability is there to do it,” Tracy says. Even if Niantic isn’t watching you wrangle your first Diglett while carefully noting the surrounding landscape, “it’s setting up a platform to do it,” he says.
Tracy also thinks Niantic’s DNA implies there’s more to the business model than just becoming a high-grossing player in freemium apps. The company’s founder, John Hanke, previously founded a company called Keyhole in 2001. It was acquired by Google in 2004 and its technology helped build parts of Google Maps, Google Mobile and Google Earth.
Niantic began as Niantic Labs and was incubated as a startup at Google in 2010, then spun off from the company last year as Google reorganized into Alphabet (GOOG, GOOGL). Then Google, Nintendo and The Pokemon Co. invested $20 million — plus another $10 million if certain incentives were met — in Niantic last October.
Prasad thinks much of the geolocation data app-makers receive “probably isn’t truly being monetized and utilized to its fullest potential.” That characterization could be changing soon.
After all, the Pokemon Go developer has a “management team who’s coming from a place that did the exact same thing, but now instead of a car coming around and taking pictures you’ve got users taking pictures,” Tracy says.
If or when Niantic decides to embrace the data-centric model that holds so much potential remains to be seen, but it will likely be rewarding to Hanke and his team.
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“I think the ultimate goal is a buyout,” Tracy says.
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Pokemon Go: Collecting All the Data? originally appeared on usnews.com
