So, Niantic officially disclosed their plans to make money through “sponsored locations”, where business owners can place virtual goods on their premises in order to lure in players and everyone seems to be happy about the company having come up with an advertisement model that is unobtrusive. Think again! There are two major problems here.
The first problem is that, as a Pokemon Go player, you now have an incentive to keep your GPS on all the time (in the past you didn’t because battery life was more important than your phone knowing where it was). At least on Android, everything is designed to ride piggy back! You may be enabling GPS because you want to play Pokemon Go, but the rest of the system gets your location as well. Suddenly all those apps you deemed “save” to install just because you keep GPS off anyway will now be able to track you as well.
The second problem is actually much bigger. Did you ever hear of a company called “Groupon”. A few years back they were the hottest game in town and ran their ads on virtually any website. Their business model was/is to sell discount coupons for retail stores, restaurants, etc. in order to lure bargain hunters to those locations. Sounds a bit like what Niantic is going to do, doesn’t it? Well, here’s what a lot of shop owners discovered over time:
- The coupons would drive customers into their stores, as promised
- But, those customers came just for the special deal and never returned afterwards
- Groupon discounts were a useful tool for doing discount sales, but horrible at acquiring new customers. A business could easily loose money that way.
Now it’s time to learn that lesson again. This time on steroids! Sure, you can pay Niantic to feature your facilities on the virtual map. Next thing you’ll know is a flood of teenager and young adults coming over for goods, not your goods, though, the virtual ones: imagine running a restaurant, full to the brim with Pokemon Go players, each ordering just a glass of water and hogging the seats for hours, waiting for a good catch.
For a business there are two ways of dealing with an ineffective ad campaign:
- Stop the campaign immediately and write off the losses.
- Raise your prices to allocate costs and continue in hope of improvements.
You pick the first option if things go really south and the second if they just go so and so. For most businesses, “sponsored locations” will probably just result in a homeopathic increase in revenue at a considerable overhead. So, yes, if you welcome this model, keep in mind that you’ll probably drive up the cost of living in a city in the long run.
