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At Seminal Research, we’re interested in understanding how markets work, and conducting an analysis of customer usage in a manner that helps clients maximize their returns. Pokemon Go makes a great case study.

Pokemon Go – the chances are that if you haven’t heard of this phenomenon, you’ve been in a coma for the last few months. With the first week of being launched, Pokemon Go was the most downloaded app. However, two different groups of people – critics, and number-crunching researchers have suggested that the phenomenon has already peaked. Naturally, if you want to know the real level of download, you’d need to be on the ‘inside’ at Niantic..

First and foremost, it is important to remember that Niantic is a business, and it makes its money from sales. Their customers are Pokemon Go players. And for Niantic to be effective in generating profits, they need to understand their market. In marketing, there are groups that are identified in the population. The Pokemon Go market is no different. At Seminal Research, this is how we’ve segmented the groups:

1. Early Adopters
These are the people who downloaded Pokemon Go in the first week. Within a month they’ve reached level 20, and probably more. They are known as ‘high retention’ players. They probably knew that the game was going to be launched months before it came to the market, and they are going to keep playing.

2. Hard Core
There may be some overlap between Early Adopters and Hard Core. For Hard Core players, the question isn’t when they downloaded the game, it is how much the play it. And for Nianic, it’s also about how much they will spend to play. While the Early Adopters may have reached level 20, this group probably also have, and probably gone higher.

3. Casual Players
These people have friends who are either Early Adopters or Hard Core players. They’ve downloaded the game. They play it a bit. They spend a little bit while they’re out. They may have reached level 5, and possibly higher. They probably still play several times every week. They will probably keep playing for the next month.

4. Hype players
These people got in on the hype of the game, and downloaded it. They got out, and tried it a little. They were following the lead, but weren’t really sold on the whole thing. This is where the bulk of downloads came from. But at the same time they are a risk for the ongoing marketing of Pokemon Go.

Although downloads may have peaked, the result may be positive for the producers, Niantic. Consider Hard Core players. They have taken the bait of Pokemon Go hook, line and sinker. They are going to keep playing. As noted, they are likely to have already progressed beyond level 20. And as they continue to play, they’re going to invest in ‘In App Purchases (IAPs)’. While only a small proportion of them may spend, the money they do invest will all be positive revenue for Niantic. Similarly, the Casual players are going to keep ticking through the levels. They are likely to keep playing for more than a month. They may not spend a lot, but it is all still worthwhile for Niantic.

But the groups of players who are dropping out are the hype players. They are unlikely to ever invest financially in playing the game. So they are of no financial benefit to Niantic. They are probably going to be bored with the game, and so will generally provide negative word-of mouth feedback. But while they have been playing, they’ve been overloading Niantic’s servers and minimizing the positive experience for the other groups. As they drop out, they’re quickly going to free up server space and speed for the players who actually invest in the game. This will improve the playing experience of the Hard Core and Casual players.

In summary, if Pokemon Go downloads have peaked, the the drop-off is from the non-spending Hype players, who Niantic really doesn’t want on their servers. And it gives Niantic the opportunity to provide upgrades and improvements for their real customers, making the game more interesting, while adding opportunity for more IAPs.

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