"My belief is that the sponsored-location model is a better business model for games."
- Niantic founder John Hanke on using sponsored locations in games as an alternative to in-app purchases.
Niantic and The Pokemon Company's mobile augmented-reality game/phenomenon Pokemon Go continues to spread across the globe, and alongside the game's recent Japan launch came a new game mechanic: sponsored locations.
It's an intriguing way for the Pokemon Go developer to pull in additional revenue from the game, as it can charge businesses to have real-world locations highlighted in the game. In the case of Japan, a number of McDonald's restaurants are now guaranteed "Poke Stops" for Pokemon Go players.
This isn't a new business model for Niantic -- the company did something very similar when it launched its earlier mobile AR game Ingress, which is still going strong. While both Ingress and Pokemon Go are free-to-play with in-app purchase options, Ingress founder John Hanke told Forbes in a recent interview that he believes the location-sponsorship model is a better way to monetize your game -- if you can swing it.
"The idea was to build an alternative to in-app purchase based on [the] idea that in-app purchase exerts a lot of pressure on game design that can lead to games that are not very much fun to play even if they make a lot of money," said Hanke. "We kind of caved a little bit when we spun out and added in-app purchases to Ingress and we of course launched Pokemon Go with in-app purchases."
While IAP have long been seen as the most effective way to make money on a mobile game, implementing them effectively often requires significant tweaks to a game's design and can raise some thorny ethical quandaries. Hanke tells Forbes that sponsored locations are a better business model, at least for games that have a real-world component, as long as they're implemented in a way that does not break the game's flow.
"The idea with real world games was to build an advertising model that is deeply tied to the way the game itself works… so it doesn’t break the flow of the game. It doesn’t feel like something is grafted on," Hanke said. "In-app purchase will be the majority of the revenue, but it does take some of the pressure off of us to squeeze hard on the purchase side which would be detrimental to the game."
For more of Hanke's opinions on location-based game design, as well as some insight into how Niantic planned and executed the launch of Pokemon Go, check out the full interview over on Forbes.