The Business of Ingress Part II

Niantic, Inc.

In late 2015, Google spun off Niantic Labs during its reorganization into the multinational conglomerate Alphabet, Inc. At that time, Google, Nintendo, and the Nintendo-owned Pokemon Company jointly invested USD 30m into Niantic, Inc.

Citibank estimated that in July 2016 Niantic was worth around USD 3.65b, and that the company was expected to make USD 740m in revenue for 2016. In January 2017, Forbes reported that the mobile research firm App Annie estimated USD 950m in earnings – not too shabby considering that the app had only been available for about half a year. As both Niantic and the Pokemon Company are privately owned, hard data is difficult to come by, but by late December 2016, Pokemon Go was unveiled on the Apple Watch. As of March 14, 2017, Niantic had doubled its workforce at the same time it was facing questions about declining player participation, but as of April 7, 2017, IGN reported that Pokemon Go had 65m monthly active users, painting quite a rosy picture for Niantic.

In the Ingress Telegram group-chat:

NosturCZ: In position. Commencing beer routine. Over.

OpenTaco: Taco is en route with clear skies, scheduled for an 18:30 landing. Over.

NosturCZ: Roger that Taco. Can you take out Hradcanska portal? It has some nasty blocking links.

OpenTaco: Wilco, Nostur. Smash-and-burn. Taco, out.

NosturCZ: Roger that, Taco. Godspeed.

Kokkos Agent: Approaching LZ from the east. ETA 5 min. Kokkos, out.

NosturCZ: Acknowledged, Kokkos.

OpenTaco: Air Taco has encountered headwinds. Revised ETA 18:50. Hradcanska portal is blue.

NosturCZ: Copy that, Taco. Good work agent.

OpenTaco: Houston, Tranquility Base here. The eagle has landed. Time to farm.

 

At the pub:

OpenTaco walks over to the group and sits down: “Nazdar, nazdar.”

The group responds in kind, as Taco sits down and the waitress brings him a beer.

“Only seven of us?” Taco asks. “You can’t plan total domination with only seven players. Where is number eight?”

“Classic Prague Resistance farm. One portal and only seven players,” laughs Slasid.

“At least the pub has beer,” Kokkos adds, to general laughter. “MorphCZ should show up later.”

They all clink glasses. Everyone continues chatting and enjoying the warm, sunny spring day in the pub garden.

Later, an eighth shows up, and everyone hunches over their phones and begins to configure the portal for farming.

“Fracker?” asks Nostur.

“No frogs in the scanner,” Wahati answers.

“Done,” Nostur says.

Ingress

While most of the press has been about Pokemon Go, Niantic has continued to develop its predecessor game Ingress. Regular updates continue, and most importantly, the current release addressed the issue of in-game black-market spam, and the black market itself. These developments may hint that Niantic intends to keep Ingress as a sandbox for testing its overall augmented-reality gaming-platform. More importantly, they may indicate that Ingress is contributing sufficient revenue, albeit not at the same level as Pokemon Go.

Observationally, the in-game store seems to have been more successful than initially anticipated, as local players in the Prague area are clearly purchasing particular items, such as the “fracker” mentioned above. These expenditures can add up to USD 5 per week or so, which is a rather large investment for an ongoing game. Because the benefits are sharable, the store has not made the game “pay-to-play” and scarcity economics have added another layer of cooperation. Indeed, many players say that the game is the most expensive one they have ever played. Niantic has walked the tightrope nicely here, and they are sure to leverage that experience with Pokeman Go.

Perhaps more significantly, the observed social impact of Ingress continues to be a driving force of the game. It is extremely rare for an online game to forge global, face-to-face relationships, and it is this feature that differentiates Ingress – even from Pokemon Go.

The Business

Niantic has largely been able to keep the competition away from this “blue ocean” for now, and everyone has benefited from the game's presence on Google Play and Apple’s App Store. For now, it still seems that there are fairly strong barriers to entry; now that Niantic is apparently flush with cash, it will concentrate on sustaining a competitive advantage. The next question for Niantic is simple: what is next for augmented-reality gaming? Ingress may be able to provide a clue. Harnessing global, face-to-face relationships will not be easy but may prove promising, particularly as Virtual Reality continues to develop. Many competitors exist in this area, but we can assume that Niantic's technology strategy will take advantage of this.

Meanwhile, Back at the Farm

As the fracker burns out, Nostur asks if everyone wants to set off another one. As the farmed resources will double, everyone is in agreement.

Suddenly, Wahati alerts everyone, “A frog is smashing blue portals on his way towards the pub.”

The group check their phones.

“Javor007,” several players say in unison. “Flip the portal to green and save the farming mods,” says Slasid.

Wahati answers, “Done.”

“We’ll smash his home portal later,” says Nostur, to general agreement. “Let’s get something to eat.”

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