Why Niantic is investing in rewarded AR to develop new revenue streams

With Pokémon Go revenues falling year-over-year, Niantic, its developer, is looking beyond its popular augmented reality game to generate profits.

Last Friday, the company showcased its advanced AR technology to the advertising world by partnering with Lunchables to kick off Pokémon Go’s first-ever rewarded AR ad campaign.

Niantic first announced that it had developed a rewarded AR ad product at Cannes Lions in June 2023. While Pokémon Go has included optional ads in the form of sponsored in-game items and rewarded video since 2021, the new rewarded AR product takes advantage of Niantic’s immersive AR technology to help marketers reach gamers as they move around the physical world, not just at their desks or couches.

“We’re definitely stressing the out-of-home aspect and just the uniqueness of the ad,” said Niantic head of brand marketing partnerships Erica Kovalkoski. “Niantic has taken a very different approach than other gaming companies or gaming media platforms.”

In the Lunchables campaign, Pokémon Go players can click on an augmented reality hot air balloon floating through the sky, which reveals a card showcasing the Lunchables brand. Per Kovalkoski, players that choose to move forward are able to interact with the floating AR ad “in the real world, whether you’re in a park or in your home or out shopping.” At the moment, rewarded AR ads in Pokémon Go are limited to one ad per user per day.

“Ultimately, the landing page at the end gives some in-game rewards, and the opportunity to click on a ‘learn more’ button and go to that brand via web or app,” she said.

Seven years after its initial release, Pokémon Go still makes money hand over fist. The game generated $42 million in revenue in June 2023 alone. That said, that number represents a steep year-over-year decline from the roughly $58 million Pokémon Go made in June 2022, highlighting Niantic’s need to develop new revenue streams — including more attractive ad formats to bring in non-endemic brands. 

“There’s always ebbs and flows and fluctuation,” Kovalkoski said. “Taking a step back, Niantic has always had the vision of continuing to diversify revenue, just like any business. So this is something that’s been in the works for some time.” 

As Niantic looks to educate brands about the unique strengths of its AR advertising formats, one potential area for the game developer to lean on could be its advantageous demographics. Pokémon Go has an older audience than most mobile games, making it a potentially attractive platform for brands to reach grown-up gamers. Women also outnumber men on Pokémon Go by a significant margin.

“For the Pokémon Go integration specifically, our objective is to drive awareness with parents of our upcoming Lunchables Playables gaming rewards program,” said Kraft Heinz associate brand manager of brand communications Christina Brown.

Niantic’s introduction of rewarded AR ads demonstrates the wide variation of in-game advertising options in 2023. In spite of the tremendous amount of user activity and engagement inside video games, many brands still remain wary of spending more on the format due to its relative lack of standard units and accurate measurement. 

Fortunately for wary brands, the Interactive Advertising Bureau is on the case. After assembling a set of updated in-game ad viewability guidelines last year, the IAB created a task force, which includes Niantic, alongside other AR leaders such as Google and Snap, to develop AR ad metrics in 2023. 

“This has sort of been a long time coming; we’ve been championing getting these measurement standards created ever since Apple and Google released their AR toolkits in 2017,” said IAB Experience Center vp Zoë Soon. “It’s increasingly becoming a part of everyone’s day on their smartphones.”

For now, Lunchables appears confident as it experiments with rewarded AR ads. The brand is not running advertisements on any other mobile games for its Lunchables Playables campaign, and it plans to track the ROI of the advertisements through user registrations for its aforementioned gaming rewards program.

“Lunchables aims to win with parents,” Brown said, “and a high percentage of Pokémon Go players are parents.”

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