Monday 18 July 2016 4:30 am

Pokemon Go is showing the potential of augmented reality advertising

Augmented reality apps have been around since 2008 and the first Android handset, the T-Mobile G1. But it has taken until 2016 for the technology to find a killer app.

The genius of Pokemon Go, which launched earlier this month, goes beyond the addictive gaming mechanics and into the business strategy underpinning it; Pokemon Go is an ad platform. So how is it going to be used?

The game uses a phone’s camera and GPS to allow the player to walk around, battling and capturing Pokemon on their screens as if they were really in their garden or at the bus stop.

The product being sold to advertisers is “sponsored locations”, which aims to attract hordes of players to physical retail locations.

A cost-per-visit model is currently being discussed. But you can imagine that the pricing model will somehow use the perceived value of extremely rare Pokemon as a way to leverage higher advertising rates from brands, or sell them more expensive packages.

It will be interesting to watch whether retailers manage to convert this foot traffic.

Attention is a fickle thing, and when you draw prospective customers into your location, they’ll be there for a specific reason which won’t be to buy what you’re selling. So it won’t be long before there are creative briefs dedicated to overcoming that challenge – assuming that Pokemon Go maintains its momentum beyond the hype of its launch.

In the meantime, enterprising individuals are already hacking the gaming mechanics and experimenting with ways to profit from its phenomenal success.

In the US, enterprising individuals have set up transient retail spaces at popular “Pokestop” points to harness passing trade opportunities. For the uninitiated, Pokestops are digital locations that players must venture to in order to top-up on essential items that are required to capture Pokemon.

But additional footfall could cause problems. Industry pundits are already making comparisons with Groupon. At its peak, Groupon was swamping small businesses with potential custom, and delivering terrible service as a result. The success of Pokemon Go has been meteoric, and within just a short period of time. SMEs risk tarnishing their image if they don’t prepare adequately.

You’ve got to hand it to the team behind Pokemon Go; diversifying an app’s revenue streams beyond in-app purchase and traditional mobile ad formats is wonderfully inventive and undoubtedly profitable.

Nintendo could certainly do with a revenue boost to help them continue to innovate after years of disappointing the industry, and the gamers who grew up cherishing it as a household name.

Nintendo’s share price has jumped 25 per cent in one week, which is an impressive feat. But it would need to double and then some to reach the peak it enjoyed in 2007 following the launch of its Wii console.

What remains to be seen is whether Pokemon Go’s popularity can be sustained, and how effective sponsored locations turns out to be.