The Meteoric Rise and Fall of Pokemon Go

The Pokemon Go craze hit the world in the summer of 2016. In the first week, over 10 million people had downloaded Pokemon Go. By Pokemon Go’s peak in July of 2016, there were over 21 million daily users along with 500 million total downloads. These insane statistics meant Pokemon Go was one of the most played apps ever. However, it seemed that as quickly as Pokemon Go came, it left. Looking at Nintendo’s stock, (which is the best financial measure we have even thought they only received a small percentage of the revenue) you can easily see the rise and subsequent fall of Pokemon go.

Google Finance. Notes: Nintendo also likely dropped once people realized they were only getting a percentage of the revenue (Niantic, the actual creator was privately held). The bounce back around October was likely the announcement of Nintendo Switch.

By time the time schools were starting back up in the fall, the phenomenon had all but faded. How had a game as popular as Pokemon Go felt such decline, where by August 2016 Pokemon Go was losing around 10 million users a month?

Source: Bloomberg

One reason Pokemon Go had such a steep rise in the first place was the nostalgic aspect of Pokemon Go. Young adults age 18-34 were the key demographic averaging 78% of downloads with males 21-27 making up the largest portion of that demographic. Mostly everyone played pokemon in some form as a child and so Pokemon Go represented a way to capture that youth. Additionally, Pokemon Go’s augmented reality set up was a fairly novel concept to the mass market.

So what happened to cause Pokemon Go to fall as quickly as it rose? One reason is that the game was released before there was actual game play. Sure you could walk around and capture pokemon or take on a gym, but little else reflected the game most of us knew and loved. There were no attacks, only swiping left and right while furiously tapping; wild pokemon simply waited to have pokeballs tossed at it, and no interface in which to communicate/trade/battle other users directly. The actual game play left much to be desired and Niantic (the creator of the app) seemed to role out new features very slowly. This led many users to lose interest in the game. Niantic was silent as to how they planned on improving many flaws in the game (the issue of pokemon tracking, no battling others, trading, etc.) which only caused more users to leave the game.

Pokemon Go, while a tremendous business idea, was a poorly executed game. The creators seemingly had no road map as to how they intended to make improvements, fix issues and their inability to communicate with users only compounded the problem. Augmented reality games (ARGs) are a novel concept and could be the future of gaming, but games such as Pokemon Go indicate that ARGs might have further to go before being truly competitive with conventional gaming.

Sources: http://theinvestmenttracker.com/how-to-buy-niantic-stock/

http://expandedramblings.com/index.php/pokemon-go-statistics/

http://www.news.com.au/technology/home-entertainment/gaming/what-went-wrong-with-pokmon-go-three-lessons-from-its-plummeting-player-numbers/news-story/3cf249645464c3a6699c1da8580271a9

Tesla and its Host of Issues

Elon Musk, considered a real-life Tony Stark by some, promised years ago to revolutionize the auto industry. It began with the Roadster, a premium luxury car experience which was followed by the Model X, Model S, and now the anticipated Model 3. Today however, Tesla seems to be running into a host of issues. The largest issue currently is that the Model 3 release date continues to be pushed back, with some estimates predicting that people who put a deposit down for the car in 2016 will not be able to receive their Model 3 until 2021. Out of the past 31 financial quarters, Tesla has only managed to post two positive quarters (it posted positive in the third quarter of 2016). As you can see from the graph, nearly every time Tesla attempts to sell cars it loses money.

What is interesting though is that Tesla has a positive profit margin on the cars they sell. So where does the disparity lie? The disparity comes in Tesla’s massive R&D budget which drains any profits Tesla may actually earn.

Furthermore, Tesla recently merged with SolarCity and Space X to form a trifecta of money losing companies. One additional reason SolarCity and now Tesla finds itself in dire straits is that states such as Nevada are rolling back their net metering programs which allow solar panel households to sell back their unused power to utility companies. Without these types of programs, solar panels make little to no financial sense. As Prof. Smitka aptly pointed out, combining three money losing companies into one is not exactly smart business.

So what is Tesla’s alternative business strategy? Well for one by asking consumers to put a deposit down on vehicles before they have even begun production allows Tesla to acquire valuable financial capital.  400,000 consumers already made $1,000 deposits on the Model 3 giving Tesla an extra $400,000,000 in financial assets. Furthermore, Tesla plans on operating out of its own dealerships, something other auto industries have attempted, but failed to do due to high operating costs associated with dealerships. Tesla hopes these dealerships will provide an added layer of unmatched service (we’ll see if that actually helps). Finally, with Tesla hoping to be one of the first fully battery powered cars to hit the market, Tesla has to operate and open more of their SuperCharge stations to make mass production and sales of Tesla vehicles even possible (imagine if Ford had to open and operate their own gas stations). One problem however, is that cars like the Nissan Leaf and Chevy Bolt are likely to hit already on the market, long before the Model 3 will launch, leaving Tesla with only brand recognition left as its saving grace. Tesla may have to up its current $0 marketing budget to compete in such a competitive market or may find itself coming up short of its financial goals yet again.

Sources:

  • http://www.cnbc.com/2016/10/26/tesla-reports-third-quarter-earnings.html
  • http://thetechnalyzer.com/tesla-business-model/
  • http://dailycaller.com/2016/11/10/billionaire-elon-musks-solar-company-has-basically-turned-into-a-bonfire-of-money/
  • http://www.businessinsider.com/a-legendary-car-exec-thinks-tesla-is-facing-the-trifecta-of-doom-2015-10