The unstoppable rise of Niantic

Meta's worst nightmare?

Hey all, Robin here—I hope you enjoyed my last Substack on Meta. Today, we’re going to be deviating from Meta and covering a sleeping giant known as Niantic.

A tl;dr of Niantic until Pokemon Go.

Niantic Labs was formed in 2010 as an internal startup with Google (now Alphabet inc.—during the shift to Alphabet Inc, Niantic was spun out). Niantic Labs is an American software company focusing on location and augmented reality experiences.

Niantic has shaped up to be a relatively quiet titan in media, thanks to John Hanke—also founder and CEO of Keyhole (2001), (Google would later acquire them and form Google Maps, 2004-2005).

In 2011, Niantic unveiled their first title known as Field Trip (an augmented reality game focusing on highlighting cooling events going on near users), it didn’t have much of an impact on the market but it helped Niantic gain data and gauge consumer interest on future location-based products. Niantic’s adoption of this data centric approach and A/B testing would serve them well.

Niantic learned from Field Trip and launched Ingress in 2014 on IOS and Android devices. Ingress was a form of “capture the flag” but with your phones where you’d visit important local sites and plant your flag as the Enlightened or the Resistance. Using the same approach as Field Trip, Niantic embarked on an ambitious quest to obtain as much data as possible and to turn locations into video games. It’s safe to say that Niantic succeeded in their quest and they were ready to create a mobile gaming titan that would galvanize the world, introduce augmented reality to a billion people, and change the course of an election.

Pokemon Go

In September 2015, Niantic announced that they had been developing Pokemon Go in partnership with Nintendo and The Pokemon Company for some time. This excited the Pokemon community; it was the first time Pokemon was making a dedicated mobile game. The hype was largely contained to the Pokemon community and didn’t gain much press attention. However, upon release in July of 2016 Pokemon Go took the world by storm and was the first major success of Augmented Reality technology. It was the most downloaded app in a first week ever (at the time). Users were spending more time on Pokemon Go than on Facebook, Twitter, Snapchat, Tinder, and Instagram. It was an astronomical success for Niantic who was making a whopping $10 million a day. The game was remarkably simple; walk around to collect Pokemon in a quest to “catch em all!” The game primarily made money off in-app purchases and regional partnerships with retail chains such Starbucks, Sprint, and many others.

However, Pokemon Go would prove to be a massive problem for Democratic Presidential Candidate Hillary Clinton—in an attempt to seem hip and cool, she remarked that young people should “Pokemon Go to the polls”. She wasn’t very hip and cool and people made fun of her. It made Hillary seem out of touch; like that one aunt or uncle that always tries to be hip with the new thing, but ends up embarrassing themselves.

This didn’t slow down Niantic—if anything, the app became more and more popular, but slowly dipped out of the public spotlight. However, in an attempt to catch the same Pokemon Go magic for another franchise, Niantic would end up creating their first failure.

Overall, the key success of Pokemon Go lies in its simplicity, strong community, addictive gameplay, and the network effect (users found the game fun, so they told their friends about it and they joined).

Hell at Hogwarts

Niantic was riding high on Pokemon Go. The app was booming with more and more downloads and a stable cult following that rivaled any AAA game. In 2017, Niantic announced that they would be taking on the Harry Potter IP to create an augmented reality location-based game.

The game would release in 2019 with mixed reviews.

It was supposed to be a smash hit, right? Something to make even MORE money and be MORE of a cultural phenomena than Pokemon Go, right? Yeah, everyone thought so too, but Niantic became sloppy; in their quest to create a Harry Potter game they ended up building a near-clone of Pokemon Go and that was what made the game a colossal failure. In the eyes of consumers, it felt like a cheap clone and a cash grab; not something they could spend time on, exploring the world with their friends. Furthermore, the community around the game did not exist. As mentioned prior, the community aspect of Pokemon Go was a key pillar in its success, and without these pillars, the game slowly declined into obscurity.

It was Niantic’s first failure and one that they would never forget.

Pikmin slowly blooms Niantic back

On October 26, 2021, Nintendo and Niantic announced a brand new augmented reality and location-game known as Pikmin Bloom. Pikmin Bloom is a sharp departure from Pokemon Go—it focused on passively walking and gaining steps, logging your day, and using the Pikmin you earned by walking to destroy treacherous mushrooms on your path.

In many ways, it appears that Niantic has learned from their failure with Harry Potter. They realized that you can’t just copy an app and slap some new paint on it and expect people to enjoy it. You have to constantly be reinventing your games while still staying true to the same core “vibe”. In many regards, Pikmin Bloom is not supposed to depose Pokemon Go as the world’s top augmented reality app; it is supposed to operate as a complimentary app with Pokemon Go.

Since the app is new, it would be unfair to declare whether or not the app is a success or failure since we do not have the numbers. However, it’s clear that there is a growing community forming around Pikmin Bloom that will prove to be of great aid to Niantic and their future plans.

Understanding John Hanke and KeyHole

Odds are that you’ve never heard of John Hanke. He’s a relatively quiet CEO who has changed the world in ways that very few ever have.

Hanke was a co-founder and CEO of KeyHole. KeyHole was a small Silicon Valley start up founded in 1999 with the ambitious task of creating an EarthViewer program that could view any location on the face of the Earth. Seems commonplace today, right? Well, you have KeyHole to thank for that.

Keyhole would initially rely upon free NASA satellite imagery for their service, but they eventually enlisted the work of pilots and planes to map American large cities as they embarked on the ambitious quest to map the world.

In 2001, the Dot-Com bubble bursted and Keyhole was forced to find a new way to stay in business. The main way that they did this was by selling imagery to local law enforcement, CNN, and even the CIA. The true genius of Keyhole was in how they arranged the CNN deal to tap into man’s innate curiosity. Whenever CNN covered the American invasion of Iraq during the 5:00 news, the reporters would use Keyhole to zoom over Baghdad, and EarthViewer.com was conveniently plastered in the top right corner.

Naturally, this drove traffic to the site. At the time, being able to view any location on Earth was revolutionary and the service would become so popular that EarthViewer’s services would crash.

In April 2004, Keyhole would be acquired by Google and would prove to be one of Google’s best acquisitions yet. The key team behind Keyhole would later create Google Maps and Google Earth. Google Maps would underpin a revolution that would enable incredible companies like Yelp, Zillow, Strava, Lyft, and Uber to form and help change the world.

I bet you’re probably curious why I told you all this information. I mention history frequently because it’s a key pillar of my investment philosophy; when you look at revolutionary people like John you need to understand their past to truly understand their future.

Just as John created an incredible platform that would form key Web 2.0 companies as the one mentioned prior, he is now preparing to do something similar, but this time for the Metaverse.

Before we delve into that, it’s time that we take a long overdue look at Niantic’s Lightship AR Kit.

A new platform for the 2020s

Niantic’s full release of Lightship ARDK Platform will prove to be the Google Maps of the 2020s.

The Lightship Platform is one the most incredible developer kits released in recent memory as the platform is used to power Pokemon Go and Pikmin Bloom, and now with the release of the platform, anyone can create a game like Pokemon Go.

It’s one of the most important developments for augmented reality in recent memory.

The platform has also attracted quite the suite of brands including but not limited to: Coachella, Historic Royal Palaces, Lifull, the PGA of America, Science Museum Group, Shueisha, Softbank, the artist JR and Superblue, TRIPP, Universal Pictures, and Warner Music Group. Every name there is a titan of their industry, and their choice to partner with Niantic will likely serve them well.

The service is currently free for all developers who sign up prior to May 1, 2022 and have less than 50,000 monthly active users.

The technology and platform is nothing short of incredible for the rapid evolution of AR that we’ve recently seen.

For example, take a look at this demo app and you’ll slowly see the possibilities for virtual experiences pour on in.

Niantic’s war chest
Just as Meta has been building a war chest of money, Niantic has been building a relatively large war chest as well.

Niantic may not have $10 billion dollars like Meta (Facebook) does to spend yearly, but they have taken a $300 million investment from Coatue (one of tech’s extremely powerful and very quiet king makers over the past decade).

Niantic has taken a very odd approach to their war chest. Instead of outright acquiring cash from investors, they are choosing to acquire key technical companies.

Scanverse is a 3d scanning app that can scan objects. Seems really damn easy to build right? You’d be surprised. Scaniverse will prove to be the key to achieving Niantic’s ambitious goal of creating a full 3d scan of the world.

Another company is Hoss which Niantic acquired in October—Hoss is a developer experience platform that will purportedly help Niantic scale the Lightship ARDK platform.

Other acquirees include Mayhem (a social gaming community app) and Lowkey (a social gaming video-sharing application to showcase top gaming clips).

All acquisitions and the formation of the venture fund point to one thing; Niantic is preparing for total war with Meta.

An alternative Metaverse

Niantic and Meta are diametrically opposed and are on a collision course with how they view the Metaverse.

Let me explain.

Meta views the Metaverse as something that we go into to have virtual experience in virtual environments. Niantic views the Metaverse as something that we use in daily life to blend the virtual and the physical into one.

While not exactly a Metaverse by definition, the ambitions of the company seem to indicate augmented virtual worlds that are interoperable with each other. For example, you could play Pokemon go and also scan a tree to learn what species it is or view digital art in the sky.

“We believe we can use technology to lean into the ‘reality’ of augmented reality — encouraging everyone, ourselves included, to stand up, walk outside, and connect with people and the world around us. This is what we humans are born to do, the result of two million years of human evolution, and as a result those are the things that make us the happiest. Technology should be used to make these core human experiences better — not to replace them.”

John Hanke, Niantic.

John and I both agree. Technology should be used to complement reality instead of replace it. However, what should and what is are not often correlated. Facebook seeks total market domination in the Metaverse and has $10 billion to ensure that happens. It’s likely that the Facebook’s Metaverse will do well (for the foreseeable future until someone new rolls around).

I am predicting that Niantic is preparing for war with Meta in an attempt to skew what the Metaverse should be towards their vision, and they’re just slowly getting the hardware chops to ensure that happens.

Niantic’s glasses

As mentioned in my last Substack on Metaverse hardware, Niantic is no stranger towards creating their own hardware. Niantic recognizes that, long-term, phones will become obsolete and will be replaced by smaller and faster devices such as VR headsets and glasses.

This is exactly why they partnered with Qualcomm and Microsoft to eventually launch their own brand.

How successful will these glasses be? It’s really anyone’s guess since we don’t know if they’re even going to release them or if they’re just a prototype.

Regardless, it’s clear that smart glasses have the potential to be a key part of Niantic’s business going forward and for the future of consumer hardware.

Looking towards the future

It’s clear that Niantic’s dreams of mapping the world and creating an incredible platform for augmented reality experiences are just getting started. It’s also clear that they are on a collision course with one of the biggest companies in the world. It’s fight night and a true David and Goliath story, who will win? The Zuck bot with billions of dollars at his disposal or the relatively young Niantic with dreams of helping humans be better with technology by giving the power of creation to everyone?

How will we define the Metaverse? Is Niantic’s “Real-World Metaverse” really a Metaverse? Will it be something that makes us go inside or something that makes us venture outdoors? 

We’ll have the pleasure of watching it unravel, and I’ll be sure to keep you all informed.

Thank you reading, do good in the world and remember to keep playing!