a16z Podcast | We Gotta Talk Pokémon Go

Seemingly overnight, a single game -- Pokémon Go -- has taken people by storm. But it's a game that was technically years in the making, building on a legacy of creative intellectual property and technologies such as mobile, geomapping/ geolocation, computer vision, and more. And since "toys are the prelude to serious ideas" [Charles and Ray Eames] or "the next big thing will start out looking like a toy" [Chris Dixon via Clayton Christensen], we want to understand this phenomenon beyond the hype and the hope: Not only is Nintendo stock soaring, but people are sharing amazing stories of massive public play, meeting strangers, saving dogs, fighting crime, helping autistic children. So what are some of the mechanics behind the game and its viral growth (and is this also a case of network effects)? Is this the first in a new wave of phone-based lightweight augmented reality a.k.a. "light AR"? How will things change as our environments become even more sensorified or more people embrace "camera expression" (as with Snapchat)? And finally, what does an "appified game" vs. a "gamified app" mean for monetization? In this episode of the a16z Podcast, a16z deal team partners Anu Hariharan and Kyle Russell (in conversation with Sonal Chokshi) are joined by Product Hunt CEO and founder -- and cultural trendwatcher/maker -- Ryan Hoover to discuss all this and more. So how do we tell the difference between a fad and something that's here to stay?? photo: iphonedigital / Flickr

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  The content here is for informational purposes only, should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16Z fund. For more details, please see A16Z.com/disclosures.

• 0:19Sonal?

  Hi, everyone. Welcome to the A16Z Podcast. I'm Sonal, and guess what? Today, we're talking about Pokemon Go. It's actually a broader conversation about AR, augmented reality, about apps and games, and just more broadly, you know, how to tell the difference between a fad and something that's real and here to stay. And joining us to have that conversation are A16Z deal partners Kyle Russell and Anu Haryharan, and we also have the CEO and founder of Product Hunt, Ryan Hoover. Welcome, guys.

• 0:48Kyle Russell?

  Hi.

• 0:48Sonal?

  Great to be here. I just want to quickly give some context. So I think we should first share what Pokemon Go is for those that don't know, or if you're one of our international listeners and hasn't had a chance to experience it yet. So do you guys want to just quickly, like, say what it is?

• 1:00Kyle Russell?

  Sure. So Pokemon Go is an adaptation of the Pokemon franchise of role-playing games by Nintendo for mobile devices. So in the world of Pokemon, kind of classic gameplay that's been around for 20 years now, you walk around this big environment, generally based on areas in Japan, and you randomly encounter Pokemon, which are pocket monsters, which are essentially weird versions of real animals. So it's a bird that has electricity coming out of it, or a turtle that can spray jets of water. So in the games, you randomly encounter them, and you can either battle them or catch them. So basically, to bring the world Pokemon to mobile, Niantic and-

• 1:43Sonal?

  Niantic being the company that was previously owned by Google-

• 1:46Kyle Russell?

  Correct. Spun out, raised from both Google and Nintendo and the Pokemon Company, which is a separate entity owned by Nintendo. And so to bring it to mobile, what they did was, the world that you explore to find Pokemon is now the real world, and the maps that you walk around and navigate through are actual maps from Google Maps. And when you find Pokemon, it's typically near what are called Pokéstops, which are augmented versions of real landmarks. Where it highlights it on the map and you go there and you can get free items and Pokemon are more common. And then there's another real world location that's highlighted and these are typically like somewhat bigger landmarks. And then these are called Pokemon gyms. And this is where the competitive aspect of the gameplay comes in. Where people go to a gym and defeat the Pokemon that are already there.

• 2:29Kyle Russell?

  And then leave one of their Pokemon there as it's essentially representative of them and their play style. This is very similar to racing video games where there's kind of this ghost mode where you race against other players' previous records and you can actually see their car on the map next or on the track next to you. It's very similar to that where it's asynchronous. You're technically battling another player, but it's not happening at the same time. They're not actively battling with you every single time someone comes to a gym.

• 2:55Sonal?

  Why is it so popular? Because I have to tell you, some of the most amazing stories I've heard are stories about people walking two miles without knowing it. People getting out of their houses and exercising, strangers meeting each other in neighborhoods. And of course, there's the inevitable get off my lawn and then get on my lawn competition going on. There's also this amazing story that's been making the rounds about this autistic mother saying her child actually connecting socially with other children, people saying thank you and getting help because he's so engaged in the game. And even this lovely, moving story about an animal shelter being out of dogs because people were using them to walk. So they don't look like idiots playing the game, so they had an excuse to walk their dog and actually catch Pokemon. It's just amazing. And what's what's happened now to make this happen, like what went into this?

• 3:40Ryan Hoover?

  I think what's super interesting is that Ingress launched several years ago by the same same team. And it was relatively successful for compared to most apps and services, but not nearly as successful as Pokemon. And part of that is just the branding itself. And Pokemon has been around for a few decades. It has this nostalgic factor that I grew up with and so many people around my age grew up with. And it's also something that's that's extremely accessible. You know, you see kids playing it to even, you know, adults. And you'll see these people running around on the streets now, holding their phone in awkward ways and you could tell they're playing Pokemon. And so it's had this interesting nostalgic factor and just accessibility. That's reached such a wide audience. Whereas with most big social platforms, let's take Snapchat as an example.

• 4:25Ryan Hoover?

  They started off really focused on a younger teenage audience. And while they're growing over time to a wider audience, initially, like my parents would never use Snapchat on day one. Now they are, but it took several years to get there. So I think that's super interesting mechanic of Pokemon Go.

• 4:40Anu Hariharan?

  Yeah, I think in addition to the, you know, we can't underestimate the Pokemon IP, right? The 20 years of nostalgia that's held driven it, but for someone like me who I Did not grow up with Pokemon in India, right? With Pokemon at all, I think what got me to the app was I just saw a lot of people walking on the road doing some funky thing with the phone. And I think what got my attention was really the light AR aspect of this app, which is, you know, showing the fictional creatures in real local landmarks. I mean, I think that was pretty fascinating for me to get started on the app. And I think that got me to start the app and, you know, start playing it. And I could also play as an individual, so I started getting more excited doing it.

• 5:23Anu Hariharan?

  And I think there are a lot of elements of the gaming mechanics that gets you hooked to the app.

• 5:28Kyle Russell?

  You look at the Pokemon IP and how powerful it is. They could have slapped it on almost any gameplay concept, say like an endless runner along the lines of was, what's the one that we all are, everyone played Temple Run? You know, you can imagine like in the same way that there's like a Spider-Man game that's based on that, that's done pretty well. That I Pokemon could have just been slapped onto that and it would have, you know, taken off on the App Store for, you know, a couple of days. It would have been featured, it would have blown up, but then it likely would have just faded it away as kind of another one of these endless runners. Where I think Pokemon Go really like kind of clinches, it is the fact that the IP applies so well to this gameplay concept in that as a kid playing Pokemon, you wanted to go out there and catch Pokemon with your friends, just like they did on the TV show.

• 6:13Kyle Russell?

  And this enables exactly that in that you want to go out with friends because it's kind of, you know, a little lonely to walk for miles at a time on your own catching Pokemon. So you go out with your friends and you're in real world places, you end up encountering other people. So it feels like it's less dorky than it is. And then this, there's this, again, as Anu mentioned, a light AR mode where when you do encounter a Pokémon randomly, you can then hold your phone up and look through the phone's camera and actually see the Pokémon on top of the real world. And so just as a brief aside on what AR is, this is augmented reality.

• 6:47Sonal?

  So what's the difference again between AR and VR? Could you define it for the audience?

• 6:50Kyle Russell?

  Virtual reality is, you know, what we're seeing coming out of Oculus, which was acquired by Facebook, Valve with the HTC Vive. So it's this idea of headsets that you wear on top of your, on your face, where it blocks out the real world and puts you inside in a highly immersive virtual world. So it looks like a game in that it's rendered content running, you know, on your graphics card. And you're kind of in that experience. And they try to play up the immersion with, you know, positional audio. So sound comes from different parts of the environment around you, just as it does in the real world. And you usually have like hand tracking, so you can interact directly with things in this virtual space. Augmented reality is very similar in that, you know, what we get excited about when we think of AR

• 7:31Kyle Russell?

  are these headsets where, you know, like Microsoft HoloLens, where you still see the world around you, but it layers on bits in addition to the atoms that you're seeing. So, you know, HoloLens, they call the things that you see holograms. That's not technically accurate, but it's close enough for what people's conceptualization of the concept or of the idea. So basically, it's you go around and you're seeing Pokémon on your phone screen. And when you encounter it, you lift your phone up and see a Pokémon through the screen, projected on top of the street that you're walking around on.

• 8:02Sonal?

  So just to really quickly, simply just, simply distill it. VR is an immersive, self-contained environment. And AR is really about layering that virtualness over the real world.

• 8:12Kyle Russell?

  Right. Yeah. So light AR, you know, again, what we get excited about here in Silicon Valley is, are these headsets where, you know, in five years, there'll be glasses and you'll just always have these virtual things floating around you as you're going through your day.

• 8:26Sonal?

  Very excited by all that.

• 8:27Kyle Russell?

  Well, you know, again, I'm the weirdo.

• 8:30Anu Hariharan?

  That's an important point because I think, you know, Chris Dixon here always says that every new thing starts looking out like a toy and Pokémon goes surely a game. I think this was the first, I would say like a massive game that showed light AR, meaning you could get some experience of rudimentary augmented reality without an additional hardware.

• 8:50Kyle Russell?

  I would say it's the first game and the second app.

• 8:53Anu Hariharan?

  Yeah.

• 8:53Sonal?

  What do you guys mean by that? The first game in the second app?

• 8:56Kyle Russell?

  I say it's the second app because we've already seen a very popular AR implementation on mobile, and that's Snapchat.

• 9:02Sonal?

  Oh, of course.

• 9:03Kyle Russell?

  So Snapchat filters. It scans your face using the front-facing camera, detects the geometry of, oh, that's your nose, that's your cheek. So it's mapping your face, and then it applies 3D models and textures. And this is how you get, you know, these faces where there's a cat on top of your head and its paws are dangling in front of your eyes. You can take a selfie. Or you see people point their phone at the TV when Donald Trump was giving a speech, and they put puppy ears, nose, and a tongue coming out of his mouth. That's technically augmented reality.

• 9:29Sonal?

  My favorite Snapchat thing is when people swap their face with, like, papers or still objects, like statues, because that is phenomenal.

• 9:35Anu Hariharan?

  Yeah. So Snapchat, yes, is the first. I don't even know if Pokemon is the second, right? Because their have ingress itself, you could argue, was pretty much trying to do the same. They used the geo caching and the mapping element of Pokemon.

• 9:49Sonal?

  So really quickly, just define why the geomapping is so important.

• 9:51Anu Hariharan?

  Yeah, that's actually the second element of the gaming mechanics, which makes the game really interesting, which is, you know, A, you're in the real world. So, you know, they obviously are using Google Maps, and John Hanke, the CEO of the company, has a background from Google Earth as well. But what was very interesting to me is even as you walk around the Andreessen Horowitz office, you know, they know the exact location and the walkways within the campus.

• 10:16Sonal?

  That's really important, because I remember in the early days of that kind of mapping, we used to always talk about how indoor mapping and geo, that kind of fine-grained detail is so key. I mean, think about the applications to retail.

• 10:27Anu Hariharan?

  Correct.

• 10:28Sonal?

  You can do so many amazing things.

• 10:29Anu Hariharan?

  Because, so they're like, they know the Andreessen Horowitz Fountain, they know the fountain behind the Rosewood Hotel. They also know, they take information on climate and weather conditions, you know, for the gaming aspect of it. They decide, you know, if you're close to the ocean, should I put a water Pokemon? Or should I put a different type of Pokemon? But you can just understand.

• 10:46Sonal?

  Yeah, New York City, for example, the subway tracks, you'll see like a bell sprout, which is like a little teeny little planty Pokemon.

• 10:51Anu Hariharan?

  Yeah. So I just think that the amount of detail that they've collected with this mapping data is important to know, even if they're not, you know, it is helpful in the gaming context. But if you want to draw a broader trend, I think this goes on to say what other applications you can do with this information that you're collecting.

• 11:11Ryan Hoover?

  Yeah, well, there's actually something also interesting going back to how awkward it is to see some people holding up their phone and talking. And I was actually in an Uber the other day and driving, going across the street and this guy was-

• 11:22Sonal?

  Wait, you took a car just to go across the street?

• 11:24Ryan Hoover?

  Well, not across the street.

• 11:26Sonal?

  Let's talk about that for a minute.

• 11:28Ryan Hoover?

  We were going across the street. We see this guy in the corner and he's holding his phone, like, looking up in the air. And I'm like, that guy's playing Pokemon. And, you know, these, there's certain apps that have come around that actually make people do awkward, weird things. And those are the things that inspire word of mouth and get people talking. So like, older examples are like Shazam, for example. Shazam is an app that I think a lot of people know where you, you recognize a song, you hear a song, and you're like, what song is that? What artist is that? And people end up holding their phone up in the air. You don't really have to, but people have this gesture of holding their phone up in the air. And so when you do that, you now attract, you're like a magnet for conversation. People are like, what are you doing? Or if they know Shazam, they're now reminded by it. I think Urban Dictionary is another one that came out a long time ago, which had this function where you'd shake your phone and it would give you restaurant recommendations.

• 12:13Ryan Hoover?

  And of course, that's like an awkward, weird, silly thing to do. But when you do that in front of someone, people are gonna be like, what the hell are you doing? And Pokemon is very, very similar in that it's inspiring people to do awkward, strange things that inspire word of mouth and get people talking. And that's kind of an understated thing in the mechanics of the game itself.

• 12:30Sonal?

  Does Pokemon Go have a network effect? I mean, it clearly has a viral growth. And by the way, just to quantify that growth, what is it? Like, what they reached, their stock value has changed like astronomically for Nintendo, but for Nintendo-

• 12:41Ryan Hoover?

  Yeah, Nintendo is up 96%. I just said this this morning since early July.

• 12:44Anu Hariharan?

  Which does sound a little crazy to me, given, you know, they-

• 12:47Sonal?

  A game! Isn't that amazing?

• 12:48Anu Hariharan?

  But it's a mobile game and that too was, you know, they've invested in the company. It was not the game that they developed on their own. But I think, yes, you're right, Song, which is in the sense, it is purely viral growth. It's word of mouth, people see. And it's a very different kind of viral growth, right? Which is, usually you see viral growth, you know, like, let's take Instagram, for example. People saw photos on Facebook. It was a social media-driven viral growth. But here, they're seeing people walking on the street and they say, well, what are you doing with the phone? Oh, I'm playing Pokemon. Oh, let's, you know, let me also download the app. The Pokemon IP, Cannot be underestimated that helped drive viral growth. My personal views, it's too early to say whether they have a network effect. Given the gaming elements today, I don't think they have a network effect.

• 13:31Anu Hariharan?

  Why? Because, you know, if you go back to the definition of network effects, it is the more users that are on the platform, the more valuable it is to existing users. So the more user, the more gamers playing Pokemon Go, is it more valuable to the existing gamers? Well, today, the app, the game doesn't work like that. I could get up to level eight or level nine.

• 13:50Sonal?

  Without any other players.

• 13:51Anu Hariharan?

  Any interaction. I'm just going out with, you know, I'm playing with Kyle and Austin because it's fun. Right? So, but not because I'm getting additional value. But I do think.

• 13:59Kyle Russell?

  I want to push back. I, okay, so I would say that there are elements of the game where there are at least early hints at network effects. And I think that by kind of implementing a few more kind of obvious gameplay mechanics, they could push them further. So there's this item that you can use during gameplay called lures, where you go to a Pokéstop on these real world locations where Pokemon are already more common. You get free items and you can install a lure at these Pokéstops that last about half an hour. And everyone in the vicinity of that Pokéstop then has an increased odds of finding Pokemon and also finding rare Pokemon. And so you could argue that in, especially in dense areas where there's already more people playing, as you crank up the percentage of people in that area playing, the more likely it is

• 14:44Kyle Russell?

  that someone will deploy a lure at one of these real world places and then you want to go there. And so you see this, just in my apartment complex, we have a park right outside of it, where every night I check the app kind of over the course of the several hours after I get home. And I go downstairs when there's a Pokemon lure and there'll be people down there also there because of the lure. And so in that way, you know, having a density of players does improve the gameplay. You level up faster, you catch better Pokemon, you get more free items. And there's a couple of obvious mechanics from the Pokemon IP that I think would, when kind of implemented in the game, are going to kind of crank up these effects. So a big part of Pokemon is catching different kinds and then trading with other players so that you get the ones that you want and, you know, they can have their, you know, favorite side up.

• 15:29Sonal?

  Right. This, by the way, goes beyond the nostalgia point that Ryan brought up. Earlier this goes, there's notion of collectibles because that's another

• 15:34Anu Hariharan?

  Correct.

• 15:34Sonal?

  Gaming mechanic. We haven't really talked about like this. It's almost universal behavior that you have to collect the set.

• 15:39Kyle Russell?

  Right.

• 15:40Sonal?

  You have to go to them all.

• 15:41Kyle Russell?

  Yeah, the catchphrase of the series is got to catch them all. And so there's 150 Pokemon and you find different ones in different areas. And so if, you know, my friend lives in LA and I live up in the Bay area and there's different Pokemon right around where we live. When we do hang out, we can then theoretically, once they implement this, trade the Pokemon that we each had. And so some elements of comparative advantage there.

• 16:02Anu Hariharan?

  Yeah. And in fact, they just announced, I think, I believe they just announced they're going to roll out Pokemon trade.

• 16:07Kyle Russell?

  Yeah.

• 16:07Anu Hariharan?

  Uh, where you could, and I think there I can see elements of network effect, right? Because, you know, for example, if you started late in the game and you're at a lower level today, you really can't conquer any gym. And it's sort of like, how do you get, uh, and we talked about this, like the adoption curve is different. But at the early stage, they make it easy for you to get up to level six or level seven. It's interesting. Then when you're level 20 or 15 or 20 or above, you're, you know, the, the curve is again different and you're excited. But getting through the mid-stage is the hard part where I think the Pokemon trading can really come in.

• 16:40Kyle Russell?

  Yeah.

• 16:40Anu Hariharan?

  And that I can see signs of network effects there because, you know, you find a team or you're working with your friends to trade your Pokemon. So that you're helping each other to get the game to the next level, which makes it more exciting.

• 16:51Sonal?

  So that, at that point, the network, it becomes more valuable with more users and therefore at that point it could have a network effect.

• 16:57Kyle Russell?

  And so that's an interesting way to look at also at network effects. And it's something you talk about a lot of how there are specific mechanisms by which you can kind of build network effects into your product. And so you have to think about, how can we make this product more valuable for each individual user? By just adding this one thing that lets them kind of bounce off of each other in, in some way.

• 17:18Ryan Hoover?

  Yeah. And what's, what's been interesting is since two weeks now or so, there've been nearly a hundred things posted on product, product hunt about Pokemon. Anything from a chat app for Pokemon, because you can't chat with your friends directly inside the app today, inside the game, to a crowdsourced like Wikipedia like map. So you can like see where all the Pokemon are and people are contributing across, across the nation, across the world. And these are essentially just demonstrations of what the, the people, the players want within the app itself. It's actually really great. Uh, it's like an MVP for Niantic in some ways to understand like how people are, are building upon the platform itself. And a lot of those do demonstrate and incorporate aspects of network effects like the chat, for example.

• 17:58Sonal?

  Ryan, what do you mean more about it's like an MVP? And by that, I'm assuming you mean the minimum viable product for Neon Tech. Like, what do you mean by that?

• 18:05Ryan Hoover?

  Yeah, it's, I mean, these are people who love Pokemon and love building products, and they're building these things that they wish existed already inside the game. And by doing so, they're giving Niantic just an opportunity to see, okay, how do people receive this? How, what, what direction do they take in this, this new crowdsourced map or this chat app, et cetera? And, you know, this is how a lot of platforms actually start, is they get really hot and then people start building on top of it and hacking around it. Snapchat's seen that, Facebook's seen it.

• 18:31Kyle Russell?

  If you look at the top of the Apple App Store right now, in the top five, there's an app where people playing the game can say, oh, I spotted this particular Pokemon at this spot, so that other players can know where they want to go, where they should go if they want to go. Like, oh, I'm missing an Onyx. Where in Oakland could I go to find one? And, and that's, again, something that should be in the application, frankly, to introduce, again, more virality, more benefits of playing with other, you know, the rest of your friends who live in slightly different areas. So you're not walking around directly with them, but you still benefit from their, you know, kind of mutual engagement.

• 19:03Anu Hariharan?

  Yeah. The, the other point I would add is I think this is very distinct about Pokemon Go. And for, you know, for the first time, it's a new way of monetizing using a game, which will actually probably help sustain or develop these network effects more easily or sustain it longer. So the lure that you talked about, the rare Pokemons that Ryan pointed out, I think retailers, restaurants, and bars now have a new way to attract people to their locations using these various elements of the app. We already know that they announced a partnership with McDonald's.

• 19:42Sonal?

  Museums are doing really interesting things to get more people into their doors using Pokemon.

• 19:46Kyle Russell?

  And this weekend, I went to see Ghostbusters in Oakland, and every single bar and restaurant in the area had to lure out. Every single one.

• 19:53Anu Hariharan?

  Yeah, but you can imagine taking that out to the night, taking that to the next level, like, hey, I have a, you know, I sponsor a Vaporeon in my store. You can just imagine the amount of traffic it's going to drive. And also, you know, it's almost like the amount they can monetize based on each of these elements will be different, and it'll drive different traffic to those respective locations, which irrespective of whether Pokemon Go is going to exist or not, I think is a big phenomenon.

• 20:19Kyle Russell?

  Something I think is interesting is all the comparisons we're making are to apps, not to other games, to all these different apps that have some gamification hooks. You know, with Snapchat, there's this idea of your streak, how long you've messaged back and forth with another player and you want to get that score up. And, you know, on Foursquare, they were really early on with gamification with the idea of mayors, people who would go to different real-world locations, typically restaurants, and check in. And then if you checked in enough times, you would beat everyone in the area and become the mayor of Starbucks or Pete's. And that's actually very similar to claiming a Pokemon gym. And I think it's interesting to see how, you know, whereas those were gamified apps,

• 21:00Kyle Russell?

  Pokemon Go is an appified game in that it's, the main way you're engaging with it is as a form of, you know, game-ish content, but the value derived from it is, oh, I ended up deciding where to go tonight based on where lures were out.

• 21:15Sonal?

  In this ecosystem of apps that you guys are describing that's growing up around, you know, all these context awareness, light AR, all these things that are happening, location, what's the difference between a gamified app versus an appified game?

• 21:27Kyle Russell?

  So I would say that it has to do with kind of just what is your typical mode of engagement with the app. Like Foursquare, you're primarily there to figure out where we're going to dinner tonight or where, right near me, should I get the best coffee? And then the gamification is kind of a way to make you keep engaging with it. Once you, you know, once you're using that utility, sometimes, hey, here's a reason to keep coming back to this app even when you don't necessarily like, you knew you wanted to go to that particular Pete's, but hey, here's another reason to open the app. Now, where Pokemon Go is an appified game is that the primary way you're playing, engaging with it is to play a game. It's to go out there and catch some Pokemon and, you know, be out there with your friends with this center around the gameplay mechanics.

• 22:11Kyle Russell?

  Where the app part comes in is you end up finding people to chat and hang out with, find places to go get a drink or go get food through the gameplay mechanisms. And so it accomplishes the goal of the utility app by being a game interface. And I think that if you look at just apps Stores in general, game content is almost always at the top of paid, free, and top grossing charts. So you look at these top charts and games are so dominant that I think what we're going to see is more games that end up accomplishing the goals of utility applications by keeping you hooked on the gameplay mechanisms.

• 22:48Anu Hariharan?

  And that is key because if you look at the historical trends, how did games monetize? Literally two ways, right? Predominantly advertising or in-app purchases. And I think Pokemon Go has actually introduced a third new channel. It's too early to say whether it'll work or not, but it's an interesting trend to observe, which is, you know, it's, yes, they have in-app purchases today, but on top of that, they can get retailers to pay for those in-app purchases versus consumers paying for in-app purchases.

• 23:17Kyle Russell?

  I think it's so fascinating that the ad is the in-app purchase, is the like product for enterprises.

• 23:25Anu Hariharan?

  Correct, yeah, it's very.

• 23:26Kyle Russell?

  It's kind of like a sponsored post on Facebook or Twitter in that.

• 23:29Anu Hariharan?

  But more actionable.

• 23:30Kyle Russell?

  Right, no, and it's not a, oh, an item of content that's like what you see in the Facebook feed, but oh, this one's paid for and a little bit more professionally done. Like you can kind of tell the difference between, you know, regular content from real people and, you know, professionally made content that ends up getting sponsored or like just put up on a Facebook page. No, the lure that you would deploy is the same that this bar or restaurant would deploy.

• 23:52Ryan Hoover?

  And this is happening so quickly. Today, they announced, it just got released in Japan, the game for the first time, and McDonald's partnered with them, and they're gyms now at nearly 3,000 stores in Japan. So it's already just weeks after it launched and they've partnered with one of the biggest, you know, food companies in the world. And that's just one of many examples that I'm sure we'll see down the road.

• 24:14Anu Hariharan?

  Yeah, and the reason this is important is if you look, again, historically, the in-app purchases, it really came from what they call the whale users, which are less than like 0.5% of what the app users are. And now, all of a sudden here, you've actually changed who is buying those in-app purchases, which is the retailers and the stores.

• 24:32Sonal?

  Just to go back beyond Pokemon Go and some of the bigger picture trends here. First of all, there's this funny thing, you know, we talk about some of these phenomena, this like this, it's, to me, it's a promise what Jane McGonigal has long talked about, about this massive super gaming, like public gaming, people playing together. And that's only possible now because of every single person has a phone and a computer in their pocket. And that goes to your idea, Kyle, of this light VR and where it fits in this tier of different types of VR. But the question that I have is that we are still not really deploying every aspect of the phone in the US the way like, for example, WeChat does in China, where they're using like the sensors and every, you know, we talk about it like, you know, killing the buffalo and using all the parts. And so, and one of the complaints I've heard is that there's not, you know, people aren't really using sensors for safety. So for example, you know, the New York subway, they issued a tweet saying, "We know you

• 25:16Sonal?

  gotta catch them all, but stay behind the yellow line." Or I see like a billboards on highways that say, "Don't Pokemon and drive." What's gonna happen as our environment becomes more sensorified and sensors are embedded everywhere? And as our phone begins to really, these apps really begin to use more than just the camera? How is it gonna change? Like, how do you guys see this sort of spinning it forward?

• 25:37Kyle Russell?

  The panopticon is going to be real. So this idea of a camera where you have a live view at any spot in the real world at any time, that's essentially becoming possible. And we actually saw this recently with the attempted coup in Turkey where if you're on the Facebook website, you could go to Facebook Live and look at a map view of Turkey and instantly see thousands of individuals live broadcasting what was happening.

• 26:02Sonal?

  Who was periscoping, who was on Facebook Live, yeah.

• 26:05Kyle Russell?

  And, you know, something that I've tweeted about is how I kind of wish Google still owned the Antic. Because you look at all the people turning on this light AR mode in Pokemon Go, there's millions upon millions of people snapping photos at every single time of day of densely populated urban areas. So you have this, you could theoretically have this amazing data set of live images of- Basically, anywhere that's in a major city in the United States and now that's rolling out globally around the world, which is just insane to think about. Pokemon Go hasn't put this out there yet, but something that they conceivably do is make the location data available via some API or backend system where you could say,

• 26:49Kyle Russell?

  where is their foot traffic in the real world at any point in time in the day?

• 26:54Ryan Hoover?

  Do you remember reading this article that was published recently regarding Foursquare's prediction of Chipotle sales?

• 26:59Sonal?

  Oh, yes, it was super interesting.

• 27:01Ryan Hoover?

  Yeah, the short version is using Foursquare data, they could predict that Chipotle sales are going down just due to the foot traffic alone. And if you imagine a world where some company or someone can measure the foot track of every person that has a phone in their pocket, that's incredibly valuable for a number of reasons. Logistically, for travel, of course, but also sales. It's very powerful data.

• 27:20Kyle Russell?

  Yeah, and this is similar to the case being made for having low orbit satellites that constantly collect imagery. People have talked about how hedge funds could make bets on different markets by just looking at how many cars are in a Walmart parking lot at any given time. Now you have that not for cars, where it's unknown how many people are in it and what they're buying, but explicitly, what are individuals doing and what stores are they going to and when?

• 27:44Anu Hariharan?

  Yeah, and I think, coming back to the sensor point, you're already seeing applications in retail. And I can tell you, I just recently moved and I had a hassle doing furniture shopping because you're taking measurements and then you have to figure out whether the color coordinates match. IKEA is rolling out a catalog. They already, I don't know how many of you have seen the YouTube trailer, but if you've seen it, it's very much like the Pokemon Go app. All I need to do is show the IKEA app around the room and if I choose-

• 28:13Sonal?

  With your phone?

• 28:14Anu Hariharan?

  With my phone. And if I choose a couch, it can actually place the couch in the room.

• 28:19Sonal?

  So instead of like little pocket monsters, you have a couch in your apartment or house?

• 28:22Anu Hariharan?

  And you kind of get a sense for, hey, is this a real good fit within my room or not? So just imagine how much easier they would make the shopping. Now, coming back to the sensor point, I think the key question is, how good are the sensors that they can actually determine the size of the room and whether the couch actually fits within the room? Those are the things which I'm excited about, but I think the potential is huge here.

• 28:43Sonal?

  You have a child, like childproofing. Imagine all the layers of interesting things you can do.

• 28:47Kyle Russell?

  Well, yeah, I mean, things like childproofing, like- It's an arduous task of finding every plug and everything that needs to have a little zip lock on it. Imagine if you could just take a single pass with your camera around the room and it would highlight every single area that could be childproof.

• 29:00Sonal?

  Yep. For me, the most interesting aspect of all of these, from Snapchat filters to the Chewbacca mask phenomenon and Facebook Live, to the fact that this is, as Brian mentioned earlier, not just nostalgia, but there's a certain animative quality to it that we're expressing ourselves through these new types of avatars. And I think that's really amazing because I think it actually allows us to express ourselves in new, completely different ways. And so I'm really interested in sort of the psychological components of what happens. Autistic child thing is not just a case, it's a really interesting example of what happens. I mean Chewbacca mask later, like, there's interesting things that happen when you're able to detach yourself or attach yourself to these layers and masks and filters.

• 29:40Kyle Russell?

  Yeah, and this is where-

• 29:41Sonal?

  And Pokemon.

• 29:42Kyle Russell?

  No, you look at Snapchat, we use them just for selfies today, but it's rumored that Snapchat is looking at, it's not clear in what capacity, but looking at the idea of making their own AR glasses.

• 29:52Sonal?

  Right.

• 29:53Kyle Russell?

  And why would they do that? Well, we're already expressing ourselves every day, 150 million daily active users expressing ourselves with these filters that apply these 3D models and textures to our faces because we think that that reflects our personality at that point in time.

• 30:05Sonal?

  Well, it just goes to show you selfies are not toys in that context. They're something very meaningful.

• 30:08Kyle Russell?

  So imagine, though, if these glasses took off, I assume that they would make something that's cheap but just good enough, where you could say, here's the filter that I wear throughout my day. Today, I'm feeling kind of moody, I'm going to wear the one that makes my eyes look pure black and my skin pale white.

• 30:24Sonal?

  Yeah, and to be able to signal that to the world. It's like telling a five-year-old child, like, you got to use your words. Say, I don't feel good today. Yeah.

• 30:31Kyle Russell?

  It's like, I'm feeling rebellious, so I give myself a mohawk haircut. Well, what if you could just do that temporarily instead of making that commitment?

• 30:36Sonal?

  Totally, I could dye my hair purple, which I'm dying to do.

• 30:38Kyle Russell?

  And then anyone with these glasses would say, oh, that's how this person's feeling today because they chose that as their avatar for however many hours.

• 30:45Ryan Hoover?

  What's so fascinating about Snapchat is they have such a unique opportunity to actually pull this off, whereas Google Glass was super dorky and nerdy and obviously not built for a younger audience.

• 30:56Sonal?

  Although I think people would argue that, and this is not, we haven't talked about this in great detail and we don't have time to, that Google Glass would probably find its promise in the enterprise. Because I know when we were working on that sort of thing back in the day at Park, one of the theses was that you can actually layer on really deep expertise into people in the field for repairing copy machines or other ideas. And so the notion that you can have a centralized expert and then disseminate that knowledge through all the different people in the field and democratize and distribute expertise in the enterprise application of something like Google Glass is pretty fascinating. And I think we haven't even talked about the enterprise beyond the retail, like going really far into what this all means.

• 31:30Kyle Russell?

  For another time.

• 31:31Sonal?

  Yeah. So one last question. As investors and, and you know, Brian, as someone who curates a very interesting community and who stays on the cutting edge of interesting trends and things that are coming up, how do you tell the difference between a fad and, and just something that's here to stay? And how, how do we know?

• 31:49Ryan Hoover?

  Yeah, I mean, if I knew the exact answer to that, I should be investing in companies. I think a lot of it is like, what is the behavior that people already do? Or what is the goal that they're trying to achieve? And does this solution, does this solve this solution in significantly more efficient way? So let's take, you know, Snapchat is one example. Of course, it looked like a toy in the beginning and it was very simple. It was ephemeral photos and then ephemeral videos. And then quickly it started to become the, really the best place to see what your friends are up to and what they're doing. And they've in many ways replaced some of the behaviors on Instagram or Facebook.

• 32:22Sonal?

  My personal favorite application of Snapchat is actually the media side, which is the Snapchat stories. I used to, I wrote about this like years ago when, when they first came out because they were doing something really interesting with Diwali. And I got to see a whole new view into Diwali in India on Snapchat, which I would never have seen.

• 32:36Ryan Hoover?

  Yeah, and so Snapchat is evolved significantly. And of course, in hindsight, you can see the opportunity and you could see where it's going. But at the time, it was very difficult to tell that Snapchat would be useful and meaningful. But they really stayed the course and built a place that focused on the camera and made the camera about, the camera is what was, you know, that was the way you communicated. That was the way you shared. That was the way you expressed yourself. It was a very different experience than, you know, Facebook and Instagram. And then if you look at the two experience in terms of creating content, there's so much more friction involved in creating content. On any other mobile platform primarily, with the exception of maybe Twitter, but Twitter is just a very different, it's like a more text-based kind of conversational platform. So for me, a lot of it's like, what's the utility that it provides?

• 33:17Ryan Hoover?

  And is it significantly different? And does it go with the trends of where the consumers are going? So in this case, like mobile, over time, there's going to be AR platforms changing the way that companies and people interact.

• 33:28Sonal?

  So utility, the frictionlessness, the differentiation, and is it kind of going, does it have sort of a headwind underneath it as well?

• 33:36Anu Hariharan?

  If you, these are, you know, many of the elements we've touched upon on our network effects cases as well. I think fundamentally Pokemon Go is a game, right? I think we need to remember that the IP is strong and there are games that have sustained for many years, like the League of Legends is still quite popular.

• 33:53Kyle Russell?

  Yeah, so I, I think the key to longevity for a game like this is the, it's a concept from MMOs typically, it's called the end game.

• 34:01Sonal?

  Yeah.

• 34:02Kyle Russell?

  So it's this idea that, and I knew you hinted at this earlier of how there's multiple phases of gameplay. The beginning of Pokemon Go, you're just kind of catching Pokemon and leveling up and figuring it out. Towards the end of the game, once you're very high level and all of your Pokemon are high level, you're trying to capture these gyms and you're battling people. So in the world of, say, World of Warcraft, which is kind of the definitive MMO, this is massively multiplayer online games, there's an end game state for that where you've done all of the questing, you know, you're going on adventures with friends, and then you shift to what's called raiding. So you're going into these very high-level, difficult dungeons with up to 40 people at the same time. And it's all about like getting the very best loot from these super difficult enemies. And if you look, World of Warcraft

• 34:44Kyle Russell?

  has done the best job of periodically adding more and incredibly increasingly difficult end game content for its most hardcore players. And this is what has kept it, millions of people paying $15 a month for north of a decade now. Pokemon, it, right now, you get to the gyms and if you're not super competitive, it's actually difficult to battle at the gyms. And so

• 35:06Anu Hariharan?

  Which could actually impact engagement.

• 35:08Kyle Russell?

  Right.

• 35:08Anu Hariharan?

  But they talk about all, if they do all the product enhancements that you were talking about, like the Pokemon trading, a good place.

• 35:14Kyle Russell?

  Right, they need to add alternatives or different ways to engage with the end game in order to keep people playing.

• 35:19Anu Hariharan?

  But in either way, in a nutshell, I would say, I think instead of just focusing on the game, what's more exciting about this app is all the external trends it tells us about other applications. And I think that's what makes it more exciting.

• 35:31Sonal?

  We could keep talking about this and playing. You guys, thank you for joining the A6 and Z podcast. Thank you for having us.

• 35:35Ryan Hoover?

  Thank you. Thanks for having me.