Pokemon Go Made Niantic Billions. Now It's Ditching Gaming For AI.
Walking through Niantic's headquarters in San Francisco's historic Ferry Building, visitors are greeted by a scrum of giant Pokemon stuffed animals: On amphitheatre-style steps, an enormous Snorlax naps in the corner while a bulbasour sits ready to pounce. Elsewhere, a stunned Psyduck stares vacantly toward the distance, and perhaps the company's unexpected future.
In March, Niantic made a bombshell announcement: the developer of Pokemon Go — once the biggest mobile game ever in the U.S. — is abandoning games to go all-in on AI. It has sold off its game development business to Saudi-owned game maker Scopely in a $3.5 billion deal and rebranded itself as Niantic Spatial. Instead of building augmented reality games for mobile phones, it will develop artificial intelligence models that analyze the real world for enterprise clients.
'It's kind of unusual for a successful company to do this cellular division — form two companies,' cofounder and CEO John Hanke told Forbes. 'It became clear to us that the way to maximize the opportunity for both was to let each of them go and pursue its future.'
Now, Niantic is doubling down on its nascent Spatial platform, announced in November, which provides AI mapping tools that companies can use to chart out routes for robots or power augmented reality glasses. Just as large language models allow AI to generate text, Niantic's Large Geospatial Models (LGMs) help AI understand, navigate and interact with physical spaces as a human would. The models are able to recreate 3D, real-world places thanks to Niantic's massive set of location data, drawn from the 30 billion miles people have collectively walked playing its games like Pokemon Go and Ingress. And when the models don't have precise data on all the dimensions, topography or physical structures in a place, they use generative AI to fill in those blanks, estimating different angles of a statue or missing corners of rooms.
'I don't think maximizing the value for Pokemon Go for the next 10 years is necessarily where [Hanke's] heart is at.'
Niantic's pivot underscores the seismic effect that the generative AI frenzy has had on Silicon Valley since ChatGPT rocked the industry nearly two-and-a-half years ago — radically transforming even a firmly established decade-old company like Niantic. According to Gartner, the market for spatial computing is expected to hit $1.7 trillion by 2033, up from $110 billion in 2023, with growth driven by location-based services from the likes of mapping giant TomTom and traditional big tech like Google. 'The opportunity is enormous,' said Tuong Nguyen, director analyst for Garner's emerging technology team.
So is the competition. In spatial AI, Niantic faces some formidable rivals. Since 2021, Nvidia, the $3 trillion chipmaker, has offered Omniverse, an enterprise platform that creates 3D 'digital twins' for performing simulations in factories and other industrial settings. And last year, computer vision pioneer Fei-Fei Li, known as the Godmother of AI, founded World Labs, a startup building AI that generates 3D fantasy worlds, which could be helpful for video game development or astronaut simulations. The company is already valued at $1 billion — without even launching a product.
To fund its new company, Niantic went to its well of existing investors, including Coatue, Battery Ventures and CRV, for a $250 million investment. As part of the deal, which was in the works for a year and is expected to close by the end of the month, about 400 gaming employees will join Scopely, maker of the popular Monopoly Go mobile game, and about 200 will remain with Niantic. The company laid off more than 65 people during the restructuring; Niantic isn't expecting any more 'significant' layoffs, though one or two people could hypothetically depart in the final phases of the deal, Hanke told Forbes.
From the start, Pokemon Go was a runaway hit, generating around $8 billion in revenue since its debut in 2016, analysts estimate. Almost a decade later, the game, which tasks players to catch virtual Pokemon by trekking to real-world locations, racked up 100 million players in 2024, Niantic said. The company brought in $1 billion in revenue last year, with 30 million monthly players across its catalog, which also includes Pikmin Bloom, a step-counter game developed with Nintendo, and Monster Hunter Now, developed with Capcom. Niantic doesn't break out revenue for individual games, but the vast majority came from Pokemon Go, according to research firm Aldora Intelligence. It was responsible for $770 million of Niantic's billion-dollar haul in 2024, the firm estimated.
Pokemon Go was a global phenomenon, attracting meetups around the world.
The game was lightning in a bottle, but Niantic has had trouble replicating its success. Harry Potter: Wizards Unite, the company's first big bet after Pokemon Go became a global phenomenon, was released in 2019 and scrapped in 2022. That same year, the company laid off around 90 people, shutting down several games in development, including one based on the Transformers franchise. A year later, Niantic shut down its Los Angeles studio and laid off 230 people, a quarter of its workforce at the time, coinciding with mass job cuts across the industry post-pandemic. The closure meant cancellations of a handful of major projects, including games with high profile partners like the NBA and Marvel. And even Pokemon Go's lustre has faded from its glory days. On Apple's App store, it's still a top 10 role playing game, but it has fallen out of the top 100 free games.
Hanke insists the sale was not due to games underperforming or revenue woes. 'It's not a case of abandoning the [games] business,' he said. 'You look around at the games we have on the market — revenue is doing well,' he added, pointing to the 'successful' launch of Monster Hunter Now in 2023, where players seek out and fight virtual monsters. The game brought in $142 million last year, a 23% jump year over year, according to Aldora. Joost van Dreunen, founder of Aldora Intelligence who's researched the industry for 15 years, agrees: 'This wasn't a fire sale to save the company.'
The biggest reason for the split, Niantic executives say, is focus. Inside the company, there has always been competition for time and resources between the game development side and technology side, which developed all of the augmented reality and mapping tools that underpin the games. The latter, for example, built Niantic's 'visual positioning system' which could precisely pinpoint a person's exact location at a specific date and time (like if you caught a Squirtle at Grand Central Terminal at noon). Its technology portfolio also includes Scaniverse, an app Niantic acquired in 2021 that lets a user create a 3D model of a room by scanning it with their phone, similar to how you'd take a panoramic photo.
Now, the company can devote all of its energy to the enterprise business — even if it means Niantic can no longer lean on its primary cash generator. 'We will have to focus on our own revenue,' said CTO Brian McClendon. 'And we won't have to split our attention between maintaining and improving Monster Hunter, and Pokemon Go revenue and business, versus addressing just this,' he said, referring to the enterprise platform. Brandon Gleklen, a principal at Battery Ventures, which first invested in Niantic's 2019 Series C, told Forbes the move was inevitable, noting that juggling games and developing AI 'was like two bodies running a three-legged race.'
The pivot to enterprise is a decidedly buttoned-up swerve for a company with such a playful culture. It was named after the Niantic, a wrecked whaling ship that brought prospectors to San Francisco during the 1849 gold rush, its remains now residing beneath the TransAmerica tower. As an homage to the vessel, Niantic's lobby is styled like an old ship's deck with an antique cannon and scuba suit.
But Hanke says the new strategy is a return to his roots. A pioneer in digital mapping, Hanke cofounded Keyhole in 2001, a satellite imagery startup that Google bought in 2004 for about $35 million in stock and used as the basis for Google Maps. After ascending to lead Google's global mapping operations, he began Niantic in 2010 as a small gaming division within the sprawling tech giant. It released Ingress, a sci-fi capture-the-flag game, two years later, and after the game became widely popular, Niantic was spun out into an independent company in 2015. (Google is still an investor in Niantic Spatial.)
Then came Pokemon Go. Released in 2016, the game's placement of virtual Pokemon characters in real locations spurred millions of people to explore the outdoors, a novelty for an online game in an era of mounting screentime. It inspired meetups and events around the world. While several businesses limped through the pandemic, Pokemon Go surged as people looked for socially distanced activities outside. Three days after its release, it had more users than Twitter at the time. After just two months, it became the biggest mobile game ever in the U.S., clocking 21 million users a day.
It was a cash cow, but that success came with lots of baggage. It takes a lot of work and money to nurture a megahit, and Niantic was throwing resources at keeping creating new features to keep people coming back. Meanwhile, coming up with a followup success became even more difficult. 'In the years since Pokémon GO's launch, the mobile market has become crowded and changes to the app store and the mobile advertising landscape have made it increasingly hard to launch new mobile games at scale,' Hanke wrote in a memo to employees during the 2023 layoff.
'We're not in the business of making weapons systems.'
So the mobile game developer did the unimaginable: it ditched the games business. 'I don't think maximizing the value for Pokemon Go for the next 10 years is necessarily where [Hanke's] heart is at,' said Saar Gur, general partner at CRV, which invested in Niantic's Series C.
The idea is to pitch Niantic's core technologies to businesses, like its visual positioning system, which could be useful to enterprises in confirming important deliveries were made, instead of just taking a photo of the package in the doorway, said McClendon. Scaniverse could allow a technician from an HVAC company to remotely survey an area and annotate the virtual space.
Niantic Spatial has a handful of clients so far. The Singapore tourism board is using its tech to create an augmented reality tour of the country's popular Flower Dome, the largest glass greenhouse in the world. The closed-door pilot, set to launch next month, will let guests use headsets to see digital overlays with information about the various flower species, which pop up as they walk through the garden, said Gregory Yap, vice president of the Americas for the Singapore tourism board.
A deal with government contractor Booz Allen Hamilton gives access to Niantic's logistics and mapping tools, like its scanning tech and visual positioning, which provides precise location tracking down to the centimeter, to all of the company's corporate clients. One unannounced client, Hanke said, is working on a development that's 'part theme park, and part office park, and part residential.' And Niantic hasn't ruled out doing business with the military. 'We will have customers in the government, public sector space that could include military customers,' Hanke said, though he does draw one line: 'We're not in the business of making weapons systems."
The lifeblood for AI models is data, and Pokemon Go hoovered it up in droves. Spinning off the games division, however, doesn't mean Niantic is giving up the firehose, the company said. Niantic will continue to provide the game's underlying mapping technology to Scopely even after the sale, now as a vendor instead of proprietor. That means Niantic Spatial will still have access to the location data that allowed it to build its AI models in the first place, said Tory Smith, director of product management for the map platform. 'It's not like there's a spigot being shut off,' he said. 'We just can't control how it evolves over time.'
Nor can the company control who has access to it. When Niantic announced the sale to Culver City, California-based Scopely in March, the company drew ire for selling its popular games portfolio — and the user data that comes with it — to a venture owned by the Saudi sovereign wealth fund. Hanke dismisses that concern. 'The rules of operation there are pretty clear, in the sense that Niantic and Scopely are the keepers of that,' said Hanke. 'So there wouldn't be any access to that, or any usage of that, outside of those companies.' In a statement, a Scopely spokesperson said the company 'maintains autonomous and independent operations.' 'Player data always has and will continue to be handled in accordance with strict data privacy laws and regulations, as well as stored exclusively on U.S.-based servers,' the company said.
Some critics see Saudi Arabia's investments in video games and entertainment as a means to distract from its track record on human rights. Hanke said Niantic considered those points when it chose its buyer. 'We thought about that. We discussed and debated it,' he said. 'From our own personal observations, and the people that we've worked with in the Kingdom, I think there's a real desire there to become a more open liberal society.'
When Niantic announced last November that it had created AI models based on location data collected by its games, there was more outcry. Some players felt blindsided their information was being used to train AI without their knowledge. Hanke strongly denied that, saying data wasn't collected when people just walked around playing games — only when players performed specific actions while during gameplay, like scanning a PokeStop to get in-game rewards like power-ups, and were asked for explicit consent to improve the company's systems. (McClendon acknowledged that AI wasn't mentioned specifically because the models weren't in development when the disclosure was written. It still does not reference AI, but after the deal closes, Niantic said the games business will roll out new terms of service that expand on its data policies.)
To mark the sale of its games business and the beginning of its play in AI, Niantic held a party in early May across the street from headquarters at Sens, a tony Mediterranean restaurant overlooking the bay. At the party, Hanke and employees shared stories and memories as they said goodbye to the company in its current form. But after the deal closes, the gaming employees won't go very far. They'll move to a Scopely office a short walk away. The Pokemon stuffed animals will likely join them, Hanke said.
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