Editor's note: Inc. Magazine announced its pick for Company of the Year on Tuesday, November 29. It's Riot Games! Here, we spotlight Niantic Labs, one of the contenders for the title in 2016.
A plaque hangs on the wall at Niantic Labs' San Francisco office that reads "Adventures on Foot." And over the last half of 2016, that's exactly what the company brought to millions of gamers all over the globe with the launch of its augmented reality game--Pokémon Go.
To bring in Bulbasaur, chase Charmander, and round up Rattata, fans have downloaded the game more than 500 million times and walked roughly 2.8 billion miles, according to company data. The latter metric might seem like an odd one for measuring the success of a mobile game, but to Hanke, it's one of the most important.
"We want to get people outside, active, having fun with other people, not just behind a screen," Hanke says of the company's mission.
Pokémon Go is just one of the company's three location-based mobile apps meant to get gamers off the couch. Ingress, a science fiction game, places "portals" at culturally significant locations like monuments or public art works for which players battle for control. And Field Trip runs in the background of your phone, popping up tips on what to see or where to eat or shop based on your location.
But Pokémon Go is easily the most successful of Niantic's products. After all, the company was created almost solely to bring a partnership to life between Nintendo, the Pokémon Company, and Niantic--the gamemaking division of Google's parent Alphabet that Hanke ran. Hanke's team spun off from Google in October 2015, after landing $35 million from the three larger companies and angel investors.
At the time, Niantic employed roughly 35 people and was valued at $175 million. But it had the rights to and idea for a game that would appeal to the nostalgia of millions of Millennials. Plus, says Hanke, he suddenly had the freedom to operate like a startup.
"In a big company like Google, you're farther away from your customers," Hanke says. "You're not as hungry. There's nothing like that feeling of not knowing whether the company is going to make it."
His team would soon know that feeling well, because the July 9 launch of Pokémon Go did not go smoothly. Within 15 minutes of its initial push in Australia and New Zealand, where it launched before coming to the U.S., the game exceeded Niantic's highest expectations--and overwhelmed its servers. The team had to call in reinforcements from the keepers of Google Cloud--where the game's massive amount of user data is stored. Niantic's engineers were getting two to three hours of sleep per night, coordinating to make sure someone was awake at all times to troubleshoot.
Fans bombarded Niantic online, complaining the company wasn't communicative enough on bugs and updates. Hanke says he "quadrupled" his customer service staff, but nevertheless, his Twitter was hacked. Gamers with fond childhood memories of playing Pokémon on Nintendo Game Boy systems in the '90s turned to trolls in today's environment of relative online anonymity.
"It's frustrating," says Hanke. "We've had to develop thicker skin to deal with the unvarnished expression of whatever is on people's minds. Unfortunately, I think that's out of control on the internet right now."
The players weren't the only ones riled by the game. Thanks to unforeseen public safety issues resulting from Pokémon Go players swarming public parks and cultural attractions trying to catch the little monsters, mayors and parks authorities contacted Niantic with questions and complaints for months.
"It was unlike anything I've seen before because it spread globally so quickly," says Hanke. "We did not have the infrastructure in place to deal with all of that, and we had to do it quickly."
Riding the Wave
By pulling in policy and PR experts to address concerns from governments across the globe and effectively doubling the staff it had a year ago, Niantic has launched Pokémon Go in 90 countries. And now, with relative stability on Google Cloud and a slowdown in new users, the game's creators have more time to consider what's next for Niantic.
They're also likely pondering its current valuation. According to a Citi research note from July, which was reported on by Quartz, Niantic was on track to book $740 million in revenue this year--making the company worth around $3.65 billion.
True to his vision of using games as a discovery tool for landmarks and businesses, Hanke says the next step is organized events. Niantic's first such attempt happened October 26 through November 1. During the week of Halloween, Pokémon Go players earned extra "candies" for walking around, catching some of the spookiest Pokémon, like Haunter, Ghastly, Zubat, and Golbat.
Hanke's hope is that events that bring players together for socialization and special offers will keep excitement alive, since revenue depends on microtransactions--buying items within the game that help you succeed. As growth slows down, Niantic will supplement that income with business partnerships that pay to turn certain locations into "gyms" where players gather to battle. In July, the company announced a partnership with McDonald's Japan, which involved turning the country's 3,000 McDonald's locations into gyms.
Video games that get players off the couch and active aren't exactly new--think Guitar Hero, Dance Dance Revolution, and Wii Fit. But thanks to the smartphone, Niantic's games can take it a step further by luring gamers outside, letting them easily take the game anywhere, and making it social, says analyst David Cole of San Diego-based digital media research firm DFC Intelligence.
"With the smartphone revolution, people are on their phones when they're out and about at social gatherings," Cole says. "So it's a natural progression to have people still on their phones, but doing something together."
But Cole says it's too early in the life of Pokémon Go to know whether fans will remain loyal now that the initial surge has worn off, or if the game's popularity will be seasonal or just center on special events.
"The potential is there for it to have a fairly long life," says Cole. "I think you'll see waves, where you have some type of event that gets people back, and you have a smaller core user base the rest of the time. But that's fairly typical and it's fine. You don't expect to see the full user base again."
In the meantime, Hanke is in the market for real estate. On top of the growth in Niantic staff since spinning off from Google, he plans to double it again in the next calendar year. He's not yet sure where the company will fit new employees beyond its main San Francisco and small Seattle and Tokyo offices. But despite the challenges of growing so quickly, Hanke is grateful to the game that's going to afford his team the chance to stretch its legs over the next few years.
"It was one of the most interesting and stressful things I've ever done," Hanke says. "But when it's all over, it's incredibly gratifying for all of us to go outside and see people out and about having a good time with the product."