Pokémon Go hit America with the force of a hyperactive rattata, but the augmented reality game may not be evolving the way its creators had hoped.
Usage of the augmented reality game appears to have peaked, according to a research report from Axiom Capital Management analyst Victor Anthony. Active users on Pokémon Go have declined 35 percent from its peak, while engagement has almost halved from its peak of 80 percent, Anthony said in his report, citing data from the app-tracking firm Apptopia.
When the game was released last month, it quickly became an unexpected cultural hit, with people of all ages wandering outside with their smartphones in hand to hunt for the virtual monsters. Some players ended up trespassing on strangers' yards and, in one case, even stumbled across a body. The popularity caused Nintendo's (NTDOY) stock to go on a roller-coaster ride, with investors bidding up the shares until they realized the company doesn't actually make the game. One very real concern has been how Pokémon Go's might impact internet stalwarts like Facebook (FB), since the more time consumers spend hunting Pidgeys means the less time they have for posting on social media.
Given the rapid rise in usage of the Pokémon Go app since the launch in July, investors have been concerned that this new user experience has been detracting from time spent on other mobile focused apps, such as Facebook, Instagram, Twitter," Anthony wrote in the research note.
He added, "The declining trends should assuage investor concerns about the impact of Pokémon Go on time spent on the above named companies."
Active daily users peaked in mid-July, when the game attracted about 45 million daily users. Since then, the game has lost more than 10 million daily users, according to the report.
The decline in active users and engagement raises questions about the future of augmented reality, which has been hyped as the next big thing in fields ranging from gaming to education. About $3.5 billion of venture money has been invested into augmented and virtual reality companies during the past two years, Goldman Sachs said in a report earlier this year. Augmented reality, when digital information is overlaid on top of what people experience, is projected to grow into a $120 billion market by 2020, far outpacing virtual reality.
The question is whether Pokémon Go's rapid rise and slow decline represents the typical arc of a consumer fad, or if it signifies a deeper issue with how consumers engage with augmented reality.
Interestingly, the fall off comes as its creator, Niantic, reduced the game's ability to track down nearby Pokémon. At the same time, it has been blocking some third-party services that had been trying to access the company's servers, which some users had relied on for tracking the animated monsters.
In an Aug. 4 blog post, the company noted, "Running a product like Pokémon GO at scale is challenging." The next challenge may be to figure out how to keep consumers from checking out.