Unless you have been living in a cave, you have noticed over the past week the large number of teens, and yes, adults too, walking around town with their iPhones, searching for the mysterious Pokémon creatures.
In one of the first major launches of what is known as “Augmented Reality,” Pokémon Go has taken off at the speed of light. As a youth, I remember Pet rocks, Clackers, and the Rubiks cube. Each in their day became instant and widespread hits but none could compare to the explosion of Pokémon Go, which makes even PacMan jealous.
As quickly as the kids have rushed to search for Pokémon's imaginary creatures, investors have rushed to find the profits they are certain await them. It almost feels like a modern day gold rush with some estimating Pokémon Go will generate over $4 Billion in revenue in one year. To put that into perspective, that is more than double the amount Disneyland will take in from ticket sales during that same time. It is difficult to fathom the power of the internet and its associated technologies, and the stratospheric dollars that potentially can flow from it.
This rush to gold pushed up Nintendo stock 25% on the day the game app was released, and, as of this writing, it continues to climb. Investors are just as frantic as their kids to get in on the action. In the frenzy, many may have overlooked a key issue. Nintendo does not own the game. Though details are still not fully known, apparently Nintendo will receive a licensing fee, but the bulk of the profits will be going elsewhere. Additionally, I wonder if investors are considering the product shelf life. The digital age can make overnight billionaires, but also overnight paupers. Just ask the folks over at Myspace about that.
In economics we have a term known as “substitution.” It refers to how easily one product is replaced with another. Someone who owns a Ford for example might decide next time to buy a Honda. With cars it takes time and effort to replace a product. With a digital app it can literally happen in seconds.
A news article years ago showed a huge pile of rocks outside the Pet Rock company that were destined to spend their lives as mere rocks, since the fad had ended. When I see kids searching for Pokémon today I wonder what they will be searching for tomorrow. Today’s digital consumer has unlimited choices, and very little loyalty. Before you jump on the Pokémon bandwagon, ask yourself a simple question. Is it likely kids will be searching for these things a year from now? Now ask, is it likely kids will still be asking to go to Disneyland a year from now? How about 25 years from now? Be careful where you choose to invest your money, and especially careful if you are looking to catch the next craze. You may do well, or you may be left with a huge pile of worthless rocks.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
Member www.finra.org / www.sipc.org , a Registered Investment Advisor. Wyson Financial, 1173 S. 250 W. Suite 505, St. George, UT 84770.
This communication is strictly intended for individuals residing in the states of AZ,CA,CO,DC,FL,HI,ID,IL,KS,KY,MA,MI,MN,MO,MT,NE,NM,NV,OH,OR,SD,TX,UT,VA,WA,WY. No offers may be made or accepted from any resident outside these states due to various state regulations and registration requirements regarding investment products and services.