Pokemon Go players are seen in search of Pokemon and other in-game items in the Pasadena Playhouse District.
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Niantic, a mobile games developer based in San Francisco, announced Thursday that it would lay off 230 employees as part of a reorganization.
The privately held company will also cancel NBA All-World and stop production on a Marvel-based title that has not yet been released, according to a note from CEO John Hanke. It will also shutter a Los Angeles-based studio, where most of the affected employees are based.
The move highlights how the mobile games industry has shifted in the years since Niantic landed its first major hit, Pokemon Go, in 2016. Since then, both Apple and Google’s app stores have introduced changes that prevent advertising tracking among apps, which has made advertising to gain new users more expensive and unpredictable.
Hanke said the reorganization was due to both “internal and external factors,” including an overall global macroeconomic slowdown.
“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.
Niantic said Thursday that supporting Pokemon Go is the company’s “top priority.”
Overall, App Store spending on games declined 5% in 2020 to $110 billion, according to an estimate from Data.ai, a research firm.
The move also signals a shift in the landscape for augmented reality applications, which can integrate computer graphics and data into the real world.
Pokemon Go can display a digital monster interacting with the real world through a phone’s screen. But the technology is starting to be integrated into headsets or goggles that use powerful cameras to integrate the real and virtual worlds, which many in Silicon Valley see as the next major computing platform. Earlier this year, Meta released its Quest Pro headset and early next year, Apple will release its long-awaited Vision Pro headset.
Hanke’s letter says these new hardware products validate Niantic’s strategy, but that it’s only an “intermediate stepping stone” to true outdoor AR devices, which likely will resemble a lightweight pair of glasses with transparent displays.
“We believe that we can build key content and platform services that will help realize the promise of this technological shift,” Hanke wrote.
Still, Hanke wrote, the AR market is “developing more slowly than anticipated, because of technology challenges and because larger players are slowing down their investments in light of the macro environment.”
Niantic had 1,050 employees as of 2022 and last raised $300 million at a post-money valuation of $9 billion in November 2021, when tech valuations were at their frothiest peak, as per Pitchbook.
