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How the Pokemon craze is becoming a money gusher for some companies

As usual in the digital age, there are a bunch of people walking the streets glued to their phone, but there's a new reason for them to do so.

Rather than surfing Facebook, Twitter or Tinder, there's a good chance these pedestrians are trying to catch "Pokémon," i.e. the pocket monster characters in the latest mobile game craze "Pokémon Go."

The popularity of the game is immense: As of July 13th the game had just under 26 million people actively playing in the U.S. To put that in perspective – more people use the Google Maps technology in Pokémon Go than the actual maps app, according to one recent survey.

It's so popular, the demand iscrashing the game maker's servers, causing the company to delayreleases in other countries.

So what's causing the craze? Recode's managing editor Edmund Lee told CNBC's "On the Money" there are two main drivers fueling the phenomenon, which is based on the "augmented reality" created by combining real geography and computer generated data.

"Pokémon is a well-known franchise; it's been around for decades…there's a nostalgia factor," Lee explained. Pokémon Go uses Google technology and adds a Pokémon overlay to everyday landmarks, meaning the characters can literally be found anywhere.

In addition, "it's really easy to play, it's intuitive, you don't need to figure out too many of the game play dynamics," Lee added. "You download it, play with it for a minute or two and you figured it out."

While the game will remain popular, Lee predicted at least some of the initial players will drop off after a week or two of playing. "It's not going to be a mass, mass thing, but clearly it's big enough to show that this augmented reality thing isn't a passing fad." He added: "We'll find new ways of how it will be expressed in technology."


Players of the game can buy virtual goods with real cash to help advance to new levels. And the revenue benefits several companies.

First there's Pokémon Company which licenses the characters. There's also a start-up from California called Niantic, which developed the game. Nintendo has a 32.8 percent stake in the Pokémon Company, as well as an unidentified stake in Niantic.

The game is either accessed by Google's Android or Apple's iOS platform. Each of these companies take a 30 percent cut from transactions made in the game. To some extent, local business have been cashing in as well.

"Your local pizza parlor could buy into the game in terms of setting up your shop as a 'stop' a place where you can find Pokémon, or create what you call a 'gym' where you can develop more abilities for the game," said Lee.

But is it a cash cow for these businesses? Lee said he's skeptical it will actually increase sales for these businesses in a significant way.

"I think a lot of people who are playing this game, who are really interested, don't care what the business has, I think you just want to go and 'level up' sort of speak, and move on from there," he added.

Yet McDonald's seems to disagree, since the company plans to be an official sponsor of the game in Japan. The Golden Arches has plans to turn their 3,000 locations into virtual "gyms"—which is likely to lure in hungry trainers.

Pokemon Go players meet at Sydney Opera House on July 20, 2016 in Sydney, Australia.
Brendon Thorne | Getty Images
Pokemon Go players meet at Sydney Opera House on July 20, 2016 in Sydney, Australia.

Pokémon Go has given a very wide audience an introduction to augmented technology. But Lee said it won't stop with games. Tech giants are banking on this to be the next big thing in the way we access information.

Lee says companies like Facebook, Google, Apple and Amazon have already poured tons of money into the general technology of virtual reality. "There's too much investment in this space for it to just be a fad, for it to be just a game."

So where will we see the technology next? Only the future will tell.

"We went from desktop computers to smart phones and everyone now is looking for what is the next way people will access information. It could be virtual reality or augmented reality," Lee told CNBC.

"Artificial intelligence is another way it might happen in terms of voice commands with your phone or some kind of home device," he said. "That's why there's a keen interest and you're going to see more to come for sure."


On the Money airs on CNBC Saturdays at 5:30 am ET, or check listings for air times in local markets.