Sponsored locations are not new to Pokémon GO and other Niantic games, but currently only major brands like Starbucks and McDonald’s are able to sponsor locations.

As TechCrunch’s Greg Kumparak explained, “‘Sponsored’ locations tend to have slight perks over their non-sponsored counterparts. Sponsored gyms in Pokémon GO, for example, are almost always ‘EX Raid’ locations — which in GO-speak just means that battling there might get you a ticket to a bigger, badder, invite-only boss battle in the weeks that follow. Sponsored fortresses in Harry Potter: Wizards Unite give out more XP and more of the spell energy required to play.”

Additionally, businesses will be able to schedule Pokémon GO raids, which require more players, as well as offer deals, such as promotional discounts, to players. According to a page on the Niantic website, businesses will have two plans to choose from, one costing $30 per month and another costing $60 per month. The latter gives businesses a gym instead of a standard Pokéstop, and it includes the ability to schedule a one-hour raid each month.

The logic behind sponsored locations is straightforward: businesses can take advantage of the popularity of location-based games to drive foot traffic to their stores and, hopefully, convert some of that foot traffic into sales.

While the Pokémon GO craze of 2016 has long subsided, the game is still popular and has the potential to put businesses on the map, literally. Even so, it isn’t clear whether this form of location-based marketing is a good idea for most SMBs.

A Starbucks sponsored Pokéstop in Pokémon Go

The Groupon effect?

Foot traffic is critical for brick-and-mortar SMBs, so any location-based marketing solution that promises the ability to drive more of it is bound to be of interest.

This value proposition led to the rise of daily deal pioneer Groupon, which is said to have been one of the fastest growing companies in history. Groupon promised businesses that it could get a ton of customers through their doors, and quickly — a dream come true for many business owners. In exchange, businesses had to allow Groupon to offer its large audience significant, time-limited discounts and give Groupon a substantial cut of the revenue it generated.

Despite the fact that Groupon’s offer meant businesses were drastically cutting their margins, or in some cases losing money, many were eager to play ball with Groupon because they believed that they would be able to turn Groupon customers into long-term customers.

In actuality, many businesses were overwhelmed by their Groupon customers, resulting in an inability to serve all of their customers well or at all. In some cases, businesses saw negative online reviews surge as their service quality declined at peak times.

In the end, Groupon became a case study in the wisdom of the old adage, be careful what you wish for.

While sponsored locations in Pokémon GO are unlikely to create the kind of traffic spikes that Groupon was capable of creating during its heyday, it’s hard to ignore the fundamental similarities: the promise of increased foot traffic, with discounting one of the tools used to convert that foot traffic into sales.

Businesses should also reflect on whether attracting gamers to their location will translate into long-term revenue or meet business goals. Is there an overlap between the gamer audience and their target customers? Could gamers’ presence in the business be off-putting to other customers? Is using tools like Pokémon GO raids a way to increase demand during off-peak times, or is it an attempt at masking larger problems?

For businesses that do see the potential for sponsored locations to be of benefit, the lessons of Groupon are worth heeding. Be prepared to deal with unpredictable spikes in foot traffic and have a plan in place for trying to generate repeat business that isn’t discount-driven.