Nintendo's ambitious bet on smartphone apps isn't paying off

Nintendo

• Nintendo is shutting down Miitomo, its freemium social networking app.
• It has previously said that "Super Mario Run" hasn't made enough money.
• "Animal Crossing: Pocket Camp" doesn't appear to be performing well either.
• But the Nintendo Switch is a smash hit that makes up for all of it.

Nintendo has been trying to add a suite of "freemium" smartphone games to its list of titles - but it looks like the company is struggling to make its strategy pay off.

The company announced on January 24 that it will close its Miitomo social networking app on May 9, just over two years after the game launched. While Miitomo was more of a social network than a traditional game, the app still followed a freemium monetisation strategy wherein it was free to play, but dedicated players could spend money for extra features.

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So, Miitomo was a failure. Fine, Nintendo can cut its losses and move on. But its two big-ticket smartphone games aren't performing well either.

'Super Mario Run' isn't making enough money for Nintendo's liking

Take "Super Mario Run," the company's attempt to bring its "Super Mario" series to smartphones using a freemium model that gives players a handful of levels to play for free before they have to pay up for the entire game.

For Apple, "Super Mario Run" was a major coup. Here was a new game in a beloved series from perhaps the world's best-known video game developer, launching first on the iPhone. It was such a big coup that Apple invited Nintendo executive and "Mario" creator Shigeru Miyamoto on stage at its September 2016 keynote to announce it.

Stephen Lam/Getty Images

Shigeru Miyamoto and Apple CEO Tim Cook in 2016.

But in October 2017, just over a year after "Super Mario Run" was released, Nintendo admitted that the game just hadn't performed well enough. "Although we have not yet reached an acceptable profit point," Nintendo said in its earning presentation, "we have learned a lot in terms of game development that we want to take advantage of moving forward." Translation: We haven't earned enough money yet, but it was a useful experiment.

That's backed up by data from mobile gaming analytics firm Newzoo. It estimated that Nintendo had only brought in around $30 million (£21 million) from people paying $10 (£7) each for the full "Super Mario Run" game. Newzoo estimated Nintendo's conversation rate for players paying to upgrade to the full game at just over 3%.

'Animal Crossing: Pocket Camp' isn't a smash hit either

Nintendo had another go at making its smartphone game strategy work in October when it released "Animal Crossing: Pocket Camp." Unlike "Super Mario Run," the freemium mechanic of this game wasn't a one-time payment. Instead, players are regularly encouraged to pay for bundles of bonus items as they play through the game.

But data from app analytics company App Annie shows that "Animal Crossing: Pocket Camp" hasn't set the US App Store on fire.

Here's the US App Store rank history for the last 90 days of "Animal Crossing: Pocket Camp":

App Annie

The game had an impressive launch and was at the top of the overall US App Store, but cratered to 823 on January 20 before recovering to 391 in recent days. It's not a particularly impressive position, especially when compared to "Super Mario Run":

App Annie

"Super Mario Run" hasn't left the top 200 apps in the US App Store - and this is the app that Nintendo said wasn't making enough money.

But let's look at Apple's grossing ranks for the US App Store, which sorts apps by how much money they're bringing in.

Here's "Animal Crossing: Pocket Camp":

App Annie

Now let's compare that with "Super Mario Run":

App Annie

"Super Mario Run" is hovering relatively steady over time between the 300 and 400 positions. But "Animal Crossing: Pocket Camp" has seen a pretty big decline in just two months, meaning its earnings are dropping. It's not looking good.

'Pokémon Go' isn't going to be Nintendo's smartphone saviour

It must be worrying for Nintendo that the only Nintendo-related smartphone game that has truly become a hit, "Pokémon Go," wasn't even made by Nintendo. Instead, it was made by US startup Niantic.

Sure, Nintendo earns money from licensing out the Pokémon brand, but it said that the revenue from "Pokémon Go" only has a "limited" impact on its business, and it wasn't enough to adjust its earnings forecasts. Instead, Niantic gets the lion's share of "Pokémon Go" revenue - and Apple takes it cut of that. Nintendo is largely left out of the phenomenon.

Maybe it's only the Nintendo Switch that matters

AP/Koji Sasahara

Nintendo's stagnant smartphone games shouldn't be a sign to investors that the company is doomed. Instead, just look at the Nintendo Switch, the company's latest games console. In short: It's a smash hit.

The Nintendo Switch is the fastest-selling video game console in US history, and has sold nearly 5 million units in the US alone since its launch in March last year. It's selling so well that Nintendo had to revise its international sales estimates upwards from 10 million to 14 million.

And those sales don't yet include Labo, Nintendo's new plan to sell cardboard kits that expand how people can play with their Switch. Those kits will sell for $69.99 (£49.03) and $79.99 (£56.04) in the US, giving the company more revenue from new and existing Switch customers.

The success of the Switch has meant that Nintendo raised its full-year operating profit forecast for 2017 to 120 billion yen ($1.1 billion, £773 million). That makes the estimated $30 million it earned from "Super Mario Run" look completely insignificant in comparison.