TheChek News Flow

Pokémon Go has brought millennials out of the house — and the next step is to get them shopping.

Marketing gurus predict Nintendo’s surprise mobile-gaming sensation will become a powerful engine for retail shops, restaurants and consumer brands, which have long struggled to spark spending habits among younger consumers.

Indeed, Pokémon Go could become a $1 billion business within a year as local coffee shops, big discounters and fast food chains alike shell out fees to become physical destinations for Pokémaniacs, according to United Entertainment Group.

“This is becoming like a second universe where consumers are more comfortable being marketed to,” says Jarrod Moses, the New York marketing firm’s chief executive.

As much as half of the app’s revenue could eventually come from advertisers, Moses estimates.

As such, Pokémon Go has the potential to out-market the likes of Snapchat, where brands like Gatorade and Taco Bell have persuaded users to take photos of themselves through “lenses” of animated coolers and tacos hundreds of millions of times.

Since Pokémon Go’s launch last week, mobile users are spending twice the amount of time in an average session as they do during an average Snapchat session, according to research firm SimilarWeb.

In a hint of what’s to come, venues from Cinnabon to the Strand Bookstore have beckoned obsessed players on social media with promises they’ll find rare varieties of the animated characters that populate the game.

“It’s a fun and interesting way to market your business to a select demographic,” says Steven Rosenblatt, president of New York-based Foursquare, the location-based discovery app. “Some are already doing it by offering discounts to players who catch Pokemon there,” he adds, likening Pokemon Go to the check-in features of Foursquare’s real-world Swarm game.

Hoopla over Pokémon’s runaway success has boosted Nintendo’s market capitalization by more than 30 percent, to more than $30 billion, since its launch last Wednesday.

The size of Nintendo’s share of Pokémon Go isn’t clear, as it splits ownership with Google — a backer of the game’s creator, Niantic — as well as Tokyo-based Pokémon Co.

Still, some investors see reasons for Nintendo’s run-up to continue.

The Pokémon Go franchise could swell to a $3 billion business within three years as Nintendo rolls out licensing deals, a movie, a TV show and a slew of action figures and plush toys, according to Moses.

Still, others warn that Pokémon Go and its prospective sponsors face potential hiccups, as the game has also been exploited by criminals to lure robbery victims. Law enforcement officials likewise have urged players not to drive or wander into traffic while playing.

“There’s a huge amount of interest” in Pokémon Go among advertisers, says Mike Gamaroff, senior vice president of channel strategy at Sito Mobile.

But, just as Snapchat faced hurdles over its early reputation as a sexting app, Pokémon Go will likely be forced to ensure the safety of players with registration and user-verification requirements, he said.

“They have a lot of cleaning up to do, a lot of checks and balances to create,” Gamaroff said.

Nintendo’s ADRs, up 55 percent over the past five trading days, slipped 11 cents on Tuesday, to $27.59.

The attorney general’s office is threatening to take the trustees to court if they don’t make governance reforms at the trust by the end of the month, according to people familiar with the matter.

Such legal action might not directly affect the chocolate maker, which recently spurned a $23 billion takeover offer from Mondelez. But it would be a potential distraction for the trust at a critical time.

Mondelez, whose brands include Oreo cookies, hasn’t dropped its pursuit of Hershey, and could raise the offer if it sees an opening, said two of the people familiar with the matter.

Meanwhile, because of pressure from state regulators, the trust could lose three longstanding board members, after losing four members since December, including one last weekend.

A spokesman for the trust, one the nation’s richest charities, said the board is in talks with the attorney general’s office and hopes to reach a resolution.

The trust, which has a roughly 30% stake in the company and 81% of its voting power, was thrust into the spotlight by the Mondelez bid. Hershey’s corporate board, which includes three representatives of the trust, unanimously rejected the offer.

The trustees are under pressure to keep Hershey independent. The 122-year-old company provides 5,000 jobs and is a major source of pride in its hometown, where street lights along Chocolate Avenue are shaped like Hershey’s Kisses. But the trustees also have a legal obligation to maximize revenue for the trust’s beneficiary, a local school for underprivileged children.

In 2002, a previous state attorney general pushed the trust to sell the company to diversify its assets. Amid the resulting political backlash, the attorney general did an about-face and won an injunction in state court that effectively prevented the trust from selling Hershey to suitor Wm. Wrigley Jr. Co.

“We think the outcome will be the same: no sale of Hershey,” said Pablo Zuanic, a food analyst at Susquehanna Financial Group. “True, the Mondelez approach is well-timed, given the slew of challenges faced by the Hershey Trust…but there are too many, mostly political, variables that would need to come together.”

The trust was established in 1909 by company founder Milton Hershey, who used his fortune to benefit an orphanage for boys. It later became the Milton Hershey School. Proceeds from the trust’s investments provide the revenue to run the school, which is now co-ed and has about 2,000 students.

But infighting and scandals have plagued the trust’s board for years.

In 2010, regulators announced an investigation into the trust’s 2006 acquisition of a golf course adjacent to school property for $12 million—more than twice the appraised value. The school built a $5 million clubhouse, only to close the course a few years later to build student housing.

Dozens of local businessmen and doctors, including Hershey’s chief executive at the time, benefited from the deal because they owned shares in the golf course, according to an investigation by the Philadelphia Inquirer.

The attorney general’s office struck a deal with the board in 2013, which required trustees to adhere to stricter conflict-of-interest standards and limited base pay for board members to a $30,000 retainer each.

Few other large charities pay their board members, including Ivy League schools that manage multibillion-dollar endowments.

In the year prior to the agreement, four board members earned more than $250,000 from various Hershey boards, including one who received more than $1 million in compensation, according to the charity’s tax returns.

Earlier this year, the attorney general’s office sent the charity a letter accusing it of failing to adequately reduce compensation, among other concerns.

In addition, it called for the resignation of three board members because they have served for more than 10 years, including former chairman Robert Cavanaugh, who also sits on Hershey’s corporate board, and the trust’s current chairman. None of those three board members have resigned.

Around the same time, regulators began digging into an internship then-chairman Mr. Cavanaugh helped acquire for his son with a company client after other disgruntled board members raised the matter, according to documents reviewed by The Wall Street Journal.

Mr. Cavanaugh didn’t respond to a request for comment.

Last year, four trustees, two of whom have since resigned, wrote a letter to the board’s head of governance, saying the board had “been required to devote substantial time, effort and trust resources on internal investigations, intrusion on management and infighting.” The divisiveness has “paralyzed us as a board,” they said.

In a more recent development, the state attorney general’s office has warned it will pursue court action if it can’t reach a settlement with the trust to remove the board members who have served longer than a decade, and comply with the other governance reforms, people familiar with the matter said.

Even if the trustees should be persuaded to approve a sale of the company, the attorney general could challenge the sale, thanks to a quirk of Pennsylvania law. Trustees would have to prove in the local Orphan’s Court that the sale was in the best interest of the charity.