Pokemon Go was an April Fool's joke before it became a huge hit

In 2014, Google unveiled "Pokemon Challenge" for Google Maps complete with a promotional video, inviting users to find and capture the cutesy fictional monsters within the application. The feature was active for a short while before it was turned off.

But John Hanke, chief executive officer of Niantic Labs, took it seriously. The company that was then part of Google had already scored a hit with the location-based game Ingress, and combining the world of Pokemon with such gameplay was an obvious step. He asked Masashi Kawashima, director of Asia Pacific for Niantic, whether "it could be done in the real world."

Pokemon Go has grabbed peoples' attention by blending the spheres of Pokemon and mobile gaming. There's a ready-made generation of fans, nurtured on playing cards, video games and cartoon shows, familiar with the story-line of finding, training and pitting "pocket monsters" against each other. With the new game, players are encouraged to traverse their physical surroundings, phone in hand, to find new characters. The game's exploding popularity has sent people into bars and pizzerias, led to the discovery of a dead body and may even be helping robbers target victims.

"This is probably the first smartphone game that has spawned a social phenomenon," said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo. "The key thing is that this is happening globally. And Nintendo has proven that it can still come out with hits that have broad appeal and can earn money."

Nintendo Co. was at the nexus of the efforts to introduce Pokemon Go. A team of developers from Nintendo, Pokemon Co. (which is partly owned by Nintendo) and Niantic was assembled to build the game.

In 2015, Niantic was spun out of Google, backed by funding from Nintendo, Google, Pokemon and other investors. The project had the full support of Satoru Iwata, Nintendo's president who died last year. Iwata, who was instrumental in turning Nintendo around by bringing hits such as the handheld Nintendo DS and motion-based Wii to market, had always advocated for games that got people out of their seats and moving. In an online blogpost, Kawashima invited the late company helmsman to "please watch from the sky, as we find out how many people start going outside."

"Iwata-san and John (Hanke) spoke several times," Kawashima said in an interview. "They were in complete agreement that the game should be something that lets families play together, and connects people. That left a strong impression on me." READ: How to play Pokemon Go

While Pokemon Go is free to download, people can enhance their performance within the game by buying Pokeballs and other items that make it easier for players to find and capture Pokemon. That's helped boost Nintendo shares by more than 50 percent since Wednesday, when the game debuted in the United States, Australia and New Zealand and shot to the top of download charts.

Niantic was already familiar with the challenges of building an app that combines real-world locations with game play, having amassed more than 14 million downloads for Ingress. That game, which is being played in more than 200 countries, requires players to move through cities and towns to capture "portals" at landmarks such as public art institutions or monuments, essentially turning the entire world into a virtual game board. The same idea has been applied to Pokemon Go.

Even before it was spun out of Google, Niantic was formed as an internal startup by Hanke, who joined Google in 2004 when he sold the mapping company he founded, Keyhole Inc., to the search giant. Keyhole later become Google Earth, and its core technology was used for Google Maps and other location-based products from the web company.

Niantic, named after a whaling vessel that berthed in San Francisco during the California Gold Rush, got as much as $30 million in its first round of funding after separating from Google last year. Earlier this year, Hanke mapped out his ambitions for the company, saying that new software and hardware will soon emerge that will "blur the lines between games, cinema, apps, fitness and even navigation and commerce." That's also strikingly similar to Iwata's vision.