It's worth noting that the franchise was hardly an immediate success in Japan, either. It didn't pick up steam until it had been out for a year or so; then it exploded. The anime is often credited as being the thing that really caused it to take off. Part of the problem in the US, though, is that the anime is actually sort of hard to find. Pokemon originally aired on a basic channel in the US; anyone with a TV could watch it. YW airs on cable, and on a non-basic channel at that (Disney XD). Not sure about in other countries, though.

Of course, one of the real big problems, IMO, is that English-language gamers are INCREDIBLY defensive about this series and many more enfranchised gamers refuse to give it a chance. Due to its popularity in Japan, YW started outperforming other children's media properties, the most well-known of which just happened to be Pokemon. In particular, it started outselling it in some of the areas Pokemon traditionally dominated, such as licensed character bread (a real thing that's very popular in Japan.) Some news outlets reported on this, in a "Hey, this up and coming property is doing better than Pokemon in some places" and the Western gaming world seemed to collectively freak out and think that Yokai Watch was a "threat" to Pokemon and/or was actively intended to be a "Pokemon killer." Neither of which is true: Pokemon is still beloved, though it now tends to be popular with an older demographic (YW DOES actively appeal to kids who don't feel they can connect with Pokemon because of how much the older, young-adult and otaku fanbase dominates it), and the games themselves were designed more to interest kids in Japanese mythology and to convey the idea that you can have adventures, even if you live in a city (since YW is about exploring a big city, instead of forests/mountains/caves like in Pokemon). But Western gamers still seem to have gotten the idea into their head, so one of the big demographics who usually leaps on new RPGs in the West (enfranchised gamers) isn't biting.

I think the series does still have potential in the West, and I think a bit more time will bring it out--it wouldn't hurt if the official channel was quicker about getting the episodes online, either. The anime is a pretty quality dub job (good voice acting, funny writing, minimal censorship which means a LOT adult jokes gotten past the radar) and the game is honestly really awesome. I think it's a prime example of how to do a kid's game right in a lot of ways. I don't know if it has the potential for being a huge-scale hit, but I just hope the series does well enough that the other installments in the franchise get localized. I'm really looking forward to YW2 now, and I'd just like the opportunity to play it in my native language....