2010 LBS Market Showed So-So Gains
GPS World
December 14th, 2010
There were no big LBS contracts, mergers, or acquisitions in 2010. Nada, nothing, zilch. While many in the industry were concerned with Google's inroads into navigation and other services, some industry execs said that social networking co-mingled with LBS is the way of the future. They contend that navigation is just a small piece of a potentially larger location market. However, the numbers just don't bear that out yet as navigation continues to be the one niche that consumers know about and are willing to purchase. This all may change in 2011.
As the year ends, 2010 has been characterized as one which location-based services did not have the big buzz that many industry analysts and company executives believe it should have. In fact, recent studies have indicated that only 4 percent of the U.S. population are using location-based social networks, which some analysts say are the real way of the LBS future.
"In reviewing the 2010, it's my opinion that there was neither a defining moment nor an acquisition that dramatically impacted the market for LBS. Perhaps it was what did not happen in 2010 that should attract our attention," said Mike Dobson, TeleMapics president. "I was surprised that no one acquired Tele Atlas from TomTom and was equally intrigued that Nokia did not move to integrate Navteq more closely than it has so far."
Dobson believes that the biggest mystery in 2010 was Apple's development of its location services with little fanfare - particularly about any future rollout of its new mapping/navigation/search platform. "I don't expect Apple's entry to the location market to harken a sea change in the industry, other than as a part of the 'iMania' that continues to sweep the nation. Indeed, it seems that the most interesting moves this year have been related to the companies and organizations providing the spatial data that support all LBS applications and platforms," he said. "I thought that it was an adroit move on Microsoft's part to hire Steve Coast, founder of OpenStreetMap (OSM), as principal architect for Bing Mobile. Curiously, Steve's wife, Hurricane, is working with AOL/MapQuest in its adaption of OpenStreetMap in a series of beta sites in Europe that are running in parallel to its standard sites that use Navteq data. In addition, AOL is using OSM as the mapping and data engine for Patch, AOl's online neighborhood social/local offering."
Dobson asked now that Google has its own map base in the United States and Microsoft and MapQuest are cozying up to OSM, what kind of a future is ahead for Navteq and TomTom-Tele Atlas? "The truth of the matter is that neither Navteq nor Tele Atlas ever depended on online services for a majority of their revenue. It appears that logistics companies, in-car navigation companies, and others with a mandate to serve paying customers who expect performance from their navigation applications are, at least for the present, sticking with the commercial navigation database providers," he said. "Navteq also has some benefit from being associated with Nokia and through providing OVI maps to Yahoo. Tele Atlas seems to be in a bad place, but TomTom is making some headway in the OEM in-car market and may yet resurrect itself."
Dobson said that Google continued to bungle its mapping efforts in 2010, but the amount of money it is spending to improve its product is slowly leveling the playing field. "Many analysts and competitors - for example, Microsoft - are thought to believe that Google is within 12 to 18 months of having a product that is competitive with the databases of Navteq or Tele Atlas. Of course, that supposes that Navteq and Tele Atlas are standing still, and it appears that Navteq is doing anything but that with the release of their new-generation mobile data collection vans," he said. "However, it is my understanding that the new vans are a joint effort with Bing. Yes, the same Bing that is now playing with OSM. Tele Atlas, as far as I can tell, is standing still, but Map Share gives them an advantage that may yet rescue them from oblivion."
Dobson said that the most disappointing thing that happened this year was that LBS appears to be slowly losing its identity. Said Dobson: "Yes, there are more applications that depend on location than ever before. Yes, even Facebook is location based. Yes, every time I use my iPhone some app or another is asking to use my location, but most of these apps were built by people who have no idea that there is such a thing as location-based services."
Dobson said that the concept of mash-ups, and being able to harvest the cloud to grab a piece here and other piece there, helps produce some interesting applications involving location. "However, none of them appear to satisfy the promise inherent in the term location-based services, probably because there are so few people who understand how a sophisticated LBS application should work and the rewards that making one would bring."
Dobson said his crystal ball for 2011 is fuzzy at the moment. "I suspect that the industry will begin to focus on the use of crowdsourced data and whether the terms authority and authoritative continue to have a place in location applications, or whether they and the concepts of map accuracy are of measurable importance to the users of location-aware applications," he said.
2010 a Year of Some LBS Success
Depending on who you talk to, 2010 was a year that was full of expectations not met in many cases. "We expected the big deal in 2010 to be the mobile operator's walled-garden approach to location, and other apps coming down completely. Although that didn't happen, we saw positive momentum and believe that the operators are well-positioned to make further strides in 2011," said Bhavin Shah, Polaris Wireless executive director, marketing and business development. "With Verizon's LTE announcement, AT&T testing LTE, and T-Mobile claiming 4G status, advanced networks able to power advanced apps are on the way. The move toward location-based mobile apps for social networking, such as Gowalla and Foursquare, has already primed consumers for further LBS takeup. These apps also demonstrate the value of high-accuracy location for other purposes, such as mobile marketing."
Shah believes that 2011 will be the year mobile marketing takes off, with wireless operators going on the offensive to reclaim market leadership in LBS away from the app stores.
One company, Where, says 2010 was a monumental year. "We've more than doubled our staff to more than 75 people and have increased revenue 350 percent from last year," said Dan Gilmartin, Where vice president of marketing.
"I expect to see the growth trends continue into 2011, fueled by the accelerated rate of adoption of smartphones driving more engagement of location-based services. The two areas that I think will get a lot of attention in 2011 are location-based advertising (LBA) and mobile commerce," he said. "Every analyst report for the last 5 years has predicted that 'next year' LBA will take off. Well, a lot of us have been waiting for next year for many years. In 2010 however, we have seen more companies, big and small, increase their test budgets and begin to focus on the ROI (return on investment) of LBA."
Gilmartin believes the increases in LBA are largely due to reach. "In 2010, advertisers finally started to see opportunities that provided enough reach to warrant the investment. Relevance has become a key area in mobile in 2010 and will continue to play a role in the increase of LBA," he said. "Brands can leverage relevancy - which includes location - to better target ads to an appropriate audience. With LBA gaining steam from increased reach and relevancy, redemption or mobile commerce will not be far behind. In 2011, we will see location based ads/offers presented to users with a means through which consumers can purchase the product/service, paving the way for what many are predicting - the phone replacing the wallet."
In-Vehicle Technologies on Upswing in 2010
In 2010, more consumers were putting in-vehicle technologies back on their list of options to want to get in their next new vehicle purchase, said Thilo Koslowski, Gartner vice president. He said that Gartner's analysis shows that U.S. consumer demand has once again reached the levels of early 2008, which underlines the company's conclusion that the majority of vehicle ICT features have yet to achieve "must-have-options" status for vehicle buyers.
"Automakers need to be aware of this dynamic when it comes to offering vehicle ICT features in 2011 and beyond. Another positive development is that U.S. consumer interest in vehicle ICT features not only has been restored overall, but also has increased for less mature functional categories such as digital media player integration and in-vehicle Internet usage," Koslowski said. "These new categories in particular offer the automotive, vehicle ICT, consumer electronics, and telecommunications industries new differentiation and revenue opportunities for the coming years. While consumer interest in new features is rising, some more mature in-vehicle technology options seem to have peaked. This is especially true for traditional safety- and security-centric offerings and even basic navigation, which continue to take a leading position on consumers' wish lists in 2010 but have been virtually stagnant when compared to pre-recession consumer interest levels."
In 2011 and beyond, Gartner predicts consumer interest increasing for infotainment and web-application-based in-vehicle features. "For the automotive and vehicle ICT industries, this all means that companies have to focus their efforts on defining ecosystems, understanding consumer needs and wants, and tackling UI issues to avoid potential legislation aimed at reducing driver distraction, which may threaten the entire space," Koslowski said. "Electric Vehicles - albeit not growing rapidly - will further emphasize the importance of in-vehicle technologies."
Polaris' Crystal Ball Is Working Overtime...
In 2011, Polaris Wireless' Shah believes three areas will fuel the LBS market:
1) Cash-rich enterprises fuel surge in mobile B2B marketing. In 2010, non-financial companies were sitting on more than $1.8 trillion in cash and, while many are still reluctant to spend this reserve on substantial hiring, Polaris Wireless predicts that some of this cash will be used to fuel a surge in B2B-focused mobile marketing. Business users comprise a large portion of location-enabled smartphone users (according to AT&T, 4 of 10 iPhone sales are to enterprise users), providing a ready-made audience for B2B companies wishing to tailor their marketing efforts. As with consumers, high-accuracy location is key to a successful campaign. Better targeting equals a more successful marketing campaign and businesses are looking to maximize their marketing spend. Mobile B2B marketers can use location to identify and alert trade show attendees to visit a company booth or, combined with other smartphone capabilities like search and apps downloads, build a profile of sales leads. B2B firms have already demonstrated willingness to use social media, online forums, and virtual events such as webinars to market their products. Mobile marketing is the logical next step.
2) The "virtuous cycle" is recognized as the business model for mobile advertising. Advertisers will increasingly turn to high-accuracy location to analyze and improve marketing campaigns. Polaris Wireless believes that every savvy marketer knows that measuring the effectiveness of a marketing campaign is difficult to do but absolutely necessary, especially in the current environment of shrinking ad budgets and reluctant consumers. Mobile marketing is no exception. The "virtuous cycle" business model illustrates the importance of injecting high-accuracy location into mobile advertising. The unique attributes of mobile marketing campaigns lend themselves to robust analytical analysis - if high-accuracy urban/indoor location capabilities are part of the wireless carrier's arsenal. One can measure how many shoppers in a mall the day after Thanksgiving responded to a text alert from an advertiser, or how far someone was willing to travel to a store location after conducting a search via smartphone. Location even works with non-mobile marketing (imagine using location to measure traffic passing by a billboard, eliminating the time-consuming and expensive practice of counting cars). The good news for wireless operators is that, with high-accuracy location capabilities, they are already collecting this data. They must package it, educate advertisers to its importance, and price it accordingly.
3) Location-based mobile marketing goes green. According to the U.S. Postal Service, in the United States $19 billion is spent annually in direct mail, and households receive 85 billion pieces of direct mail each year. This represents a significant drain on resources for paper, printing, and transportation. Enter mobile marketing, which responds to a common consumer irritant - the flood of direct mail marketing pieces that intensifies during holiday season. By setting preferences and filters, we are all moving towards a more contextual mobile experience that includes location and provides targeting capabilities that advertisers cannot achieve with traditional paper-based campaigns. With direct mail in decline, 2011 is the year mobile marketing goes green. Increasing adoption of smartphones has left subscribers in control of what information they receive. While green ad campaigns were all the rage a few years ago, the public soon caught on and is skeptical of any attempts at "greenwashing." Polaris Wireless predicts that advertisers will increasingly "brand" campaigns and products as explicitly green and call out competitors who don't use mobile marketing. Those in the vanguard include youth-focused and tech-savvy companies with a green track record such as Diesel clothing and Nike. Companies that tie in location to bolster their green credentials will be even more successful.
