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Lowenstein: What's next for location-based services?
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We are at an important fork in the road with respect to location-based services. LBS has been in our nomenclature for about ten years, even before GPS capabilities were in phones. But we have reached a tipping point recently. The majority of devices being shipped are GPS-capable; vehicle-based and portable navigation devices are closing in on mass market penetration; and a wave of exciting and innovative applications leveraging location is available from the various mobile "app stores." The wireless industry has been investing in this area big-time, from Nokia's acquisition of Navteq a little over a year ago to Ericsson's recent deal with Networks in Motion and Google's launch of the Latitude service.
At the same time, location services have proven difficult to monetize. Only about 10 million customers in North America pay a monthly subscription fee for a distinct location-based service, such as Verizon Navigator or AT&T Navigator, the WHERE Widget platform, friend finder, or Loopt. The venture capital community, with whom I work closely, believes location is one of the "next big things" in wireless but has been frustrated by the apparent lack of good investment opportunities in this area.
What's the next stage? Starting from a glass half-empty perspective, I am not optimistic that there is a large market for subscription-based LBS. To begin with, the growing number of portable and vehicle-based GPS devices compete directly with the services being offered by wireless operators, as are the myriad free navigation services that smartphone users can download. Beyond navigation, I have not seen any "killer location app" that I believe has the potential for mass-market adoption. Rather, location is a capability that will be woven into a large family of potential applications and services. I also believe, as a general trend, that the mobile data pricing model is moving away from subscriptions for particular applications to a combination of flat-rate data plan subscription and premium app downloads involving a one-time, rather than a recurring, payment.
That said, I believe there are four primary ways in which location services can be monetized going forward. First, the "app store world" is quickly dividing into free and paid-for ("premium") apps, much like the cable industry's free/pay-per-view model for on-demand services. There is a lot of potential to develop premium applications and services that, while not based exclusively on location, certainly leverage that capability, as we are seeing today with a number of top-selling iPhone apps.
Second, location will, over time, become in important element of the "mobile" version of two large areas of market opportunity: advertising and social networking. With respect to mobile advertising, we can certainly envision higher CPMs for ads that tap into or contextualize the user's location. I think there will be a fair bit of experimentation around this concept in 2009. On social networking, location is clearly an integral part of the mobile roadmap of MySpace, Facebook and others.
Third, location is a key asset in wireless operators' place in the mobile ecosystem. Mobile search is an excellent example, as operators have the potential to work closely with their search partners to deliver a highly branded, compelling and value-added experience. Owning the customer relationship, also gives operators the opportunity to be the responsible "broker" of who shares what information with whom.
Finally, I believe there is an untapped opportunity to effectively distill and package information about where customers are and where they go. Of course this would have to be permission-based, but location information can be a significant market research and segmentation tool that multiple parties--brands, media, and so on--would be willing to pay for. I can envision a world where customers are given various incentives (depending on the granularity) to allow their location information to be shared, as long as the proper safeguards are in place.
This last point leads to one more area we need to consider: consumer education. I am not sure that consumers are all that aware of the two sides of the location coin: how location can enable new applications and improve the experience of things they do with their phone every day; and conversely, the potential implications of this information being shared. If it can be demonstrated that location information enables higher CPMs, click-through rates, and so on, consumers have an important bargaining chip that they might use in some way.
Mark Lowenstein, a leading industry analyst, consultant, and commentator, is managing director of Mobile Ecosystem. Click here to subscribe to his free Lens on Wireless monthly newsletter.
Comments
Posted by Nappytown | February 25, 2009 - 3:06pm
Interesting and insightful views on the mobile LBS market.I spent meany years in the market development and growth phase of the GPS industry and learned the following:
1)there is always another new niche application for GPS location awareness and some are mass market and some are not. (where am I, where are you , where is it, control it, drive it, measure it, etc.). There are literally hundreds of apps.
2)most of the LBS mass market appetite is satiated by maps and navigation (i.e. growth of Garmin and TomTom)
3) mass market mobile LBS is personal; the information/app has to be related to ones immediate decision making needs
3) generally immediate needs are local not national, fragmenting the mass market potential or at least the granularity of the data delivered.
Therefore, I agree that LBS mass market acceptance is limited if one assumes that every app must be universal in scope. But, it is not limited if data is tailored to the local need, delivered easily, with quality and promoted locally. Step and repeat, city by city.
Example, Traffic applications. National databases of real time traffic information are not real time and are "cause" based (accident) not "effect" based (flow), road coverage is incomplete or poor, data is not commercial quality or faked.
But, what if local traffic data was measured every mile, for every road, every minute. This is economically feasible and currently, there are companies providing such a data solution, and I would argue this is a killer app like navigation. But the app requires data and it is the local data quality for almost any app that holds back adoption and growth of LBS services.
Posted by Benjamin Wesson | February 25, 2009 - 6:06pm
Due to the expense involved in deploying this technology, the potential for LBS in a business setting was largely confined to industrial applications such as automatic vehicle location (AVL). Now with the assistance of cellular technology, cost-effective LBS applications are more available to small and medium-sized businesses and enterprises.
As Lowenstein mentions, over the past few years, market awareness of—and demand for LBS technology—has been growing. Google Maps, an extremely popular web-based application, introduced free LBS-type services to a worldwide audience. Car manufacturers began making smaller, more cost-effective GPS systems available to businesses and consumers alike. And wireless providers started enabling cell phones and other mobile devices with GPS capabilities.
Yet barriers remained to widespread adoption of LBS technology. GPS applications rapidly drain battery power from mobile devices, limiting their usefulness. Also, GPS technology does not work unless the user has line-of-sight contact with overhead satellite receivers. This means users inside dwellings or surrounded by tall buildings cannot use their GPS-enabled phones to find their location or track assets.
With the introduction of assisted GPS, however, all of that is about to change. Assisted GPS uses a combination of GPS technology and cell tower triangulation to determine location—even if there is no line of sight with the satellite receiver. Triangulation is accurate to within a mile depending on the carrier and distances between cell towers, and uses no more battery power than a normal phone call does. Essentially it relies on the same constant communication with cell towers that mobile devices already use, providing real-time location status without draining battery power. In fact, triangulation’s real-time tracking capabilities give it an edge over satellite-based GPS solutions because they cannot collect data reliably or regularly without a line of sight which can be a problem with tall buildings or even trees.
Emergency response units have been using cell tower triangulation for years, but wireless carriers are only now rolling out applications for consumers. Legal and privacy issues no doubt contributed to the delay, although developing a profitable pricing model may have been wireless carriers’ biggest challenge.
In any case, the technology is here now, and the market opportunity is huge. Assisted GPS literally puts LBS technology into the hands of anyone who owns a GPS-enabled phone or mobile device. By logging into a secure, web-based interface provided by the wireless carrier, small business owners can determine the locations of their mobile employees and dispatch the one closest to a customer’s job site. On the consumer side, concerned parents can use assisted GPS to check whether their children are at school, at home or at a friend’s house during certain hours.
Benjamin Wesson, Dexterra
Posted by Flor Rita | February 26, 2009 - 4:08pm
Hey, didn't this guy, Lowenstein, work for Verizon for all of two months? I wonder what happened... Perhaps Verizon wanted someone to roll up their sleeves and actually do some work instead of daydreaming about "what if" pie-in-the sky scenarios!
Posted by Julian Bourne | March 10, 2009 - 3:19pm
I undertook a poll of business executives asking them which solution did they trust for an accurate ETA (estimated time of arrival): PND, mobile navigator, mobile mapping solution or their judgment. 76% replied they trusted their judgment. Closer quantitative analysis of these alternatives illustrated the problem the quality, accuracy and user experience is appalling. I agree traffic done properly is a killer app. The app needs to be customized, high quality, accurate, delivered just-in-time and convenient. Check out award winning Prompt - the road warriors traffic early warning system by Proxpro at www.proxpro.com.
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