Is it excitement or hype for mobile LBS?

By Brian Dolan

In five short years mobile location-based services are expected to generate $13.3 billion in annual worldwide revenue, according to a recent report from ABI Research. Last year the services generated $515 million, but the momentum in the mobile LBS sector is apparent in the aggressive marketing carriers' have put behind navigation services and family locator applications as well as massive mergers and acquisitions like Nokia's acquisition of Navteq. So are these red letter days for mobile LBS? That depends on who you ask.

"Last year was more of a banner year than ever before for LBS services," Leslie Presutti, director of product management for Qualcomm's gpsOne group. "Nokia did an awful lot of groundwork to get LBS services established last year and they were going to push LBS with or without carrier partners. Carriers got the sense last year that they need to get on the [LBS] bandwagon."

Presutti notes that Nokia isn't the only one putting pressure on the carriers: Other change agents like Google are entering the market and pushing the incumbent to take action sooner than later. While Presutti acknowledges that the Nokia-Navteq is probably just the beginning of consolidation in the mobile LBS space, she hopes there won't be too much consolidation that innovation is sacrificed.

Right now mobile LBS applications like family and friend finders are gaining widespread support and navigation is close to becoming a given on advanced handsets, Presutti said. "We're almost to a point that navigation services that allow users to get from point A to point B will be commoditized. It will be a given in 12 to 18 months I bet. Consumers will just expect navigations applications to be present on their phones." Presutti said.

Once navigation services do become commoditized, however, application developers and carriers will need to look to the market innovators more than ever to keep users happy enough to be paying their $10 a month for LBS services.

"What will keep folks interested in mobile LBS?" Presutti asks. "When the market reaches that point in the next year or two, mobile advertising will come into play in a big way. LBS will help carriers and brands get more ingrained into a user's personal life and determine what that user likes to do and what kind of information they like to receive when they are doing certain things. In these cases, location based services are no longer serving as differentiators, but as the foundation [of the mobile experience]," Presutti said.

A recent report from Jupiter Research encouraged brands to enter the budding mobile advertising market, citing Nokia's acquisition of Navteq as an indication of an imminent rise in geo-targeted advertising.

Some companies in the location-based services market, however, contend that the hype around some of the newer applications is overblown. WaveMarket's founder and CEO Tasso Roumeliotis doesn't share Presutti's view that 2007 was a banner year for mobile location-based services.

"It was and it wasn't," Roumeliotis said. "On the one hand, we saw a lot of coverage and excitement over LBS, but there are only two applications that have generated big revenue: navigation and family locator services. These services generally cost consumers between $5 and $10 a month and they have been extremely well-marketed by carriers. The rest of the applications in LBS have received very high profile press coverage but achieved very little traction."

Roumeliotis chalks up the weak uptake of other services to expensive pricing, a dearth of interested users and a lack of carrier interoperability for LBS services.

WaveMarket is positioning its platform, VeriPlace to become the defacto platform for mobile LBS services by opening up its APIs and encouraging developers to create future applications. The company has already launched family locator services on a half dozen carriers, including Alltel, but Roumeliotis does not believe the market is yet ripe for applications beyond family locators and navigation.

"Who wants to be on a friend locator service if only two of your friends are on it?" Roumeliotis asked. "Once one subscriber leaves because it's not worth the $10-a-month to keep tabs on two friends, do you think those other two friends are going to stick around for long?"