Location starts to find traction; helped by Vodafone

After years in the wilderness, location based services (LBS) might--and I stress might--be inching their way forward enough for operators to start seriously considering its revenue potential.

First on the list is the growing capability of smartphones to threaten the dominance of personal navigation devices (PND) given GPS is now becoming a commonplace feature in the newer smartphones (let's forget, for the moment, the associated battery drain of turning GPS on). The screen size, downloadable apps, faster processors and all-round usability are making smartphones a very viable alternative to PNDs, and are causing worry in the boardrooms of companies such as TomTom and Garmin.

However, TomTom and others have wisely turned to being app providers, and in particular for the iPhone where the number of navigation users is forecast to jump from just two million today to nearly 30 million by 2013. Of interest, data from the market research firm, iSuppli, maintains that in two years time nearly all smartphone will ship with GPS functionality, and by 2014 navigation-enabled smartphones will rise to 305 million units, exceeding the 128 million PNDs sold.

But this means little in terms of additional revenue for mobile operators --and this is where Vodafone makes an appearance.

While the company has toyed with LBS for some years, along with many other European operators, the announcement that it plans to launch a mapping and navigation service, based on technology it acquired with the purchase of Wayfinder last year, could be significant.

Out goes the long-held (and failed) notion that LBS would be successful by directing subscribers to the nearest bank, cinema, pizza restaurant, etc, and instead Vodafone is looking to sell a host of advertising and marketing formats --based on location--to major brands and advertising agencies.

This launch will form part of its Vodafone 360 initiative (replacing the cumbersome Live! portal) and aims to use its Wayfinder-based mapping service to commercialise LBS to provide sponsored local search and content, together with other location-aware advertising and marketing opportunities.

The company has the service in Beta format today, but will look to go live with adverts sometime next year. 

However, while mobile advertising has attracted much attention--perhaps more than the revenues it has generated--combining it with location does perhaps add the spark that could catch subscriber attention.

The critical aspect in this strategy is the need for users to opt-in to receive adverts and promotions--which they are apparently willing to do if the messages are relevant. A recent survey of smartphone users claimed that nearly a third of them were comfortable receiving targeted offers on their phones. Of those, nearly half were receptive to location-based offers at restaurants and 45 per cent would use mobile grocery coupons.

But Vodafone's renewed push into LBS will put it up against existing solutions from Google and Nokia.

Some observers believe Vodafone will address this competitive issue by pre-installing its navigation app on its branded handsets, and then use its marketing and sales channel to promote the service--something less easily achieved by Google or Nokia.

The outcome could see LBS becoming a key battleground where operators fight the mighty intruders from gaining what Vodafone and other service providers claim is their revenue--the alternative would see them slide further into that fearful chasm--the dumb pipe.-Paul