david kerr - strategy analytics

Strategy Analytics

Collision Course: How will the Location

Market Evolve in the next 3-5 years?

David Kerr

Vice President, Global Wireless Practice

[email protected]

Agenda

Where are we today?

Major issues impacting location services market

On portal to off portal – who has the upper hand?

Monetization strategies & challenges

www.strategyanalytics.com 2

Monetization strategies & challenges

LBS users & revenue flows

Conclusions

Defence

Systems

GaAs

RF Components

Wireless Handset

Components

Connected Home

Devices

Multiplay

Networks

Digital

Media

Automotive

Custom Insights to Support Client Business Planning

Proprietary

Consulting

Advice

Work

shops Strategic

Advisory

Services


Wireless

Media

Wireless

Enterprise

Wireless

Devices

Emerging

Markets

Smartphones

Automotive

Multimedia

Navigation

Automotive

Electronics

Consumer

Energy

Virtual Worlds

Tariffs

Consulting

Projects

Advisory

Reports

User

Experience

Bench

marking

Best

Practice

Insights

for

Success

LBS Market: Current Status

People Tracker

6%

Map Data Overlay

1%

Mobile Maps

Search

2% Other LBS

4%

Global LBS Revenues 2009 - $1 billion

• LBS has been over–hyped in the past

• CDMA markets more advanced than GSM

• US carriers controlling LBS


Mobile Maps

1%

Pedestrian TBT Nav.

3%

In Car TBT Nav.

83%

• US carriers controlling LBS

• Revenues dominated by TBT Navigation:

• Navitime: +4 million subscribers (July 09)

• NIM: 3.5 million licenses end 2008

• Telmap: 400k paying customers (2Q08)

• Other LBS contribute to <20% of revenues

Opportunity for LBS is Expanding

GPS on handsets set to

expand significantly

• GSM markets

• WiFi

Cell Tower databases

• Google, Skyhook,

Spotigo, Nokia30%

40%

50%

60%

70%

80%

GP

S P

en

etr

ati

on

of

Ha

nd

sets

So

ld (

%)


Spotigo, Nokia

Application Stores

• Off portal

distribution0%

10%

20%

2007

2008

2009

2010

2011

2012

2013

2014GP

S P

en

etr

ati

on

of

Ha

nd

sets

So

ld (

%)

North America Western Europe Asia Pacific

Central & LatAm CE Europe Africa Middle East

Total

Source: Strategy Analytics Global Wireless Practice Jun-09

GPS Beyond the Wireless Handset

100

150

200

250

Sh

ipm

en

ts (

m)

Non Mobile Phones devices

offer GPS Opportunities too

• MIDs and Netbooks

• Cameras

Connected PNDs and Other

Devices Emerging

• WiFi and Cellular


0

50

100

2007

2008

2009

2010

2011

2012

2013

2014

Sh

ipm

en

ts (

m)

Digital Camera Portable iPod/MP3 Player

Portable Media Player Mobile Internet Device (MID)

Netbook Portable Nav Device (PND)

• WiFi and Cellular

• 23% of PNDs connected in

2014

• 15% of cameras WiFi in 2014

GPS offers good combination

technology

• robust technology, next

generation development

limited

• $0.50 cost point in in

mainstream handset markets

Source: Strategy Analytics Digital Consumer Practice May-09

Other Consumer Market Drivers

Consumer data package adoption

• Rising mobile data adoption

• Mobile browsing, access to social

networks e.g MySpace, Facebook,

email

‘All you can eat data’ plans

Monthly Data Plan Adoption as a Penetration of Total Cellular Users

15%

20%

25%

30%

35%

mo

nth

ly d

ata

pla

n p

en

etr

ati

on

of

cell

. u

sers

(%)


Source: Strategy Analytics

• iPhone model has been catalyst

• Japan leads, NA and Europe strong

Increasing consumer use of

application stores

• Apple, Android Market and Nokia

Ovi Store

• +60% Apple users and +50%

Blackberry users downloaded

‘majority of their apps for free’

0%

5%

10%

15%

2008 2009 2010 2011 2012 2013mo

nth

ly d

ata

pla

n p

en

etr

ati

on

of

cell

. u

sers

(%)

W.Europe N.America C.E.Europe CALA

APAC MEA Japan

Consumer Interest in LBS

US Interest in Location Enabled Services

36%

24%

24%

21%

20%

16%

Business Search

News

Friend Finder

Picture Geo-Tagging

Time Tables

Sports Tracker

So

cia

l Ap

ps


53%

49%

43%

41%

39%

37%

36%

0% 10% 20% 30% 40% 50% 60%

Routes

Maps

Weather

Traffic

Car Locator

City Guide

Business Search

interest (%)

Wireless Media Labs, End-User Survey, July 2009

Pra

ctic

al A

pp

s

IP Owner

Power is in the hand(sets) of consumers

Network

Operator

•Operator

•Open internet

•Handset

manufacturer

services

PublisherConsumer


• Carrier walled garden approach breaking down – GPS and cell tower databases opening up LBS

• Who has the upper hand?– The operator has an important relationship with the consumer

– Internet players have the brand

– Handset manufacturers can integrate access

• Consumers have more power than ever before

services

Mobile LBS Competitor Positioning

Role Within Location Services

Location Acquisition Retailing LBS Own LBS Apps

Internet

Companies��

Google MyLocationGoogle MyLocation

��

Extend internet apps to mobileExtend internet apps to mobile

Strong competition within LBS apps retailing and own LBS applications


Operators ��

Network location dataNetwork location data

��

Portal, app storesPortal, app stores

��

White label premium appsWhite label premium apps

Handset

Vendors��

Enabling GPS, location APIsEnabling GPS, location APIs

��

App stores & on deviceApp stores & on device

��

NokiaNokia

PND ��

Extend navigation to handsetsExtend navigation to handsets

App

Developers��

Focus on own LBS appsFocus on own LBS apps

Operators remain a strong player in LBS as they leverage their strengths:

• Preinstall, bundle and zero-rate own applications

• Developing own app stores and take share of billing revenues

Handset vendors increasingly important for LBS distribution:

• Application stores & device integration

Who Will Win?


• Application stores & device integration

• Preinstall own or partner applications – e.g. Wayfinder and Sony Ericsson

Independent provider with strong brands will gain traction in mobile:

• Strong brand recognition e.g. Google, TomTom– Smaller players without brand likely to struggle

• Branded players good partner for operators and handset vendors

Smartphone App Stores A New Route To Market

Growth in LBS availability though application stores has been impressive:

• 2.8k location aware applications in Apple App Store

• 400 location enabled apps in Android Marketplace,

• 23 location enabled apps in Nokia Ovi Store.

• Operators typically offering a handful of location enabled applications.


Company Application Type Pricing Model

Networks in

Motion

Gokivo Navigation &

Local Search

$0.99 application download with $9.99 per month for voice

guidance through App Store.

Intermap AccuTerra Outdoor Terrain

Maps

$0.59 per application with additional map bundles purchased

in application through App Store

uLocate Where LBS Aggregation Free application available through App Store, App World and

for Palm Pre.

TomTom TomTom Navigation £60-£80 for a lifetime user license.

Yelp Yelp Local Search Free. Internet model based on advertising.

Off Portal Application Stores Gaining Upper Hand

App Stores: Volume Market Share 2008 - Global

Get Jar, 10%

Nokia Stores,

9%

Handango,

2%

App Stores: Volume Market Share 1H09 - Global

Nokia Stores,

Handango,

3%

Android, 3%RIM, 1%

Palm, 1%


Source: Strategy Analytics

Apple App

Store, 12%

Get Jar, 10%

Operators,

67%

Get Jar, 12%

Apple App

Store, 29%

Nokia Stores,

11%

Operators,

40%

Clear LBS Applications Opportunities Emerging

300

350

400

450

500

LBS U

sers

(m

)


0

50

100

150

200

250

2007

2008

2009

2010

2011

2012

2013

LBS U

sers

(m

)

In Car Navigation Pedestrian Navigation Maps

Map Data Overlay People Tracker Other LBS

Show me the money –

Pricing varies by application

Subs A la Carte Rental Ads Free

Maps/

RoutingIntermapIntermap

Nokia, Google Nokia, Google

Vodafone, OrangeVodafone, Orange

Navigation

(TBT)Nokia Nokia TomTom, TomTom,

GarminGarmin

Verizon Verizon

WirelessWireless

locationet,locationet,

SkrobblerSkrobbler

��

��


Social

LocationLoopt, Where, Loopt, Where,

GyPSiiGyPSii

GyPSiiGyPSii Loopt, Where, Loopt, Where,

GyPSiiGyPSii

Safety

LocationVZW, AT&T, Sprint VZW, AT&T, Sprint

Search

Yelp, GoogleYelp, Google Yelp, GoogleYelp, Google

Utility LBS

Verizon WirelessVerizon Wireless GG--ParkPark

��

��

��

��

��

Pricing options include free, freemium, a la carte, subscription and advertising:

– Subscription: Preferred model for carriers. However, adoption has been low and willingness to pay is segmented.

– Free & Freemium: Ideal for driving downloads, promoting other channels and awareness building. Nokia Maps a major example of this. Challenge to up sell and provide value-add.

Monetization Challenges


provide value-add.

– A la carte: Low ($0.5-3.0) price points proving ideal for impulse purchase within application stores. Not ideal for applications generating ongoing costs, e.g. TBT navigation.

– Advertising: Currently nascent and experimental. Unproven on mobile.

Other Pricing Strategy Considerations

Other factors to consider:

• Costs?

• User segment?

• Competition/ substitutes?

• Willingness to pay?

• Frequency of use?

• Ease of use?

Va

lue

to u

ser

High

People

Tracking

(Safety)

TBT

Vehicle

Nav.


Location Accuracy

City Local 5-20 meters

Va

lue

to u

ser

Med

Low Buddy Finder

(Social)

Car LocatorCity Guide

Sports

Tracker

Local

Map

Routing

Local

Search & AdvertisingNews &

Weather

Different monetization models will co-exist, but SA predicts:

• Increased bundling together of distinct location applications

improves value-add.– uLocate’s WHERE application

– Google Maps Layers

• Use of freemium type models will gain traction. Hybrid examples:

Monetization Conclusions


• Use of freemium type models will gain traction. Hybrid examples:

– Gokivo - $0.99 for basic application with $9.99 per month for navigation

– Intermap - $0.59 application with additional charge for additional map

bundles

• Revenues from advertising will generate over $3.5 billion for LBS,

the vast majority through location enabled search. – Advertising linked to location enabled search represents a strong proposition for

local advertisers.

LBS Search and Advertising – the Hot Topic

• Location enabled search will drive LBS advertising

• But still need to prove effectiveness to advertisers

• Opportunities for local advertising– Customised solutions emerging – Yelp, Sherpa, Cha Cha

• Growing momentum behind connecting mobile advertising with


• Growing momentum behind connecting mobile advertising with

location enabled services– Navteq acquires location based advertising network Acuity (Sept 09)

– Alcatel Lucent (location and messaging platform) and 1020 Placecast (advertising

engine) launch a hosted service to wireless operators (May-09)

– Advertising network Quattro Wireless teams up with uLocate to deliver ad targeted

units into uLocate’s WHERE iPhone application

$7.5B Global LBS Revenue Opportunity in 2013

4,000

5,000

6,000

7,000

8,000

LBS R

evenues

($m

)

Other LBS

Location Enabled Search

People Tracker/ Locator

Spending

Map Data Overlay

Mobile Maps


0

1,000

2,000

3,000

2007

2008

2009

2010

2011

2012

2013

LBS R

evenues

($m

)

Mobile Maps

Pedestrian Navigation

In Car Navigation

• Location enabled search including advertising will emerge quickly: approach $3.6B in 2013

• Navigation and map applications will remain strong: $2.9B in 2013

• Monetization key challenge impacting rate of market development

Revenue Flows in the Value-Chain

• Subscription

• A la Carte

• Freemium• Google

• Nokia (Ovi Maps)

• TCS

• DeCarta

Content

Providers

LBS APP

Developer/

Publisher

LBS RetailDigital

Maps

LBS

Platform

• Advertising

• TeleAtlas

• NavTeq

• Intermap

• InfoUSA

• ViaMIchellin

• Inrix

• uLocate

• Wavemarket

• Nokia

• Google

• Operator

• Device Vendor

• D2C

Location

Acquisition

• Operator

• Skyhook

• Google

37%63%


• Retailing LBS will generate almost $1.3B (37%) by 2013: Operators and device vendors in strong position to capture this opportunity.

• LBS publishers will generate just over $2B (63%) by 2013: Navigation the primary opportunity. Revenue distributed across other value-chain partners.

• Search will drive location advertising revenues to reach $3.6B: Search giants Google, Yahoo and MSFT well positioned.

• DeCarta • Google

Conclusions

• Opportunity is large– Navigation and search will drive total LBS revenue to $7.5B by 2013.

• Routes to market are changing – Carrier wall garden around LBS has broken down

• Application stores are becoming a significant route to market

• Operators remain strong retail partner


• Monetizing LBS remains complex outside navigation and search– Maps, Navigation & Routing will generate $2.9B

– Search will generate $3.6B by 2013, dominated by giants Google, Yahoo/MSFT

– Other categories hindered by lack of established business models

• Companies have to be responsive and nimble over the next

couple of years as the market matures to make the most of the

opportunity.