Is the Resurgence of Location Based Services for Real?

The hype around location based services (LBS) has been there since the beginning of the decade. In the year 2000, Gartner had placed LBS at the peak of its hype cycle which reflects “Peak of Inflated Expectations” and the service has the highest visibility. For the benefit of the readers who are not aware of Gartner’s Hype Cycle, a hype cycle is a graphic representation of the maturity, adoption and business application of specific technologies. However, location based services were not able to maintain their visibility and hit their bottom within three years to “Trough of Disillusionment”. Now, in the last couple of years, there is resurgence in the LBS but many skeptics are asking – Is the resurgence in LBS for real?

The figure below is the Gartner Hype Cycle for Location Based Services –

I am very optimistic about the future of LBS and my confidence is based on the following factors:

Increasing perceived consumer benefit

When we talk to a friend over mobile, we mostly start the conversation with a question – where are you? Location adds context and meaning to life. No wonder over 35% of status updates on Facebook are related to where the user is. Location helps the users gather information and knowledge on things in their vicinity. LBS are now seen as essential services that can be used for navigation in an unknown place, for emergency services, finding places of interest, finding friends and family members, local search, etc. In a way these services give sense of security to the users. After US, now even Europe is attempting to make use of location of mobile device for emergency services. All in all, these is an increasing appreciation on the benefits of LBS amongst consumers

Many more Location Enable Devices

Higher availability of GPS enable devices is a big boost for LBS. Gartner estimates 26% of all devices shipped in 2009 would be GPS enabled. Almost all devices in Japan, Korea and US are GPS enabled. The other factor in favor of GPS devices is that the cost of GPS module is falling due to economies of scale and hence now the GPS functionality in available in even mid range phones. Nokia has been focusing on GPS and given its volumes, GPS is soon likely to be a mass market product

Far more Location Based Applications

Apple launched its Application store a year back and its success has prompted other handset vendors, operating system providers and operators to launch their own application stores. A vast proportion of applications require location co-ordinates. The popularity of mobile applications would be a key driver of LBS adoption in future. Companies like Nokia that have a global reach and operators like Vodafone and Telefonica which are the largest operators would keep the consumer interest going in mobile applications and hence the LBS

Mobile Advertising

Mobile Advertising is far more developed today than it was in 2003. I do not foresee anybody able to charge money for navigation and the only revenue source would be advertising. Google has already launched Adsense for mobile applications to be able to take benefit of increasing advertising opportunities on the mobile. There are other technological advancements like mobile ticketing and coupons that are conducive for generating advertising opportunities.

Opening up of APIs

This time around, the operators and other LBS platform owners are relatively more open to opening up of APIs for application development using maps. This would lead to many more useful applications getting developed leading to continued consumer interest in LBS. Nokia recently opened by Ovi APIs to developers for developing applications using navigation.

Crowd-sourcing of Maps

One of the pain points of users has been that the maps do not get updated fast enough. Google is now sourcing a lot of location information from users (user generated content). Another effort on crowd-sourcing on maps on the lines of Linux is Open Street Map (OSM). Created in 2004 with the idea to build a free, worldwide digital map, OSM is now over 130,000 participants (they were 100,000 in March) with an accelerating growth. The participants are volunteers who are building up the maps by collecting the GPS coordinates. In May, 2009, there was over 33 million kilometers of roads in the database.

Flat Fee data tariffs

Many of the applications that utilize location as an input also require GPRS connectivity to the servers for processing. Mobile subscribers in the past were concerned about the charging for data as in most case the billing was not very transparent. However, in the last few years, flat fee data tariffs are being offered in many countries. Flat fee has increased the data usage multifold and this phenomenon is irreversible. LBS would certainly benefit from this trend

Popularity of Social Networking Sites

Users this time around are more connected to each other due to social networking sites than in 2003. Facebook has over 300 million users and Twitter, the youngest of all, is the fastest growing at 40 million users. Both Facebook and Twitter opened up their APIs to get the location updates. The popularity of social networks with location updates is likely to excite the users as well as application developers.

Gartner has estimated the LBS subscribers to grow from 16 million in 2007 to 837 million in 2013 at an annual growth rate (CAGR) of 94% and expects the revenues to grow from $400 million to $12.7 billion in the same period with a CAGR of 77%. ABI research has its estimates which are similar to that of Gartner at $13 billion by 2013. I strongly believe that the industry can surpass these projections if it builds the products and business models based on the consumer insights. There are differences in the consumer expectations across the geographies – people in the western world value efficiency and hence the navigation appeals to them whereas the people in the Asian countries value relationship and entertainment and hence location based services based on music or social networking would appeal to them. Focus on the basics, get the products and pricing right is the mantra for LBS

Related Posts: