Strategy Analytics: “most operators are letting the LBS opportunity slip through their fingers”

GPS BN: Sometimes I have the impression that this market is moving from pure LBS applications into LBS features on common mobile apps; to some extend when everybody in the wireless industry is doing LBS then defining a LBS market seems irrelevant. What is your take on that?
DK: We believe mobile is all about context and location is an element of context. Location can act as an enabler. We expect to see location features to become pervasive: in your agenda, in your address book, in content, etc… at the end of the day consumers will expect to find location features in all these mundane applications. Customers are going to take for granted that location is built in all the applications they use in their daily life.

GPS BN: What about consumer privacy?
DK: This is going to be a very significant point. There is a greater sensitivity in Europe and less regulations in the US. Opt-in has to become a key factor. For application developers the big question will be: what are you able to do with all the data you have? We believe there is a role for regulators and large operators.

GPS BN: Now if we take the value chain: who is going to make most of the profit in this market?
DK: The proliferation of location-enabled handsets will require map data. Whatever is the final purpose of location, there will be some kind of mapping data needed. So we believe that map makers are going to generate substantial revenue in that market, and to a lesser extent, geospatial platform providers.

The providers of location-based applications are also well positioned to drive revenues from the distribution of their applications through on and off portal channels. Currently, off portal smartphone applications stores such as Android Market and Apple iPhone represent the best distribution channel for LBS applications given more attractive revenue shares vis-à-vis carrier stores. Furthermore, on average smartphone users are more likely to have flat-rate data plans and to engage in mobile application usage than users of feature phones. However, carriers will also stand to gain by leveraging their control over handset distribution and pre-installing their applications and app stores across handsets in their portfolios. They can also provide flexible charging options through their billing platforms, which can cater to casual application usage.

GPS BN: The acquisitions of NAVTEQ by Nokia, Wayfinder by Vodafone and Dash by RIM demonstrate there might be a trend towards some sort of consolidation in the value chain. What do you think about that?
NP: We believe these acquisitions will be limited to a small number of players. We don’t think this will take place across the board. Other handsets manufacturers don’t have the resources to do what Nokia is doing. If we look at Vodafone this is pretty unique so far no other wireless operator has done that. Handset makers want some services play for brand support rather than revenue. For most of them anything that they are doing is not going to be head to head competition with wireless operators.

GPS BN: Looking at Nokia it seems their service strategy is not taking off. The OVI Store is getting little traction with developers and their “Social Location” concept is still… well, a concept. What are your thoughts on them?
DK: The big play for Nokia via OVI is in India, China, and Africa, where they can represent the trusted service provider. In these markets their brand equity and distribution give them an advantage. In addition, local wireless operators will get a cut of the revenue that will be generated. So this is going to be a win-win situation.

GPS BN: To wrap up our discussion, what is the key message you want to deliver to the audience at the Metaplaces conference?
DK: What strikes me the most about the LBS market is that we generally see most operators are letting the LBS opportunity slip through their fingers. They are getting bypassed and very little of them are fighting back.

Metaplaces will take place in San Jose, California on September 22-23. GPS Business News is a media partner of the conference. Click here to learn more.