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

Strategy Analytics: “most operators are letting the LBS opportunity slip through their fingers”
GPS Business News interviewed with David Kerr, vice president in charge of the global wireless practice and Nitesh Patel, senior industry analyst (wireless media strategies), both from Strategy Analytics.

David Kerr is responsible for managing wireless voice and data communications activities within the Strategy Analytics Global Wireless Practice. His experience includes 18 years of consulting and industry analysis work in cellular, PCS, paging, wireless data, WLANs, and WPBX.

Nitesh Patel has been with Strategy Analytics since 1999. He is responsible for analyzing and reporting on developments in the global wireless data and computing arena.

GPS Business News: next September you will be both speaking at Metaplaces, an industry conference focusing on the monetization of location data and services, what are you going to tell to the executives attending the conference?
David Kerr: We will focus on the transformation of the value chain within the location-based services market. But the biggest question I will try to answer is why we should be optimistic about this market since it had so little success… So far the size of this market is roughly $600 million per year globally, which is not much if we consider for how long the wireless industry has been talking about the advent of location-based services.

Nevertheless, at Strategy Analytics we are optimistic about LBS. We are optimistic not just in terms of consumer paying for it. We think there is a big role to be played by advertising and also by Internet players. We do see upside potential and there are several reasons to that. The first one is that there is a growing installed base of GPS handsets, particularly in GSM markets like Europe. The second one is the significant growth in number of users on unlimited data plan. The third reason is that according to our consumer research LBS ranks in the highest in terms of consumer’s willingness to pay for applications.

The fourth reason is the growth and success of application stores, which are driving LBS success beyond the operators. There are 1,600 LBS applications available for the iPhone in the Apple App Store. And it is going to be the same on the Android Application store and on others. The clear consequence of that is that operators are getting desintermediated. They have been willing to charge premium for as long as possible. But new companies such as Google or Yahoo! are looking for eyeballs, not high premium fees, this makes a big difference.

David Kerr, Strategy Analytics
David Kerr, Strategy Analytics
David Kerr, Strategy Analytics
David Kerr, Strategy Analytics
GPS BN: Your take on the value chain is that operators are losing ground?
DK: We believe that the operators have missed most of the LBS opportunity. They have to fight back, but so far we have only seen Vodafone and Sprint doing so.

Who is going to be the winner then?
DK: What is important to understand first is that the agenda of the three main players: operators, handset manufacturers and internet companies are completely different. Handset makers such as Nokia and others are in that market for driving handset sales. They want to differentiate in offering services which location and mapping is one element of. In comparison to that, Google is in the game for driving eyeballs and learning a bit more about its customers. Now if we look at the operators they are primarily focused on driving data revenue.

Therefore it makes a fragmented landscape and a complex ecosystem. It is probably a bit too early to say who is going to be a winner and who is going to be a loser.

GPS BN: What do you expect to be the largest source of revenue in that market if we look at the different types of applications?
Nitesh Patel: We believe the biggest share of revenue will be in local search. It will be the largest single revenue pipe. We estimated it at around 44% of the total market revenue. A second big revenue stream will be handset-based navigation in cars. This revenue is expected to be generated by the users paying for the service.

GPS BN: How do you see the growth of the rest of the market beyond local search and turn by turn navigation? It seems there is a lot of innovation taking place there today; don’t you think this will generate serious revenues moving forward?
NP: Well, you know, there are many applications in volume, but there is a lot of competitive pressure happening there so this means free application or very low prices, so in total it is not going to be huge compared to local search and turn-by-turn navigation.


Wednesday, July 1st 2009

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