Thursday, November 13, 2008

Location Mobile Trends for 2009 LBSs

The Location Based Service (LBS) sector of Value Added Services (VAS) on mobile is evolving.

I see 3 key trends and a similiar number of challenges for the year ahead for companies within the expanding LBS ecosystem:



There is little doubt that this sector is heating up, with both the iPhone and the Android platforms spawning a plethora of applications. And the global start-up map for LBS indicates that new ventures are emerging outside of traditional hotbeds like the US and Western Europe. This means that differentiation is becoming key. Start-ups with the big budgets can choose to differentiate via advertising (though this is becoming unviable-see point 3 of Challenges below) while smaller companies need to think smart and go for whatever niche they think offers the best returns.


It is apparent that consumers are ready to pay a premium for some LBS services, though this is on a more pay-per-use model than a subscription model. Quick and easy services that everyone can understand and that add immediate value (place me on a map now and show me Points of Interest around me) can be charged successfully and it is looking increasingly likely that pedestrian navigation-type services will also meet with success.


Convergence spans a wide spectrum of meaning. In terms of LBSs, it means that traditional LBS services are moving into the Portable Navigation Device (PND) space, and that the reverse is also happening. It also means that connected devices like the Playstation Portable (PSP) are also moving into the LBS space with the likelihood of new devices entering the market (including the rumoured launch of the National Geographic Explorer Device).The LBS landscape is liable to some tectonic shifts in the coming year.

The LBS sector has consistently offered some of the greatest opportunities but also some of the greatest challenges in mobile, some that I would highlight today are as follows:



Fortunately for the mobile ecosystem, walled gardens are crumbling and we are seeing what I have previously defined as 'Open Playgrounds' being created. This doesn't stop Mobile Network Operators (MNOs) from imposing limitations on accessing their location platforms. No MNO currently offers anything other than 'pull' mechanisms for location detection (the user has to request to be located) while it is the 'push' mechanisms (tell me automatically where I am and push relevant info to me) that would yield the greatest benefits to the user.


Locator technologies are in themselves converging as the need to deliver a seamless location detection service to the mobile user becomes more of an imperative. 2009 will see an acceleration of this trend and successful apps will be able to switch automatically from a GPS to a Wi-Fi to a CellID environment according to the criteria that deliver the best experience to the user (this could be related to location, so delivering Wi-Fi location indoors or battery life, switching to CellID to reduce battery exhaustion).


The monetisation model for LBSs has not been proven.But it will. And even if it takes time, let's not forget how long it has taken YouTube to adopt a clear monetisation mechanism (it announced today that it will offer sponsored video search, 3 years after launch). However, there is a tiresome task pending for LBSs to continue educating brands and advertisers of the potential effectiveness of LBS advertising (particularly that which links place with context). However, we live in a period of retrenchment-MNOS are retreating in their shells and curtailing infrastructure spend. Some, but not all, advertisers are cutting back on mobile and retreating to less effective media like TV.

Now is the time for LBS start-ups to redraw the lines of their monetisation models-to squeeze out revenues where they can be squeezed and cut costs in other areas. Highly funded start-ups with high burn rates will need to adapt more to the new low cost environment. The opportunities for small start-ups with smart monetisation ideas will peak next year-but their emphasis will have to be on easily addressing the true needs of the mobile user, requiring an understanding of the likely behaviour of this user in the new economic environment.