Like other data-communications services, Location-Based Services (LBS) require either a one-time payment,
subscription, or pay-per-use fee. It is hard to tell which business model is most suitable for each LBS segment. Depending on the characteristics of the content services and the communication links that device terminals have, LBS business models vary significantly.
Many times, end users pay for a service once and then enjoy a lifetime subscription. For example, when PND manufacturers sell their devices, traffic receivers are either included in the box with lifetime Radio Data System-Traffic Message Channel (RDS-TMC) services or sold separately with the TMC service fees included.
Annual or monthly subscriptions are common in premium location-based service packages. The most common model is monthly payments where end users receive a discount if they purchase the annual subscription package. The most common LBS segment is the off-board navigation services area. Off-board navigation services utilize the data plan the user has, rather than employing one-time payments. Off-board phone navigation service providers such as Networks In Motion and TeleNav have drawn more than 7 million paying monthly subscribers.
Subscription Bundled Service
In the phone navigation space, off-board service providers usually bundle non-navigation services with other LBS content, such as traffic information, local searches, information guides, local events information, weather, destination download and fuel prices. End users can pay a flat fee, i.e., $9.99, for the entire brand service and enjoy all the location-based services along with Turn-by-Turn (TbT navigation services.
Off-board navigation services also can be purchased for one-day use at a higher price than subscription. This service offering is fitting for consumers who would like to try out any LBS content. This service model is not a main revenue source for service providers, but serves to attract novice/casual users to their offerings.
Except for off-board navigation map updates and real-time traffic information services, most other LBSes are free to the end-user. Domain-expert LBS providers either share their revenues with service aggregators and wireless carriers that allow end users to utilize the data plan, or they make the content space open to advertisers.
Finding Your Inner Model
The most appropriate business model for each LBS segment varies depending on data-freshness requirements, everyday relevance to consumer’s needs when using location-aware devices and communication links.