Free Navigation as Indirect Revenue

08 November 2010

Turn-by-turn navigation has become an essential part of today’s mobile smart phone ecosystem. Until recently, this type of application was a high-end feature that allowed providers to charge a premium fee. For example, AT&T’s Navigator application has been a revenue-driving success for the carrier for some time.

However, since Google and Nokia shook the market with their free navigation application announcements, players in the space have used navigation as a means to another goal. With increased competition in the smart phone space not only among handset makers but also between carriers and platform providers, navigation is seen as a central tool to achieve differentiation from the competition, with free navigation on the minds of many.

Focus on Data Plans
For carriers, navigation services have been an important part of their service portfolio for years. While some wireless providers present navigation as an add-on to existing service agreements, others choose to include the application as a bundled service.

Sprint has been bundling its Sprint Navigation application with data plans even before its “Simply Everything” plans were announced. The carrier emphasizes the bundling of add-on services like navigation or mobile video for two reasons. First, to differentiate from the competition, Sprint believes that providing a host of branded services will entice customers to choose the carrier because of its package deal. The benefit for the carrier outweighs potential revenue that could be generated by selling each application to users individually. If the users are not Sprint customers, there is no chance of up-selling anything.

Second, this strategy enables the carrier to stay involved and remain in the mind of the customer—beyond the consumer/carrier relationship that is based solely on a handset and the access to a network. Especially in today’s mobile market where smart phones and associated application stores continue to gain in importance, carriers have to fight to stay in the conversation with customers or risk relegation to being mere network access providers.

O2 Germany is following a similar strategy.

Navigation Apps by CompanyNavigation Apps by Company

A different reason, or strategy, for the deployment of free navigation applications is the use of existing assets. Nokia and Vodafone are two prime examples of companies utilizing existing location services assets to provide free navigation to their users.

Nokia’s Ovi Maps has been a premium service for some time. While users were able to download map data for free, Nokia charged for additional features like voice guidance. In some cases, navigation was used as an incentive for customers to buy a special

“navigation” version of a device, featuring a full premium application and accessories like a car mount. Leaving Google out of the equation, two forces contributed to drive Nokia to make Ovi Maps a free service.

First, Nokia had previously stated its desire to transform itself into a solution company. This means providing end users not only with devices but also a complete package, with devices and services presenting a unified user experience. Location plays a central part in this transformation, because mobile handsets are always where the user is, and services need to be available wherever they are required by users. Additionally, Nokia acquired map data provider NAVTEQ for a substantial amount of money. To turn this investment into revenue, the company needs to deploy the available data on a large scale—its own handsets. Finally, by presenting a complete package of hardware and software, Nokia hopes to sell more devices.

Vodafone is driving a diverse strategy with regard to navigation and LBS. The carrier has a longstanding relationship with Telmap, provider of its Find&Go and Navigator applications. Traditionally, these services have required subscription fees or sometimes have been part of contract packages. Now, with the impending sale of the iPhone in Germany, Vodafone is including the Find&Go product for free.

Navigation Transformation
Over the last few years, navigation has seen a tremendous transformation—from a premium feature and application able to generate revenue for providers and developers, to a complimentary feature used to drive data usage or achieve differentiation from its competition.

This does not mean that the value to the end user has changed, but that providers now see navigation as part of a bigger strategy. Carriers use it to attract new data plan customers or drive data revenue in general, while Nokia is trying to sell more handsets by offering a compelling complete package of hardware and services.

For platform providers like Google, integrating navigation is an essential extension of its core service and enables the company to provide users with a unified user experience, while at the same time enhancing its platform for advertisers and generating more revenue that way.

While navigation applications for carriers might lose some of their lure as direct revenue drivers, they have not lost importance to their providers. Navigation can be the central driver of indirect revenue for mobile and location based services.

Find Out More > Location-Aware Portable Devices

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