Distribution Channels for Mobile Navigation Services Industry Research Whitepaper www.berginsight.com
BERG INSIGHT André Malm, Senior Analyst (andre.malm@berginsight.com) Johan Fagerberg, Senior Analyst (johan.fagerberg@berginsight.com) OFFICE Viktoriagatan 3 S-411 25 Gothenburg Sweden ABOUT BERG INSIGHT Berg Insight offers premier business intelligence to the telecom industry. We produce concise reports providing key facts and strategic insights about pivotal developments in our focus areas. Our vision is to be the most valuable source of intelligence for our customers. ADDITIONAL RESEARCH BY BERG INSIGHT The following titles are available in the LBS Research series from Berg Insight: CUSTOMER SERVICE Phone: (46) 31 711 30 91 E-mail: info@berginsight.com Web: www.berginsight.com Mobile Navigation Services Personal Navigation Devices Mobile Location-Based Services Published in October 2009 LBS Platforms and Technologies GPS and Mobile Handsets Copyright 2009 Berg Insight, All rights reserved
DISTRIBUTION CHANNELS FOR MOBILE NAVIGATION SERVICES Industry research whitepaper Distribution channels for mobile navigation services The number of users of various forms of turn-by-turn navigation services for mobile phones is growing rapidly worldwide. In Asia Pacific and North America, high availability of GPS handsets led to high uptake already in 2005. The European market started to evolve in 2007 and accelerated during 2008 as more compatible handsets were introduced. Ever more models of low cost GPS handsets and improving digital map data availability is now fuelling fast growth in markets worldwide. Berg Insight estimates that the number of users of mobile navigation services increased twofold from H1-2008 to H1-2009 and reached 28 million worldwide. This number comprises all active users of on-board, hybrid and off-board turn-by-turn navigation services for mobile phones, both paying users for premium services and users of free services. The total subscriber base includes end-users ranging from frequent users with lifetime subscriptions or annual subscriptions to less frequent users that have opted to purchase a single month subscription or even individual routes or day passes. A growing number of free and adfunded turn-by-turn navigation services are also available worldwide. Figure 1 Active handset navigation users (Worldwide H1 2007-H1 2009) Active users (million) H1-2007 H1-2008 H1-2009 On-board software 0.5 1.5 3.0 Off-board services 7.5 12.5 25.0 Total users 8.0 14.0 28.0 Source: Berg Insight 1
DISTRIBUTION CHANNELS FOR MOBILE NAVIGATION SERVICES Navigation services are primarily available as on-board solutions with map data stored in the memory of the handset and off-board services that rely on maps stored on a server. Over time, many of these solutions will converge into hybrid services that store frequently used maps in the internal memory and leverage wireless connectivity to access dynamic content such as traffic flow information, fuel prices and weather. In the future, virtually all GPSenabled handsets can be expected to have mapping and navigation software as part of the standard feature set, similar to media players today. Evolution of distribution channels for mobile navigation services Mobile operators have been the main distribution channel for mobile navigation services the past years. Today, approximately 60 percent of all active subscribers worldwide use services marketed by mobile operators. However, new distribution channels are growing in importance, such as handset vendors, equipment distributors as well as various directory, search and mapping service providers. On-device application stores that are being launched by handset vendors and mobile operators are now improving discoverability for end-users. Mobile network operators Turn-by-turn navigation services are now marketed by all major network operators in North America, by more than one third of the European operators and by most operators in markets such as Israel, Japan, South Korea and Australia. These services are either operator branded or third party branded services. In countries such as the US, Japan and South Korea, mobile operators control the value-chain for handsets and services and have also achieved a dominant position as distribution channel for navigation services. Operators not only have the ability to ensure that the navigation application is pre-installed on all handsets or readily available from the operator portal or download section on the handsets. An operator can also choose to bundle navigation services with premium service plans or simply sell navigation as a premium service with convenient billing. In addition, operators have the resources to market navigation services along with other services. However, integration of navigation services with other applications and services becomes more important in order to improve the user experience and ensure that customers continue to subscribe even when free alternatives become available. Some of the first integrated LBS and navigation offerings are about to become available from mobile operators. 2
DISTRIBUTION CHANNELS FOR MOBILE NAVIGATION SERVICES At the end of September 2009, Vodafone announced its new suite of integrated Internet services called Vodafone 360, which enables customers to access their contacts, mapping services, status updates and messaging services from one place. The maps and places feature includes maps, turn-by-turn instructions and voice guidance, location messages, realtime updates of friends locations, as well as tagging and sharing of favourite places. Meanwhile, T-Mobile has collaborated with decarta and Appello to roll out a set of locationbased services as part of T-Mobile s web n walk mobile browsing and widget offering. Services including search, mapping and turn-by-turn navigation will be launched throughout Europe towards the end of 2009. The integration with web n walk will allow users to share information across applications and between multiple devices. Handset vendors While mobile operators in North America and Japan largely control handset sales, distributors and alternative sales channels are more important in other parts of the world including Europe and Asia Pacific. These open sales channels are particularly important for handset vendors that are increasingly focusing on applications and services as part of complete offerings to customers. Most major handset vendors have introduced some kind of navigation service offering with many of its GPS handsets. Nokia has been aggressive on the market and has the most clearly stated strategy for location services. Since the acquisition of gate5 and NAVTEQ, Nokia has become a vertically integrated provider of navigation services and devices. Moreover, Nokia is gradually expanding its Ovi services offerings beyond core mapping and navigation to include other location-based services. Other vendors have so far opted to collaborate with specialist navigation developers that can deliver customised services. Service providers and other distributors Numerous service providers have introduced branded navigation services that leverage their established brands for navigation or information related services. Examples include Internet search providers, mapping and travel portal providers, directory publishers and telecom equipment distributors. These companies market services that often include unique content or navigation related services not available from the operators. In North America these service providers rely on co-operation with operators that largely control which applications that can 3
DISTRIBUTION CHANNELS FOR MOBILE NAVIGATION SERVICES be installed on handsets, whereas multiple channels are used in Europe where most handsets are open for third party software. Overall, these service providers have only been moderately successful so far. Especially ad-funded services have not reached significant revenues yet. Figure 2 GPS-enabled handsets with navigation software Source: Sony Ericsson, Apple and Nokia Application stores become game changers Over the years, thousands of applications have been written for Palm OS, BlackBerry OS, Windows Mobile and Symbian OS smartphones. The importance of a well implemented and easy to use delivery channel has been shown by Apple s App Store for the iphone and ipod Touch. In little more than one year, over 85,000 applications have been made available through the App Store and the number of downloads has surpassed two billion. Other handset and operating system vendors have since followed Apple and announced their own application and content stores. Premium applications became available in the Android Market in March 2009. One month later RIM introduced the BlackBerry App World in the US, Canada and the UK. Nokia launched its Ovi Store featuring content and applications in May 2009. Ovi 4
DISTRIBUTION CHANNELS FOR MOBILE NAVIGATION SERVICES Store is now available for over 100 device models in more than 180 countries. LG s Application Store went live in July 2009 and will be available in 24 countries by the end of 2009. Samsung followed with its on-device application store in September 2009 and will be available in over 30 countries by the end of the year. Windows Marketplace for Mobile became available in 29 countries in early October 2009. Besides handset vendor and device OS specific application stores, several mobile operators are introducing their own on-device stores as well. Operators have sold content such as wallpapers, ringtones and music on their portals for several years. However, new stores such as Vodafone Shop and Orange Application Shop are more open to third party providers and put further emphasis on downloadable applications. Especially for smaller application developers, the application store concept is almost a revolution. In the past, reaching the mass market has essentially required pre-installation of applications on handsets by reaching distribution agreements with handset vendors or operators. The arrival of on-device application stores partly or completely bypasses the operators control over application distribution. Although the sheer number of application stores being launched requires developers to submit their applications to multiple parties for approval the much larger addressable market should more than compensate for the extra effort. For users, application stores enable easier access to a broader selection of content that facilitates feature and price comparisons, ultimately increasing competition and customer value. Application stores will become an excellent distribution channel for mobile navigation services. Berg Insight forecasts that in 2015, more than half of all active users of navigation applications will have downloaded the application from an on-device application store. A majority of these applications will be marketed by third party service providers. 5