Enter Google; Exit Microsoft, Stage Left

November 11, 2009 By: Kevin Dennehy

LBS Insider Newsletter, November 2009

Google Maps Navigation will change the way the location-based services industry does business. How it will change the industry remains to be seen, but a major player offering the same services for free that companies are now enjoying much profit from is very disconcerting.

In other company news, MSN Direct’s use of unused FM radio spectrum was a great idea in 2004. It effectively used unused portions of the FM radio spectrum to deliver such location-based services as real-time traffic, weather, and other content. It was a victim of low-cost and evolving technology for LBS delivery. Having Microsoft involved in LBS was a big shot in the arm for the industry. However, it remains to be seen what the company’s plans are to continue in the LBS space in the near future.

Despite industry observers and competitors who say otherwise, Google’s launch of its Google Maps Navigation product will clearly change the players, services offered, and financial stability of the location-based services market. The service, while being touted as free, still requires initial users on the Verizon system to have requisite voice and data plans.

With such capability as turn-by-turn navigation, voice guidance, and automatic re-routing, Google Maps Navigation is no entry-level app that competitors should ignore. Google Maps Navigation initially is being offered on the Android 2.0 series devices.

Companies have seen this type of service coming from Google for a long time and predicted some dire times for both personal navigation device (PND) companies and handset navigation vendors who offer services in a very lucrative market.

Some say that Google, which dropped Tele Atlas as its mapping company for North America in early October (though kept the company’s mapping data for international markets), will make money off of location-based ads that are sold in conjunction with the navigation solution. The company purchased mobile advertising company, AdMob, for $750 million, though it is not known whether it AdMob will be joining the location-based advertising fray in conjunction with Google Maps Navigation — but the speculation is there.

Stay tuned, the fireworks and fallout from this announcement are yet to be determined.

MSN Direct to Be Shut Down in 2012

Microsoft’s recent decision to shut down MSN Direct in early 2012 not only means that a major company’s location-based services offering is going away, but also signals that the way LBS is delivered is rapidly evolving. MSN Direct, launched in early 2004, was offered on several navigation devices, such as Garmin’s Nuvi line.

MSN Direct works with unused FM radio spectrum to broadcast such data as real-time traffic, weather, stock quotes, and local gas prices. Microsoft said that the demand for the service had decreased significantly with the rise of Wi-Fi cellular, FM RDS (Radio Data System), and other digital networks.

The data networks that deliver traffic and other content to mobile and in-car devices are going through a significant evolution, said Scott Sedlik, Inrix’ vice president of marketing. “MSN Direct was an innovative service early on and did provide value-added information, but ultimately is a casualty of getting stuck between other networks that were able to deliver more scale…less expensively.”

Sedlik said that RDS-TMC (Traffic Message Service) continues to be the dominant broadcast network for delivering traffic in North America and Europe. “Clear Channel’s Total Traffic Network has the broadcast adoption with more than 1 million subs from BMW, Mini, TomTom and other PNDs, OEMs. Navteq’s RDS-TMC network has grown from a few thousand subs to several hundred thousand based on their ad-supported model that is bundled with Garmin PNDs at retail,” he said.

Sedlik said that XM/Sirius traffic data services, delivered via satellite, have had some success in automotive. “However, the high subscription price and Sirius’ financial stability have created significant concerns at auto OEMs regarding the long-term viability of the services,” he said. “HD radio broadcast data services, and [Digital Audio Broadcasting] in Europe, are still in their infancy, but are expected to deliver broadcast services next year. MSN Direct ultimately got squeezed between the various business models and content of these one-way broadcast services.”

While one-way broadcast services may be dominant right now, the end-game is two-way connectivity for delivery of traffic, navigation, and other services, Sedlik said. “The iPhone and, soon, Android-based devices are creating a revolution in the classical mobile value chains. They are spurring intense adoption of GPS-enable smartphones,” he said. “Two-way connectivity and the evolving value chain allow application developers, and OEMs, to deliver incredibly rich, up-to-date, and personalized traffic, navigation, weather and other content in ways that were previously not financially viable.”

Microsoft said it will provide pro-rated refunds for existing MSN Direct customers, including those in a one-time payment program.

So while MSN Direct is shutting down, Sedlik predicts that RDS-TMC continues to grow in the next few years in terms of overall subscriptions, but will ultimately decline over time. He said that HD radio will gain some adoption, particularly in automotive to steal a share of the market from satellite operators. “GPRS and GSM, as well as hyrbird HD/GPRS solutions, will gain the majority of the market opportunity,” he said.

Echoing Sedlik’s remarks about the rise of the smartphone as the platform of choice to deliver traffic and other content, Andre Gueziec, Beat the Traffic CEO and founder, said that wireless data plans are going down in cost for 3G and 4G service. “We see the smartphone as the key client for traffic information. We are moving aggressively with consumer and white-label products for Blackberry and the iPhone,” he said.