Google or Nokia: Which Company Will Win the LBS War?

March 10, 2010 By: Kevin Dennehy

LBS Insider Newsletter, March 2010

While not a lot of huge location-based services news surrounds this month’s CTIA Wireless conference, one of the big topics of discussion zeroes in on who will have the edge in the mobile LBS space between Google or Nokia — both companies recently announced free navigation applications. Will it be Google, with a huge advertising and LBS focus? Or will it be Nokia, the top handset manufacturer with a giant digital map company in Navteq?

Going into this month’s CTIA Wireless conference in Las Vegas, more opinion is coming out as to who will win the “free navigation” market quest—Google or Nokia—than what’s happening at the show. It is a debate that currently overshadows most others in the industry.

When Google released its proprietary Google Maps-base of the United States and free route guidance/navigation services using the database on smart phones, Nokia may have been the most interested listener in the audience, said Mike Dobson, TeleMapics president.

“Clearly, this strategic move into the infrastructure of the mobile LBS space by Google was not the best news for Nokia. Not only did it provide another sign of Google’s intent to dominate mobile commerce, but also its map base could provide significant competition for Navteq, a company that cost Nokia more than $8 billion by the time the company’s acquisition concluded in 2008,” he said. “By releasing its map base and navigation service, Google had taken the first mover advantage in the U.S. and appeared to be poised to try to replicate that feat in markets around the world.”

However, Dobson doesn’t believe, like many industry observers, that Nokia was dealt an early knock-out punch by Google, which is perceived to be the 800-pound gorilla in the location-based services market.

“While many may believe that Nokia cringed at the news, I suspect the opposite was true. It is my opinion that Nokia and NAVTEQ clearly recognized Google’s potential to combine their imagery based mapping system, data from collection vans used for Street View and User Generated content for map updating and augmentation into a powerful map database creation system,” Dobson said. “In other words, Nokia knew what was coming and believed that their counter-strategy would be quite effective. The only real issue is whether they may have been forced to show their cards before they wanted to do so.”

Dobson said that when Nokia announced Ovi Maps with “free walk and drive navigation” on Jan. 21, 2010, during the week following the announcement, there were more than 1 million downloads of the app and data. “Which, by the way, can be used whether the phone is ‘connected’ or not,” he said.

According to Nokia, OVI Maps are available for more than 180 countries with car and pedestrian navigation available for 74 countries in 46 languages, while traffic services are available in 10 countries.

Perhaps more telling, Dobson contends, is that the top five countries downloading the new, free version of OVI maps were China, Italy (with the highest number of smart phone users in Europe), UK, Germany and Spain. The number of users of Google’s navigation applications in these same five countries is zero, he said.

Said Dobson: “It looks like the first mover advantage in the ROW, or better known as rest-of-the-world, goes to Nokia—and Navteq.”

Gartner’s recent analysis of the phone market says that Nokia leads the pack with 36.4 percent of the market, based on selling nearly 441 million phones in 2009. This is followed by Samsung, LG, Motorola and Sony Ericsson (whose percentage was 4.5). Google’s Android, Apple, and Rim were included in the “others” category, whose members must have had percentages lower than Sony Ericsson, Dobson said.

According to Gartner, 170 million smart phones were sold in 2009. Categorized by operating system, Symbian was the leader (46.9 percent market share) followed by Research in Motion, iPhone OS (14.4 percent) and Windows Mobile (which led Android Phone sales by almost 9 million units). “It is noteworthy that both Apple and Android were the two best performers in 2009, as they increased their sales by 6.2 percent and 3.5 percent, respectively. Unfortunately, a recent Apple patent suit against HTC and tangentially aimed at Google, as well as concern in the market over Google’s overall strategy in the wireless market, may reduce phone vendors willingness of adopting Android in 2010,” Dobson said.

The real ball that companies shouldn’t take their eyes off of is in Europe, Dobson said. Forrester Research suggests that mobile internet penetration in Western Europe is now approximately 20 percent and may hit 70 percent in 10 years. Similarly, they expect the mobile Internet penetration to grow to 39 percent by 2014. Gartner thinks that smart phones will account for 46 percent of the mobile phone market by 2013.

“In other words, most of the phones sold today do not have the capability to connect to the mobile Internet, or the horsepower to run the mapping, routing and route guidance software required for a satisfying user experience. The market for local LBS and local advertising is, once again, not quite here yet, but it is getting closer,” he said. “The interesting issue is who can be ready to take advantage of the market when it begins to mature.”

One thing Nokia has over Google is the company’s ability to provide quality maps, Dobson said. “I suspect that Nokia’s ownership of Navteq will help keep them ahead of Google, in terms of maps and navigation, over the next few years. The important question is whether Google can enhance the quality of its map database to provide routing that rivals the accuracy and reliability of that provided by systems using Navteq data,” he said. “It is my opinion that the Google map base is less accurate than that possessed by Navteq, although Google is certainly making progress in improving the quality of their database. In turn, Google, so the backwoods chatter holds, apparently concluded a one-time deal with AND in the first quarter of 2009, to use AND’s maps of Western Europe.”

In addition, Dobson said that news from AND indicates that the revenue from the deal with the “major U.S. company” might be delayed until 2010, indicating that Google may not be able to move as fast as it had hoped to create a Euro-Google-Base. “It is my opinion that Google will find creating a navigable map base of Western Europe comparable in quality to Navteq or Tele Atlas much more difficult than doing the same in the United States--as noted before, a goal that they have not yet reached here,” he said. “Nokia’s acquisition of Navteq has provided it a cushion and a lead over Google, but only in mapping and I am not sure how long that lead will last. Remember, Google’s primary interest is not in selling Smartphones, or even in licensing Android to manufacturers of smart handsets. Google has developed both initiatives as methods of forward integrating into a “distribution channel” that will help them sell geospatially-targeted advertising to merchants interested in marketing through the mobile Internet.”

Overall, Google is not competing with Nokia, nor is it competing with Navteq, Dobson said. “It is Google’s need to support the delivery of advertising that drives its relentless innovation. For example, ‘why doesn’t Google’s map app work offline like Nokia’s?’ Easy, they have not yet figured out a way to deliver advertisements to an unconnected handset in a manner that would make it worth their while,” he said.

Google is not interested in giving away map and navigation applications to its users to make the geographically literate, Dobson said. “Instead, Google is interested in exposing their users to location-based advertising, a process in which the advertisers and buyers might be advantaged by the autocorrelation between their locations,” he said. “Nokia, at least today, is just trying to define features that will lead buyers to choose their phones over those of their competitors. If Nokia cannot find a way to enhance its business model and strategies for connected handsets, including advertising, it will slowly be ‘Googleized.’”