Mobility Abuzz with LBS as Hot New Sector

The wireless world is buzzing about location-based services (LBS) thanks to two significant announcements this week from GPS makers that new turn-by-turn navigation systems for the iPhone are on the way.

But Apple (NASDAQ: AAPL) isn’t the only vendor making LBS headlines, as Research in Motion (NASDAQ:RIMM) acquired Dash Navigation and recent data shows LBS as an emerging trend in mobile, resulting in opportunities for both advertisers and carriers.

This past Monday, TomTom announced it is working with Apple to deliver the first dedicated “in-car navigation solution” for the iPhone 3G S, comprised of a TomTom navigation app combined with a car kit designed specifically for the iPhone.

Apple is focusing on development of the app itself, which will include routes and maps from Tele Atlas when it becomes available at the App Store following the release of iPhone Software 3.0 on June 17.

Meanwhile, TomTom is completing the car kit accessory, which enhances the iPhone’s GPS signal through a dock connector, as third-party accessory support is built into the iPhone SDK 3.0. The kit also charges the iPhone, includes a built-in loud speaker for spoken turn-by-turn directions and comes equipped with a microphone for hands-free calling.

TomTom’s co-founder and CTO Peter-Frans Pauwels said during a presentation at the Apple Worldwide Developer Conference (WWDC) that the kit will include a built-in FM transmitter for playing iPhone music files through the car stereo as well.

Not to be outdone, German GPS maker Navigon announced this week that iPhone owners will be able to “kit out their smartphones” with its iPhone navigation apps.

“With the new OS 3.0 operating system, Apple has made the use of navigation software on the iPhone possible, and Navigon has quickly managed to adapt the MobileNavigator software to the new firmware. The iPhone can now be transformed into a versatile, fully functional navigator,” Egon Minar, CEO of Navigon, said in a statement.

He added that if you turn the iPhone 90 degrees, then the display switches automatically from portrait to landscape view. Along with this automatic display adjustment and the intelligent address entry, there is also the option of navigating directly to an address from saved contacts. If navigation is interrupted by a telephone call then navigation is resumed automatically after the call has ended.

(Next page: RIM reacts.)

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RIM reacts

Meanwhile, Research in Motion recently snatched up Dash Navigation.

Dash is known as the first U.S. vendor to have launched a connected personal navigation device including real-time traffic information generated by the Dash user community. The device was launched in April 2008 following a long test period.

Despite the huge focus by press and analysts, the reception by the public was lukewarm, partly due to a lack of brand power, communication and channel presence, and because real-time traffic did not offer sufficient value to the consumer. In November 2008, Dash abandoned its direct-to-consumer strategy in favor of a licensing business model.

So, how can this acquisition be interpreted?

“The surge in interest in phone-based navigation and LBS has prompted several handset manufactures to vertically integrate these applications in their GPS handset offer,” said Dominique Bonte, director of telematics and navigation research at ABI Research.

“Owning the Dash assets will allow smartphone vendor RIM to go one step further, offering real-time navigation or traffic content as a major differentiator. It will also open possibilities to build upon Dash’s open LBS platform approach based on widgets,” according to Bonte.

At the same time, this reopens the debate about the relative merits of built-in LBS applications versus third-party software available on application stores. While it increasingly looks like both approaches will coexist, device manufacturers and operators need to decide how they will complement each other, said Bonte.

But there’s more than that going on the LBS arena.

Some recent developments include: WeFi, which uses LBS for its community-based global Wi-Fi network, plans to open up its own app store to provide applications that leverage its existing Wi-Fi access point community. The goal is to move consumers who use bandwidth-intensive applications off the carriers’ networks and onto Wi-Fi.

This is key in light of the recent SlingBox and Skype mobile app denials — controversy ensued after Apple and AT&T disabled 3G support in the SlingPlayer Mobile video placeshifting app and Internet calling app Skype for iPhone.

And Skyhook Wireless, a technology provider for location-based services, recently released some data it had mined from various application stores about the growing quantity of LBS applications, noting that almost 75 percent of LBS-based applications for the iPhone cost money as opposed to being free.

Given all this activity, it’s no wonder industry watchers are taking a close look at LBS to identify opportunities for advertisers and carriers.

For instance, Web analytics firm Compete‘s latest “Smartphone Intelligence” data found that, overall, one in three smartphone owners currently use an LBS at least once a month. Plus, an additional 20 percent of smartphone users said that they would be interested in using LBS if they knew more about what was available and how to use them.

The report goes on to say that weather and navigation apps are the current leaders in the LBS space.

“However, when asked which types of LBS they would prefer to use if they were available or knew how to use them, we saw some interesting results, particularly appealing for advertisers. It turns out that consumers are also interested in getting local alerts and special offers or promotions from nearby stores or other retailers,” wrote Andy deGaravilla, senior associate at Compete.

“This presents an opportunity for advertisers to reap the rewards by serving up compelling and relevant ads that will likely see higher click-through rates and subsequent engagement,” he added.

He added that ROI from these types of promotions would be easier to measure as the benefits are more immediate and trackable to a specific customer interaction than many other forms of advertising.

“In addition to being valuable tools for local businesses and advertising networks, LBS services are also important to carriers who provide the data packages and may possibly split the application revenues. It turns out that smartphone owners who use LBS are more likely to spend more each month on their total wireless bill,” says deGaravilla.

For instance, LBS users are less likely to be spending $75 or less on their monthly wireless bill and more likely to be spending $125 or more than smartphone owners who do not use LBS.

“So, in addition to being a good segment for advertisers to target, LBS users are valuable customers for carriers as well,” says deGaravilla. “It will be important for carriers to decide how to best leverage all the different app stores to maximize subscriber use of LBS.”

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