Elusive pot of gold beyond reach of location-based services and GPS now on iPhone 3G

I've made many statements about location-based services here on this blog and in my books and often with a repeat of my "throw-away line" that of course location-based services will fail in the market.

Now that the iPhone 3G hype is strong and one of its new features is the assisted GPS positioning (a wonderfully accurate system by the way), there are very many new pilgrims arriving to pray at the altar of LBS (Location Based Services). I've seen many new reports and tons of blog postings and semi-credible experts comment on LBS. The business and tech press has been re-energized to revisit this much-maligned area. And some who never lost faith, have said - but yes, we always said you needed precision in LBS, and now with GPS on top phones like say a Nokia N95 or N82 or Apple iPhone 3G - now we can do LBS right, and the customers will love it and use it and the money will finally come.

This will not happen.

I hate to burst this bubble, but there is now so much hype around LBS, that I have to step in with a major word of caution. Please please do not build your business around LBS as its primary element. Yes, sometimes location information can add value to your service. But if you make the location positioning as the primary benefit of any mass market service, your service will fail in the market place.

I am very serious about this. Mass market services will not survive if their primary benefit is based around positioning, and having assisted GPS and near-perfect pin-point accuracy will not fix the issue. If your business is currently built around an LBS concept, please trust me that much, that you read this essay and re-consider.

TOMI AND LBS

So first why should you care about me and my view. Fine, we are a well-trusted and well-read blog on mobile-related topics and yes, once Tomi Ahonen was the head of Nokia's global telecoms consulting unit. Fine. Lets see how well I know this space. My first book. Services for UMTS, on mobile services - a global telecoms bestseller in 2002 - was not only the first book published about mobile services, it was the first book to cover location-based services, and has more than a full chapter on LBS and several dozen actual LBS service concepts outlined. My second book, m-Profits, a global telecoms bestseller in 2003, also had also more than a chapter on LBS. I developed the mobile services short course for Oxford University around these books and we featured LBS prominently there. Its not that this Tomi T Ahonen started to think about GPS a few months ago; I have been quite legitimately one of the world-leading authorities on LBS for most of this decade. I really know this stuff.

So lets go back. In 2002 this is what I wrote expressly about location information when discussing "movement" as one of the attributes of mobile services and applications:

"Location will often be an integral part of the service to the point that without it the service would not exist. Positional information is one of the key knowledge factors that Mobile Internet operators will use to add additional value to their mobile service offerings."

I am sure that is a mouth-watering endorsement for any LBS product manager or business development executive today. It certainly echoes many current statements coming from the West Coast of America. But that was written in 2001, when almost no LBS services had launched commercially. Now, lets see how I phrased it in my follow-up book, that was written with much actual market insights from early LBS services hitting the market. This is my thought on positioning on the same Movement attribute from my follow-up book m-Profits:

"Positioning rarely provides direct benefit to the user, unless the person is totally lost and wants to know where he is. Nevertheless, positioning can be used to guide and to provide assistance in finding friends and colleagues for example in a crowded place."

This was a change in my view, over just about one year in my understanding, from the pure theory view - before commercial launches - to the practical honest analyst's first view after dozens of the concepts I had outlined in my first book had now launched and were not succeeding in the market place.

Understand please where I come from. I went on record in my first book to state that positional info was a key factor, and so much an integral part of mobile services that they would not survive without it. So once I have believed whole-heartedly in this myth. I devoted more than a chapter for all kinds of LBS services. Trust me on this - I was a self-employed consultant in 2002 when the reality started to hit in. It would have been in my interest to find ANY silver lining on the LBS cloud, any slightest bit of it, for my second book. I had said positioning was a key factor and that many services would not survive without it. For me to shift this dramatically in one year - I had to have heard time and again. And time and again. And again. And again, that every one of the early LBS services was failing in the marketplace. Every one of them.

So already in my second book I turned cautious about LBS, and said "positioning rarely provides direct benefit". I saw the inevitable facts on several continents, on every concept I had outlined, failing. I have to be truthful to my craft, and report the facts, even if that means I was wrong in my book. Trust me I did not WANT to write that in m-Profits. But I did. And since then I have repeatedly said whenever discussing mobile service creation - that Movement the attribute (one of the Six M's theory, the industry-standard service creation theory for mobile apps, developed together with Joe Barrett of Nokia and Paul Golding of Motorola) has several factors and positioning is only one of them. And focusing on Movement alone, tends to lead to an over-emphasis of LBS. An over-emphasis of LBS.

LBS WEATHER TRACKER, LBS FRIENDS FINDER, LBS DOG TRACKER

We as an industry somewhat learned that lesson (in very costly launches and trials) during this decade in most leading mobile markets, with Italy launching the LBS based tourist guide in 2001 to help you know which church or bridge or statue or fountain you are near - "you are not near any historical landmark" it will tell mobile phone owners if they request the service in the woods for example. I was talking to the product manager of an operator who testing their soon-to-be-launched friends-tracker in 2001 and had his wife's phone on it (and his wife did not know) to see when she was shopping. This is not a new idea! An Israeli friend of mine said in 2002 that the first killer app for LBS is not the child-tracker or wife-tracker, it is the mother-in-law tracker - wouldn't we want to know when our mother-in-law is coming for an un-announced visit?

We had the French launch the LBS based doctor service making house calls in 2002. We had the Finnish hunting dog service - track your hunting dog via LBS (GPS) collar in 2003. The Japanese offered the haunted house finder in 2003 and in Cambridge they had an LBS based virtual treasure hunt in 2003. We had the Germans offer the personalized weather service - how long does this rain last from 2002 - individual radar-based rain cloud tracker with pin-point positioning to where you are. The Germans later added the real-time allergy warnings to the personalized weather (the direction of the wind, and allergen warnings, based on pollen counts, and your personal allergies - certainly that must now make it a killer application. No. It has 100,000 registered users several years after launch - in a country of 80 million people. Every conceivable LBS service has been tried - and failed or only very weakly adopted - as a mass market service.

There are many niche apps, most of all in the vehicle, parcel and employee tracking areas. Yes. But for mass markets, please, any concept you can think of - I've already seen it written about, and launched commercially - and usually to dismal success. This cool GPS maps (Google maps etc) guidance feature we now have on say the N82 and the iPhone 3G. Nothing new about that - they had this in South Korea back in 2006 on Samsung SPHS 1100 phone. Incidentially, to show how much I've moved beyond LBS, my fifth book Digital Korea has only one page devoted to LBS.. This is NOT our big opportunity when we enter the vast and profitable eldorado of mobile services.

FAILED IN JAPAN

So, maybe Tomi is the eternal pessimist and has some personal grudge against the LBS industry? Yeah, perhaps this industry does have promise after all. So let me give my clinching argument. When I heard this, I personally admitted, LBS is not ever going to fulfill its promise.

Japan. An amazing country. In Tokyo - an enormous city where it takes you 3 hours to take the express train from one edge of the metropolis to another. First time tourists are always bewildered by the sheer size of the expanse, the immense scale, how enormous amounts of time have to be allocated to move from "our hotel which is quite near"..  So. Here is the really nutty part. The house numbers are not in numerical order on any given street! Yes. This is true. On any given street you might find house number 17, followed by 22, then by 5, then by 61, then 18, then 44, then 131. There is no logic. Not odd/even logic. Not increasing numerical order nor declining numerical order. No pattern (every other number or doubling the previous number or whatever). They are not based on the block, as many American addresses are. Nor are they based on the crossing street number as in some places. No. There is NO logic. Taxi drivers will go to the right street, and then just cruise slowly up and down looking at literally every house number until they discover the number you are seeking. This is why in Japan people will always give landmarks, it is near the MacDonalds etc..

So. If ever there was a city where we NEED location-based guidance, it is Tokyo. And yes, KDDI was among the worlds' first mobile operators to launch LBS guidance and mapping in 2000. The system has gotten progressively better with fantastic guidance and info and services to it. Today there are dozens of maps and guidance and navigation systems, including full 3D renderings of all of Tokyo's main districts, so you can look at the building on the phone, and compare it to the view you have, to see is it the building you want, etc. We reported here just a few days ago, that they have such features as "give me the route that has least steps to climb" or the route with most overhang and inside routes to avoid the rain etc. The world's most advanced location-based mapping and guidance system, with pin-point accuracy, and 3D maps. This in the country with the most advanced mobile internet, and the biggest need for guidance!!!Surely it must be a hit today? No. They are not mass market hits.

When we get a hit service - like we reported here on CDB a few months ago, about the Japanese innovation of Otetsudai Networks, the location-based short term work finder - that is primarily a work finder (or temporary worker-labour finder from the view-point of the prospective employer), where LBS is a minor additional benefit. The service would work just fine without LBS, but its better with LBS. The service is not built to be an LBS service, it helps match temporary work offers to people with sudden free time, as I happen to have this morning in Hong Kong when my meeting got moved and now I'm blogging... 

If LBS services will not work in Tokyo, where even the house numbers are not in numerical order - and where today more than half of all internet users access the web on their mobile phones - then, it should be clear that the EVIDENCE suggests that this Tomi Ahonen is right - mobile services will not thrive if built on LBS principles. LBS is an additional extra. We have the Six M's to build mobile services, and Movement is certainly one of the Six M's, but it is not the most compelling attribute, by any means. And even Movement itself is far more than positioning...

WHY NOT

So yes, if the evidence suggests LBS is not the key to big killer applications, then why not. Ha-ha, now we get to the meat of the issue. Yes, I've asked this question hundreds of times myself in 2001-2003, and have been answering those questions myself since 2002...  I think I know most of why.

One. We are rarely lost. Think of the normal adult employed person. Not you and me, high tech specialists who may jetset around the world, but the average working person. A secretary at an office, a factory worker, a waitress at a restaurant, a nurse at a hospital, a teacher etc..  Average normal workers all around the world. Every one has a mobile phone today (all employed people in the western world now have mobile phones, and most of the economically viable population in the developing world have a mobile phone).

But how do they move. Almost every morning they take the exact same route to work, using the same method. The bus, the tram, the subway or train; the car, a bicycle, or perhaps walk if the job is close to home. But the factory or office building or hospital or school - the place of employment - did not suddenly move last night. It is the same place for years (we may change jobs far more often than our employer moves to a new building). So, on our morning, we have no need for guidance (except perhaps, for some car drivers who have traffic issues, fine, a congested route indicator is a good service yes, but not a mass market offer - not enough commuters in traffic when calculated globally. Yes, perhaps Manhattan or Los Angeles, but not in the majority of the USA which is, after all, the suburbs or small town USA etc..)

Same for coming home. Here we have some variety, some days we take the shortest route home, other days we go do some grocery shopping, etc. Some days we go out to have some drinks after work with mates from work or meet up with other family or friends downtown, etc.

And if you say "but the kids" - same story again. They go to school in the morning (no deviation) and most days they go to familiar places on their way back home, or in their evening play with friends. The familiar park for football, the familiar Burger King, the familiar cinema, the familiar ice cream parlour etc. Kids do the same, most days, most of the time, they are in familiar places on a routine. Perhaps more variety in their routines, but then, again, they tend to roam around in small groups, where one of the group knows where that cool new store is with the wild skateboarding tee-shirts etc..

GO TO FAMILIAR PLACES

Now, comes the second part. Almost always, almost always, in our home town, when we don't go directly home - we go to familiar places. The favourite pub or bar or cafe after work; the favourite shop or store or shopping mall near our home; or the same address where our brother has lived for the past seven years..  We are not "lost" during a typical week, not once. We may be "lost" briefly, perhaps once per month... and then almost always we knew of that beforehand, and we had OTHERS with us, who knew where we were going.. So if we go to check out the new Spanish restaurant that opened down town, and don't know where it is, the person we are going with, most likely does know.

But then the second big lesson to understand. We don't "find ourselves lost" most of the time. Even if we go to a totally unfamiliar place - we tend to know this beforehand, and we prepare. We take out a map (if we are men) or we ask our friend for instructions how to get there using landmarks (like women, ha-ha) but we plan beforehand to make sure we know where we need to go.

Most of the time, we are not lost. When we need to go to the post office, we know fully well, where is the nearest post office to our home, and the one nearest to our office, or along the route when we go home. We don't need to find a post office except when we move to a new home or job (excepting vacations and travel, I'll get to that later).

NOT USED DAILY

So. Now another insight. If a mobile service is used daily or weekly, it gets rapid adoption. If the service is used less often, it often strongly disappoints in adoption. Compare movies and parking. Both can be paid for by mobile. Both were launched in many countries in 2000-2001. Today in Estonia all parking is paid by mobile. In no country is anywhere near half of movies paid by mobile. If you think parking or Estonia is somehow an exceptional case, take public transportation. Helsinki Finland launched mobile ticketing as a trial for payments for their trams the start of 2002, and by 2005, 55% of all single tickets sold to trams in Helsinki were by mobile phone. In four years, 55%. If we use the mobile service daily or weekly, it can take off dramatically. If we use it a couple of times per year, it has a very hard time to gain adoption.

So. Where does this leave us. You want to do LBS based ads, LBS based games, LBS based child-trackers (of course parents would love to know where the kids are - but kids are not stupid. As we saw with the Disney MVNO and its child-tracker feature, if kids notice that a given phone brand or operator/carrier brand is spying on them - that phone - and that kid! - becomes toxic. NOBODY wants to be friends of the kid whose parents snoop on that kid...)

HOLIDAYS AND TRAVEL

Ok, then the final element. When we travel, go to vacations, and certainly then we need maps and guidance, don't we?

Again, the evidence is contrary to that. Yes, when we travel, we are more likely to need occasional guidance. But consider your last trip. When did you first pull out a map of Paris? Not in Paris when you were lost? No. You started to explore Paris when you booked your hotel online!!  We start our journey to a new destination weeks or even months beforehand. If we've never been there, we buy a guidebook like Forbidden Planet or Lonely Guide to get to know that place. Yes, such a guide could - and should - and actually even is - migrate to mobile phones. But then we have far more value than "just positioning". Most of the time we may be in unfamiliar terrain but "not lost". We are inside a taxi cab, which knows where we need to go. Yes, it may be of interest to some nerdy map-freak (like myself) to know every moment where we are moving, is this taxi driver taking the direct route - but most people are perfectly happy to surrender their lack of local knowledge to that of the taxi driver, to get us to the museum, and then back to our hotel.

Even when we travel, we are not mostly lost, and when we are, we don't care. It is rare, that we need to "position ourselves". When we leave our hotel lobby for the nearby shopping mall, we ask the conscierge for direction.. We look at the hotel and on our way back from the shopping mall, we use the landmarks to get back to the hotel, or we may ask (well, of course men don't ask for directions.. ha-ha).

The worst part of travel and LBS, is that operators tend not to serve international traveller needs with LBS based tourist guides. And when they happen to do so, there often are severe international data roaming charges making them prohibitive, and then the perception by users that it is far too expensive.

A good example is the GPS mapping feature on my N82. Great. I love it (but I'm a maps freak). But - I am in a different country essentially every week and could use it every time. Except, that I need to download the local country map every time in every country - at hideous international data roaming charges. By the time I'm at the hotel and perhaps could use the WiFi of the hotel room, by that time my only need to navigate a given country has passed - I've found my hotel, I do my gig here, and fly out tomorrow, so its into the taxi and to the airport, no need to navigate anymore...

IF YOU BUILD IT, LBS WILL NOT COME

These LBS concepts are fantasies. Dreamt up by technologists, who pray to the altar of LBS, thinking simplistically, that if I only make it more accurate, they will come.

The customers will NOT come. Since 2000, I have discussed more than 300 LBS based service concepts in the public domain (among the more than 1,200 "Pearls" that I've shown into the public domain; my books have over 600 of them). I have discussed and debated and analyzed and tracked them since. They are singularly the biggest failure of our industry. The biggest failure. This has nothing to do with GPS accuracy. These concepts simply do not find a loving customer response.

Yes, we can do business/enterprise applications with LBS functions - they manage forests in Finland with GPS/GSM chips on every single tree - millions of trees tracked this way. Now, do these trees move about a lot? No. They tend to be planted down, so they tend not to move about a lot. Not until they are cut down. Then yes, they move once - on a death-journey to the saw mills on the beds of the wood-hauling trucks. At that time we get brief utility if one tree is accidentially headed to the wrong sasw mill, so for example headed to the pulp saw mill, when it was supposed to go to the furniture quality wood saw mill, but that is it. And trees live what 40 years... One use in 40 years. That is typical of LBS.

USE THE OTHER OF THE 6 M'S

We have six M's (Movement, Moment, Me, Multi-User, Money and Machines) to build services for mobile. Movement is but one of them, and from having run hundreds of service creation workshops and seeing them deliver hundreds of commercially launched services and applications, I know - and I always say this - that Movement is the least relevant of the Six M's. Moment, Me and Multi-User are all far more powerful attributes that can generate far more compelling and attractive services, that can deliver far more money for you. Don't focus and fixate on Movement.

Further, that Location/Positioning (GPS) is only ONE of the elements in Movement. Back in my second book M-Profits I aleady pointed out that "Positioning rarely provides direct benefit to the user, unless the person is totally lost."

We are mostly not lost. If we drive our car, then yes, there is good use for a mapping/guiding system - but that already exists, in TomTom and its clones. Nothing new here. And that model does not transfer well to pedestrians.

MAYBE TOMI IS WRONG..

Now one last bit of wisdom from the old consultant...  I am old, and grumpy, and very negative about LBS. I am not pessimistic about all mobile services, I am very enthusiastic about for example mobile social networking and mobile advertising (but not the spam LBS ads). So I am not the "glass is always half empty" kind of guy. But yes, I once believed in LBS, very passionately, and have changed my tune. That should give my view more credence than the view of a random "expert" who has recently discovered this supposed opportunity and hasn't written extensively about it and engaged in countless debates in Japan and South Korea and Scandinavia and other advanced markets about LBS.

But, it is of course possible that I am wrong. I have been wrong many times in the past. I do not discourage you from experimenting in this space. Please just do not base the basic premise of your service on LBS.

As much as I am a pessimist about mass market LBS services, I believe a lot in niche LBS services (Long Tail and all that). And Movement is one of the attributes of MY theory on the 6 M's, and I still teach it, so yes, we can add value with LBS.

But if you do find true commercial success in LBS, please do tell me, I'll be happy for you, and celebrate it here at our blog and in my upcoming books. But so far, all the evidence suggests that LBS is driven by technologists in love with positioning technology, and it is an idea where a commercial opportunity for mass markets does not exist. Most of the time, most of the people, are in locations that they know perfectly well. If they are not lost, they are not willing to pay you to let them now where is the nearest cash machine or pizza hut.

UPDATE July 2009: I have taken 2 excerpts from my latest book to illustrate specifically LBS ads, what won't work and what can work.

http://communities-dominate.blogs.com/brands/2009/07/why-locationbased-spam-ads-will-fail-but-also-lbsbased-event-ads-will-succeed.html

Comments

[Paul Jardine]

Tomi, very good analysis of why LBS services have typically failed.
The question is: Who cares where you are? You have answered that in one dimension, i.e. it is pretty clear that I do not care where I am. You have also raised the privacy concerns, i.e. kids don't generally want their parents to know where they are. My location is not of benefit to ME (directly), but it is potentially of benefit to others.
The services that might succeed in LBS are those where there is a group who really want to know where you are and where you are happy to allow them to know because it provides you with some benefit. The system also has to allow that location information to be exchanged more easily than a legacy method (e.g. by calling you and asking)
On that model, instant dating seems like a service that might work. Perhaps a taxi service, where you could see the taxi location as it approached you. In the parking example, the local council may want to know your location to vary the cost of the parking.
On the advertising side I think it will come down to a model that was proposed by Doc Searl in the Intention Economy (http://www.linuxjournal.com/node/1000035). If I can opt-in to a subject in a location, for example 'Lunch' when I'm in Cambridge, and then get some offers from restaurants in the neighbourhood. Essentially I share my intention and location and the sellers compete to satisfy my need.

[mark]

Tomi:
Could it be that LBS failed because of the way they were monetized? To use those services, did you have to pay for each piece of data transported? And did you also have to pay for each access to the service, or have subscribed (i.e., monthly fee) in order to get access?

Apple may be interested in providing the LBS for "free". In other words, you pay for these services by buying iPhone hardware, or you pay one subscription fee (i.e. MobileMe) for a whole slew of services of which LBS is just a piece, or you indirectly pay for it when you actually buy something (i.e., Paul's example of offering me specials/discounts for lunch when I ask for lunch choices at a particular location or Google ads). Have these other methods of "monetization" been tried with LBS?

In other words, if I had to pay extra for each use, I would likely not pay either (except in an emergency). For example, being in the US, I don't care about SMS, and certainly would not pay .10 per SMS, or even $5 for 200 SMS. But having access to a multitude of little services available, including something like Quick Reply (see Mobile Me email) to replace SMS, might entice me to pay one fee for unlimited data. At least in the US, cable television and home broadband access are arguably only successful because the subscriber pays one aggregated fee for unlimited/untimed usage of many channels/web services. But again, I am not in the mobile industry and I am in the US backwaters (east coast not west coast), so I could be just wrong.

Didn't I read that smartphones with unlimited mobile data plans still account for only about 10% of subscribers globally? Yet for iPhone, Apple has insisted that all carriers offer unlimited data, ostensibly, for access to Internet-based services like email and other web apps. If Apple could get 20% more of a carrier's subscribers to add an unlimited data plan, wouldn't that be enticing? For just one carrier, such as AT&T, 20% would be 14Mx$360/year or $5B, which seems to me to be real money, and more enticing than getting a small part of the 14.5B MMS pie.

[Jason Devitt]

Tomi,

My guest column in VentureBeat makes me one of the semi-credible experts you mention: http://venturebeat.com/2008/06/14/iphone-3g-heralds-new-day-for-location-based-services/

My first company Vindigo developed a range of mobile content and applications for the US market, including ringtones, wallpaper, games, and location-based apps. Two of our best known and most profitable titles were the Vindigo city guide for PDAs and phones, and MapQuest Mobile for phones.

According to research conducted by Michael Mace at Palm in 2003, Vindigo's city guide was one of the ten most popular apps for the Palm platform. According to Nielsen Mobile (then Telephia) in 2006, MapQuest Mobile was the top revenue-generating application for mobile phones in the US, excluding games and mobile TV. Neither of these apps had access to location data - the user had to enter their own location.

By the end of 2007, there were true LBS apps on every major carrier and Networks In Motion was the market leader. According to Nielsen Mobile:

"Of the $118 million in revenue that downloadable mobile applications such as LBS, weather applications, chat/community, and personal organization tools generated during Q2 2007, LBS represented 51 percent."

http://www.telephia.com/html/LBS_PressRelease_Q207.html

You could argue that none of these apps are 'mass market' successes. But by that standard, there are *no* mass market success stories in mobile data apart from ringtones and SMS. There are lots of people who claim that games and video are 'proven' failures. Judging by the only market data we have - sales of applications to early adopters - location-based services are one of the most promising categories of mobile app.

From testing dozens of location-based apps at my previous company, I can tell you why so many of them failed: lousy user experience. Often this had to do with location accuracy, but even more often it was because of familiar problems like discovery, app design, and in the case of local information services in particular, poor content.

Best,
Jason

[Gustaf Alstromer]

Wanted to add three comments to this discussion:

Innovation

Most of the location apps that have been suggested along the years have been really bad ideas. Basically all discussions about LBS and advertising has been hype and been a pain to listen to. I think Loopt should be perceived as the leader in the LBS, at least in terms of innovation. However I'm not sure if LBS is a "category", I think it should looked upon as a feature that can be integrated in many services (Just like "social" on the web). The coolest part of loopt imho is the "serendipity" functionality where location can tell you things that didn't know was happening, that you're really close to one of your friends for example. That is the type of services that will make LBS become many hits.

The need for location
A lot of app developer think that their app will be better with location when in fact it wont. I think this comes from the fact that many apps are developed "because you can" not "because you want". When pitching Heysan to really clever people I still get the suggestion that finding your friends on a map or having location based ads sent to your phone as the most important feature. An app that works very well without location is m.yelp.com - I use it on a regular basis and I don't need an installed client or LBS, i'm usually in the same neighborhood any way. Finally the previous LBS services where that great in making an exact position of myself which made a lot of services irrelevant simply because most people on a normal day are only at like 3-4 different locations. Most people don't move as much as you would think. (This is less true in the US than in the rest of the world)

Privacy
Is location based services dangerous to privacy? I don't think so. The traditional view of what is online privacy has been distorted by what young people actually have been doing. I think we've reached a tipping point. For most people it's more important to be IN the photos online than to be excluded from them, regardless of the state you're in. I imagine Loopt will be able to sell a "premium-dot" that 3x as big on everyone elses Loopt map for a lot of people. Really, who wants to be just a dot?

Gustaf

Tech

[alex]

Hasn't Loopt just become a "free" service?
I understood Tomi's main message such that LBS don't make money because of location.

Location as a useful add-on feature to other services, which fly on their own, is a different story.

Does that justify GPS in mass-market mobile phones?

Nokia seems to think so, and sells real-time street navigation services on top of free maps.
I agree with Tomi that this appears to be a niche on the scale of the mobile industry, albeit a big enough niche for companies like TomTom and Garmin to prosper.

Jobs' presentation of GPS in the new iPhone lacked enthusiasm. He referred to real-time tracking as added value over current cellular/WLAN based location, but no compelling application was demonstrated; just a demo of a user's position dancing over a map.
Mobile Me doesn't include LBS; Apple left maps to Google with its ad based business model.
So actually, Apple may not believe in LBS as a viable business on its own. But if location enriches 3rd party applications, Apple earns its revenue share through the Apps store.

alex

[Wenhan]

Hi Tomi,

Great post. I have been thinking of LBS for a few years old. Maybe phones were too primitive to support any kind of network previously. However location can easily give you the context that the user is in. This context is so valuable in guessing his next search query and even sending suggestions to the user before he needs it.

There is much that has to be aligned before we see a killer app and I think the 6Ms is a good framework to use to create such an app.

I will be using it in my start up process so I must thank your for this post.

[mark]

alex: Today mobile me doesn't include any LBS-related services, but that's no reason to think Apple won't in the future. Apple has previously spoken of an ability to order a cup of coffee from Starbucks from your iPhone (which means it knows where you are and at which Starbucks store to fulfill the order, etc) and have it ready when you get to the store (which means it could've tracked and estimated your time of arrival). Mobile Me could provide a back-end LBS and payment service for any number of retailers; it could even inform the customer when the order is ready.

In the US, Best Buy (electronics retailer) allows you to search and order products over the web for in-store pickup within 20 minutes at the front counter. This could easily be done over iPhone and I wouldn't even have to enter my zip code. This could be done with florists, bookstores, fast food, restaurants, theatres, Disney World, etc. It could even be used to simply check on a product's in-store availability (like at Apple) or the wait-time at a restaurant table, so a customer can decide to stop at a store, or not.

Obviously, this type of thing would appeal most to those in a hurry, or those who know what they want and don't want to shop in crowded stores, or those who act spontaneously. Others would not pay one penny extra for it. But retailers may offer it as better customer service, and thus, get the customer to spend there and not at a competitor.

[Tomi T Ahonen]

Hi Paul, mark, Jason, Gustaf, alex, Wenhan and mark (again)

Thank you all for the considered comments. I will reply to each individually.

Let me re-iterate my basic point. Positioning data is one of the elements of Movement, which in turn is one of the six potential attributes of a new mobile service. It is therefore a valid consideration for mobile apps and services. But I have personally totally soured on any prospect of LBS being any kind of mass market killer app. Yes, some location-based niche applications can thrive. But if positioning is the main benefit of any new service, my guidance to the industry is now that this is a failing proposition. Location can add value to a service, but the primary benefit has to come from elsewhere (ie one of the other 5 of the 6 Ms)

Paul - Good points. But the Doc Searls article is the perfect example of the US industry arriving to this game very late. That idea has been proposed - tried in dozens of countries - and failed. It is inherently interruptive advertising (if it is location-based) and the very fundamental business model of it is a failure. To get any kind of reasonable volume for the audience (and far far more if they use personal preference criteria to eliminate most advertising to get the tailored offering) it then turns into LBS spam. And consider the alternative, Paul, the benefit of the alternative. If you are into mobile coupons for restaurants in Cambridge, you can do that WITHOUT the LBS.. Sign up to the couponing service (that does not spam you by location) and get the same benefit. If you want, it can offer maps to show where the restaurant is. The benefit is not "the position of the restaurant" but rather the "discount at the restaurant" and our LBS benefit loses out totally in the proposition to the better benefit of the Money dimension of the 6 M theory. This is the key advantage to our user. And if we do not need to pay LBS data for a pretty useless addition to the service, it is a further savings that can be passed onto the actual end-user ie making the cost of the discount less costly to the restaurant owner, etc.

mark (first comment) - yeah, each of those models has been tried. There honestly are multiples of hundreds of LBS services that have been launched in several dozen countries years and years ago. Every model you describe has been tried many many times. Same result. Also observe my reply to Paul about the restaurant.

Yes, smartphones account for a little over 10% sold and under 10% of total installed base of all mobile phone subscriptions in 2007.

There is a general trend towards unlimited data plans. On the PC based fixed internet, where almost all users are essentially on unlimited data plans, it does not mean that all internet services are free. So yes, you can access the site of some newspaper and then find that you have to subscribe to get to use their archive, or yes, you can go to the World of Warcraft site, but to join and play the game, you have to subscribe. The total value of paid content on the PC based fixed internet in 2007 was 25 billion dollars (vs 31 billion on mobile).

So while yes, there is a global trend to "open gardens" and full data access on near-unlimited data plans on especially 3G mobile networks, which started in Japan and South Korea by the way, and spread to Europe via Scandinavia - still today most mobile operators do not strongly support unlimited data plans. But bear in mind, that still leaves open the chance to charge for premium content - like downloading a videogame or ringing tone or MP3 file etc.

Jason - good points, but you need to put those numbers you quote into their proper context. If you count downloadable "applications" and not services consumed, you do get a very distorted view. Lets look at the most recent numbers you mention, the Telephia 118 Million quarterly number from 2007. They said 51 was LBS related ie 60 million. Lets multiply that by four to get a rough annual number at 240 million.

First, remember my observation at the start of this comment, that LBS is a valid component of a successful service, but not the driving component. So if we have a successful mapping service, which offers LBS based updates, then it is legitimately counted as an LBS service by Telephia/Nielsen - but even if most map users never do LBS updates and only use the basic maps, that is counted on the LBS side of the Telephia numbers. Their number is the "positive spin" on the best LBS story, not the truth, the whole truth kind of view.

But even so, lets put the 240 million into context. The global mobile VAS data market - excluding SMS - in 2007 was 31 Billion dollars by Informa. Music was worth 8.8 Billion dollars and videogaming over 5 Billion. Of Music, over 5 Billion was ringing tones, but over 1 Billion were "Ringback" ie Waiting tones, and over 1 Billion were full-track downloads of MP3 files ie like iTunes but direct over-the-air downloads to musicphones (about half of the total South Korean music market works like this already, while iTunes has about 10% of the USA music market).

So if you think 240 million dollars is significant, but do not think ringtones should be considered, I have two other music categories already that are 4 times larger - and legitimately billion dollar industries by themselves, MP3 files and Ringbacks. And another 5 billion in mobile gaming revenues, and dozens of other categories. THAT is where the killer apps are, not LBS..

Sorry, Jason, the scale is totally different. The mass market in mobile does not even start to register in scale, until we hit about the billion dollar level in revenues. And you will not find LBS restaurant guides as billion-dollar businesses any time soon, ha-ha..

Gustaf - great comments, thank you. I totally agree. Yes, many LBS concepts were bad ideas to begin with (and still perpetuated, now with for example the intrusive and interruptive bluetooth based proximity ie LBS spam ads). And yes, in most cases LBS is a nice-to-have extra, not the core must-have component, but drastically oversold by the technologists involved. And great comment on the shifting perception of privacy.

alex - very good points as well, somewhat echoing what I wrote and some of the comments. Yes, we agree :-)

Wenhan - thank you for the honest opionion, and I respect the thinking process that you must be going through. I also ask you to trust me on this point - that "technology" argument that the phones were not good enough and the positioning accuracy was not good enough - has been repeated also for all of this decade. The "if you build it, they will come" argument. That if only we make the LBS better, it will be embraced by users. No. As you have found the 6 M concept, I suggest you direct your development on the other 5, and totally abandon your current development work on Movement. Getting Moment, Multi-user or Me right, rather than Movement right, will get you far greater success. Going creative and innovative in Money may double or tripple your profits!! But Movement will drain your resources on a useless quest.

mark (second comment) great reply to alex and good examples. I would add that again, in the urgent shopping example, we are clearly, as a society, learning to use digital networks to enhance our shopping. From now all airline tickets becoming eTickets (and most traditional travel agents going out of business the past decade) to eBay and online auctions and bargaining, to Paypal online payments and many countries where mobile payments are commonplace. The benefit you outline of getting the right item in stock at a store you want to go to, works on the Moment attribute (get it to me faster) rather than the Movement attribute (get it to me from nearest store). Yes, both are relevant, if you live in Texas, you will not drive to Canada to pick it up, ha-ha, but the Moment (and Me and Money) attributes for the service you describe, are all stronger benefits than Movement.

The key was the word Hurry, ha-ha. Yes, nearby is important in a hurry, but saving me TIME is the key, not location. And Moment mostly trumps Movement in mobile apps.

Thank you all for writing

Tomi Ahonen :-)

[alex]

mark,
I think these ordering-coffee-at-Starbuck ideas were from Apple patent applications. So indeed Apple engineers seem to see the technical potential for LBS (like all of us); however, they might find many of their ideas already patented outside the USA.
Patent applications don't imply that Apple believes in the business. Typically they try hard to get all major ends right in the beginning if they really believe in something new. Eg. "real Internet in your pocket" is pushed by desktop class browser, big screen, flat-rate data plans (via the operators), mobile optimized apps for email; heck, even porting Safari to Windows.

I cannot see comparable effort for LBS.
Free maps via Google, GPS thrown in for 3rd party apps, no convincing demo.
It is telling that they have not launched the Starbucks idea together with the 3G iPhone.
And how many cents per cup of coffee do you think Starbucks is willing to give to Apple, and how many deals does Apple need to create a profitable brokering business?
Compare with the iTunes store, which generates little profits even though Apple holds the power cards in their own hands.

Nevertheless I can well imagine a great LBS success story comparable to YouTube or Facebook. Meaning success for the investors of a start-up company with a popular "free" application (maybe a new social network for broadcasting location to buddies) without sustainable business model.

[Brendan Lally]

Tomi

Great stuff as usual (well mostly).

I've been 'following' LBS 4 yrs as well and watched the Japan/Korean 'successes' slowly sweep Eastwards towards EU and dribble-by-dribble into the US (but some seem 2 get lost in the ocean)

Great 2c some serious 'common sense' logic and analysis. As a techie's we often get enamoured by the lure of what the technology can do and fail2 grasp the real 'needs' of the user.

Spot on. Do agree that some LBS players will do ok (even if they think their #s are fantastic) but only as an add-on feature 2 a real 'service'

Lal

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