Why free maps are Nokia’s best bet

Nokia (NYSE:NOK) took a cue from Google (NASDAQ:GOOG) today and removed the price tag from its latest version of Ovi Maps, a global walk and drive satellite navigation system for Nokia smartphones. According to ABI Research’s location expert Dominique Bonte, offering Ovi Maps for free could be a positive turning point for the global handset maker as it competes with the likes of Google, looks for carrier partners and pushes its services strategy.

It makes Nokia a formidable competitor to Google.

Tero Ojanperä, Nokia’s executive vice president of service, didn’t try to disguise that making maps free was designed to directly attack Google, which began giving away its mapping software free of charge on Android 2.0 last year. At launch, 10 Nokia smartphones, including the N97 mini and 5800, will have the latest version of Ovi Maps, featuring voice-guided turn-by-turn navigation. But, come March, all GPS-enabled Nokia smartphones will be equipped with the free nav. Ojanperä said that Nokia has more than 80 million GPS handsets across the globe, while Google only has a handful in the US. According to the company, offering Ovi Maps free of charge could increase worldwide GPS cell-phone users to 50 million, up from only 23 million.

In a conference call on the news today, Ojanperä also pointed out that Google’s mapping solution is bandwidth intensive and off-deck, whereas Nokia’s hybrid-vector maps are pre-loaded, bandwidth efficient and don’t require a data connection.

“When you think about it, if you are moving, you always need to load a new version of the map,” Ojanperä said. “If you zoom, you need a new version of the map. With a hybrid-vector map, you have all the information in the device and you can zoom without reloading the map, like in the Google solution.”

In addition to turn-by-turn voice directions, consumers will get lane guidance, traffic info, a safety camera and speed warnings. On foot, the features include shortcut notifications, 3D landmarks and typically premium location-aware extras like Lonely Planet and Michelin guides available for no cost. In the short term, Nokia's free navigation is potentially even more disruptive than Google's offer, according to Bonte.

“It’s better than Google and they have been really stressing that part of the message…Nokia is all-together a different scale,” Bonte said. “They use high-quality navigation, high-quality digital maps from Navteq. It’s a high-quality solution now available for free. I’m not suggesting what Google is going is bad quality, but everyone will agree that maps they’ve collected over the years can’t live up to what Nokia is offering.”

Free Maps shouldn’t hurt Nokia’s revenues, and could drive more for carriers.

Nokia spent $8.1 billion when it purchased digital mapping data provider Navteq in 2007. Since then, location has become an integral part of its strategy, permeating Nokia’s entire services strategy, but there remains a big investment to recoup. Ojanperä said that Nokia will not increase the price of phones to make up for lost mapping revenue, but it does plan to sell more smartphones as a result. In addition, Bonte expects increased customer loyalty – and repeat purchases – to be a byproduct.

Nokia has always walked a fine line between seeking carrier relationships and risking alienating carriers with its services strategy. Most carriers, including AT&T and Verizon Wireless in the US offer their own premium navigation service that Ovi Maps could cannibalize. Both Nokia and Bonte agree, however, that carriers should view today’s announcement positively as it could have the affect of driving data plan purchases.

Nokia also plans to integrate advertising into its navigation product eventually, but went to great lengths to explain it won’t be just any ads. They want to make it as valuable as possible to consumers by providing only ads that are relevant in terms of location and users’ preferences, Bonte said. All things told, Bonte said the move shouldn’t hurt the handset maker nor its relationships with the wireless operators. Rather, it sets it apart from the competition.

“It is very difficult for any other handset vendor to copy this,” Bonte said. “No other handset vendor owns a digital map company. No other company has the scale Nokia has. Nokia isn’t strong in the US, but I’m curious if this will be the point will where Nokia does become very successful in the US. It could be.”

Nokia’s Ovi service strategy will gain momentum.

Turning Ovi Maps into a free service is only the beginning for the handset maker. Bonte said that it will also create momentum for Nokia's open LBS development platform and provide a catalyst for the success of Nokia's Ovi service strategy. Nokia was already the largest digital camera vendor in terms of volume, and now it can make the same claim for navigation. Using its global scale to introduce compelling services is a move they will likely repeat with money, music, email and the rest of the services in its Ovi portfolio.

“Everyone was being critical about Nokia and their problems, but it seems to me they are bouncing back now,” Bonte said. “The overall strategy is about music, email, money, financial services – this will put Ovi on the map. Anyone who didn’t know it yet will now know through it through free navigation. Navigation is such a high-profile thing. They are using it as a tool to communicate about Ovi and provide an illustration of what else they plan to do.”