Taking It to the Street

Mar 1, 2001 12:00 PM, Nikki Swartz, Assistant Data Editor

Everyone knows location is key in real estate, but what about in m-commerce? After carriers deploy location-determination capabilities to meet the requirements of the FCC's E-911 mandate, l-commerce, the next generation of m-commerce, will enable users to purchase services, content, applications and goods based on their location.

Today, users' interest in and demand for m-commerce applications is unimpressive. But when carriers add location to the mix, consumers may be more interested. According to many industry analysts, mobile-location services are the key enabler of m-commerce's future success. One thing's for sure: There's a lot of l-commerce hype already.

For example, The Strategis Group predicts that l-commerce revenue will reach $7 billion by 2004.

Analyst Adam Zawel said the Yankee Group expects more than $50 billion retail dollars to be spent with wireless phones in the United States in 2005, and “many more transactions will be enabled once the wireless phone is used as an intelligent product, store and directions finder.”

According to Ovum's research, mobile-location services will generate $20 billion by 2006, and $10 billion worth of m-commerce transactions will be powered by automatic location determination.

According to Steve Krom, Cingular Wireless vice president of data and Internet services, location services will be one of the big drivers for m-commerce growth.

“We leave predictions on the industry up to the experts, but as a company we believe that commerce and location services tied to commerce and other applications is extremely important for us to continue to grow the business and add value to our customer base,” he said. “It's a very important piece of our strategy.”

The l-commerce road hasn't even been built yet, so many of its applications still are unknown, and few carriers have a strategy, let alone a business model. In addition to information, content and direction applications, location-based services also will enhance m-commerce.

“M-commerce works on its own legs,” said Dario Betti, Ovum analyst. “If you want something, you can buy it; knowing where you are doesn't add too much. But l-commerce opens up a few more doors and increases the overall market.”

Betti said l-commerce will bring new functionality and applications that will interest carriers and consumers. For example, if you're stuck in an airport after a cancelled flight, you can use your location-enabled phone to find an alternate flight, pay for it at the same time, and then get directions to the gate — all with minimal clicks because the phone will know your location.

According to Rama Aysola, founder & CEO of AirFlash, a development platform provider for building location-based wireless applications, l-commerce also will enhance comparison shopping.

“WAP has been waiting for good services like location-based comparison shopping, which provides a truly useful service that specifically addresses the needs of mobile users,” he said. “It is services like these that will drive the uptake of m-commerce.”

ViaVis Mobile Solutions offers location-based wireless services that help consumers make better buying decisions with their cellular phones. Its Proximity Marketing application is a geographically targeted marketing and advertising application for wireless devices that delivers location-specific, time-sensitive and/or category-sensitive marketing messages to the consumer's phone via voice, WAP or Web. The application also can deliver coupons and support call through.

ViaVis' GasToGo time- and price-sensitive, location-based service uses voice-recognition technology to provide callers with the cheapest reported gas prices in the area they are in via any phone. GasToGo is free to consumers; revenue is generated from a 10-second location-based ad played before users receive the prices.

As with other location services, l-commerce should follow a permission-based model, Krom said.

“It's going to be critical for the customer that all of this is permission based from their standpoint, that we'll be able to use location data to help customize promotions and coupons and other commerce-related applications based on customer needs with various merchants,” he said.

Promotions and l-commerce seem a natural pairing for carriers and businesses that want to advertise via wireless devices. For businesses, m-commerce and location-based services are the next step to capitalize on getting their products to consumers quickly, efficiently and wirelessly.

For example, Coca-Cola, the world's largest brand, has ventured into the wireless world by providing its fountain clients (McDonalds, Burger King and more than 800,000 U.S. restaurants) with the opportunity to attract additional business by placing their names on Go2 Systems' wireless service. The 5-year, $30-million deal will allow customers to find the nearest Coke fountain location through their cellular phones with Go2's location-based direction services, which include addresses, turn-by-turn directions and 1-click calling. Go2's service is available online and through Web-enabled cellular phones and PDAs, and is featured on virtually all U.S. carriers' networks including AT&T, Sprint and Verizon. The service also offers users wireless coupons and discounts, and Go2 currently is conducting closed trials on an m-commerce platform.

“Wireless will create amazing new possibilities in terms of connecting merchants with customers who are in their immediate area looking for their product and will create a whole new way of giving the right information to the right user at the right time to facilitate a transaction,” said Lee Hancock, Go2 Systems president & founder. “One of the key components of building good location-based services, especially as you start moving into l-commerce, is relationships with the merchants.”

And such relationships will be necessary to create demand for l-commerce services. According to Krom, it really all comes down to creating applications and programs that are relevant to consumers by using relationships that they already have, such as allowing them to access their American Express accounts with their wireless phones.

Location information combined with commerce-related applications will enable carriers to provide relevant, 1-to-1 promotions and marketing to customers, too.

“Once you combine location with commerce with merchants and promotions, you really get to a point where you can almost do 1-to-1 marketing and 1-to-1 promotions effectively for customers,” Krom said. “That's really what's going to drive it, because people have different desires and needs. With the technology we're talking about, we can make things much more relevant to the individual and therefore, there will be a lot of attraction toward that.”

When m-commerce and location services intersect, industry insiders say personalization and promotion will drive the market.

Krom said m-commerce lacks personalization and user friendliness today, but the marketplace is still in its infancy. Cingular recently launched m-commerce applications for its My Wireless Window wireless Web service, combining shopping with an e-wallet with promotion-rewards capabilities.

“Not only do we have to get technologies like location in place, but we also have to mature just the shopping components and the commerce components of this so customers have devices that work with these services, and make sure that the services themselves are robust enough and have enough merchants,” he said. “We're really at the starting point for a lot of this and all these areas we've talked about are going to be necessary to drive growth.”

Both Krom and Betti said location-enabled services will be embedded in carriers' networks and linked to applications by 2002. When l-commerce applications are available to wireless users, will they live up to all the hype?

According to Betti, these services won't be difficult to sell consumers, and location services, including l-commerce, will be best marketed as part of a wireless package.

“But how much people will be willing to pay is an entirely different matter,” he said. “You won't even realize you're using them. You'll think of buying something, not buying something using mobile-location services.”

To meet analysts' high expectations for l-commerce, Krom said carriers must have all the critical capabilities in place, including location, shopping, e-wallets, promotion and personalization. Beyond this, carriers must have the right merchant relationships to ensure a robust suite of products and services for customers.

“If you have all the capabilities but there are no good merchants, you have the capability but you're not going to drive all the consumer interest because there's nothing there for them,” he said. “Getting that tie-in to the merchant level is going to be critical.”