Navigating LBS business models

“The first thing to think about when I look up a phone number is, ‘Do I want to call them or go see them?’ I should just be able to click on them and say, ‘Take me there,’” Harris said. “It's about navigation as an enabler to what my goal is.”

Driving business model decisions, along with the carriers, are technology providers themselves. TeleNav creates GPS navigation systems embedded on four out of five top U.S. carrier mobile devices that can interact with a portable Bluetooth-enabled GPS receiver in a vehicle. TeleNav's carrier customers offer the service for $10 per month or $2.99 for one day's use. Sal Dhanani, senior director of marketing and co-founder of TeleNav, said the company looked into advertising but ran into roadblocks related to the cost of providing navigation technology. He said that even Google, which generates 70% to 80% of Web activity a day, only makes $4 per subscriber per month. As such, advertisers still are not willing to pay much more than they would online.

“To make any money, you'd have to charge the advertisers a lot,” Dhanani said. “Today, mobile ad rates, although higher than online — it is still not that high. I think it will be hard to subsidize [navigation] and then make money with advertising.”

Dhanani added that for TeleNav, GPS is the primary money-maker, followed by mobile resource management and family and friend locators. Social networking thus far hasn't come close to that revenue-generating potential.

TeleNav competitor Networks in Motion is deployed globally for navigation and location search functions with carriers including Alltel, Sprint and Verizon. The technology lets users interact with one another to share information, directions and locations in a family-finding-style service. Most of NIM's navigation products are marketed on a subscription model, but some carriers do offer charge per use in cases of vacation or sporadic pedestrian usage. Steve Andler, vice president of marketing for NIM, agreed that a free, ad-supported business model might not make sense from an advertiser's point of view.

“Mobile is hard to do, and expectations are high,” Andler said. “It doesn't support a free business too well. The amount of revenue you can support from ads is not enough to cover the cost for things like navigable maps. It requires constant care, improvement and updating.”

NIM's NAVBuilder Developer Platform Program gives wireless app developers and enterprises a set of tools to integrate LBS into business applications. While subscription dominates, with the largest carriers now offering unlimited pricing plans, the service may have the image of being free to the customer as it is lumped in with data services. Otherwise, advertising could play a role going forward.

“What you'll see happen over the next couple of years is that advertising experiments will be run by us and others to see how much revenue we can generate and what the consumers' tolerance is for advertising that might be information they're interested in versus purely unwanted advertising that's just a nuisance,” Andler said.

Motorola's Harris added that a larger user base would allow different business models, including advertising or bundling into all-you-can-eat plans. For now, the market is focused on proven revenue generators, but it has the potential to drive other value-added services instead of just driving customers to where they want to go.

“Navigation is a sharp point today, but we really want it to be embedded into the experience,” Harris said. “Location is just an enabler.”