Location services set to thrive

Location based services have emerged as a major growth area in the mobile applications area, with researchers expecting it to be valued at $17-billion by 2016. QUENTIN JOBERT, product manager at Cellfind, outlines five trends set to shape the LBS market.

Location based services (LBS) have emerged as one of the hottest growth areas for the worldwide mobile applications and telecommunications industries. Market researcher ABI predicts that the global LBS market will grow to a total value of $17 billion by 2016, thanks to growth in retail applications, advertising, and emerging markets.

We’re expecting this market to keep heating up throughout the year ahead, with growing competition driving massive innovation in LBS.

Here are five of the trends we’re expecting to see shape the market through 2013 and beyond.

1. Focus shifts to monetisation

LBS services are widely available and rapidly growing in popularity for a range of navigation, personal safety and entertainment applications. The user base is growing at a rapid rate, but monetisation of this user base has yet to occur. The major challenge all players in the value chain face over the next couple of years, is turning the traffic LBS generates in revenue.

We can expect players in the market to experiment with a range of ‚’freemium’, subscription and advertising supported models as they look to turn LBS into a profitable business. Call to action services such as roadside and home assist as well as panic-button activated emergency medical services are examples of services that users may see enough value in to be willing to pay for them.

2. Operators to promote LBS for subscriber stickiness, higher ARPU

The mobile market is changing rapidly as a result of consumers shifting from voice to data services, lower interconnection rates, and growing price competition. Faced with falling ARPU, South African mobile operators are looking for new ways to bolster their revenues and reduce subscriber churn.

They see enormous potential in LBS as a revenue-boosting class of subscription services or as a value-add that can enhance subscriber loyalty.

Most of them already have some basic LBS services in place, but expect to see them launch new LBS-based products and services – fitness, health, enterprise and other segments are largely untapped – as well as to market them more aggressively in the year ahead.

3. LBS-based advertising accelerating

Consumers are happy to share location data with organisations that they trust. They are willing to receive location-based marketing and advertising – provided that there is some value in it for them. Companies need to tread carefully around privacy issues, but LBS can be an incredibly powerful advertising opportunity.

According to ABI, advertising was less than 30% of the total application store LBS revenues in 2012, but growth is accelerating. Local search and discovery, proximity social networking, and retail are all massive opportunities for LBS-based mobile advertising in the years to come, says ABI.

4. Shaking up the ecosystem

The navigation ecosystem is complex and competitive it spans GPS and GIS companies such as Telmap, Garmin and Navteq, mobile operators, large and small application providers from FourSquare through to Google and Yahoo, and mobile device manufacturers (including fitness device, personal navigation device and handset manufacturers).

We see overlap and competition for example, smartphone mapping apps from the likes of Google are eroding value for the likes of Garmin, while handset manufacturers and application providers are wrestling with mobile operators for control of the customer base.

It’s hard to know how this will all play out, but only those that can clearly define their value will thrive in this competitive market.

5. Enterprise LBS apps market to explode

Mobile operators and application providers are looking to the enterprise as the next hot market for LBS. From mobile advertising to asset tracking to transport and logistics, there are a wealth of business applications that can benefit from LBS.

It’s an especially attractive market since corporate users will be willing to pay a premium for reliability and accuracy when it comes to apps that allow them to, for example, track assets such as vehicles and equipment, or to manage and deploy field service technicians in the most efficient manner.

Another powerful enterprise app with a lot of potential is using LBS to add another layer of authentication in credit card payments something which could offer significant benefit to the financial services sector.

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