Positive trend for mobile LBS in Europe

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For the past several years, more and more mobile operators all over the world have introduced location-based services (LBS) to their service portfolio. When the first services were launched in the early 2000s, the market hype surrounding LBS forecasted rapid uptake and fast revenue growth.

However, the success failed to materialise due to reasons such as uncertainties over positioning technologies, regulations and privacy issues. In addition, customers showed little interest in the services that often were difficult to use due to poor user interfaces andunclear value.

In Europe, the overall development of LBS has lagged behind the more advanced markets in Japan, Korea, and more recently, the US as well. Nevertheless, several important drivers are finally about to bring a breakthrough for LBS in Europe.

Mobile network operators increasingly seek new ways of maintaining revenue growth when intensified competition and regulations drive call prices down and subscriber growth slows down. LBS are again seen as one means to maintain or grow service revenues. The performance of new handsets is gradually improving, with a growing share of handsets featuring large, high-resolution displays.

Moreover, because of improving coverage of high-speed 3G networks, increased availability of reasonably priced flat rate data plans, as well as better browsers in handsets, usage of mobile Internet services are increasing at a fast rate in Europe.

Access to location data that is fundamental to LBS is gradually becoming less problematic for service providers. Emergency call regulations have forced mobile operators to upgrade their networks to enable positioning of handsets. Although the network-based positioning technologies deployed so far are less accurate than GPS, the high yield and low latency can be leveraged by many services. What's more, many operators are opening their location platforms to third party developers and location aggregators to enable deployment of commercial services.

Even though handset manufacturers like Nokia and HTC achieved considerable success with their GPS-enabled models in 2007, 2008 is well on its way to becoming the true breakthrough year for GPS handsets in Europe.

Virtually all major vendors have already announced several models in several segments. Greater availability of GPS handsets has proven to be especially important for turn-by-turn navigation services that require high accuracy location information, but are less sensitive to availability of position data indoors.

In 2007, about seven years since the launch of the first services, Berg Insight estimates that European mobile LBS revenues amounted to roughly €160 million, with forecasts indicating this will reach €412 million by 2012.

The most successful services, in terms of revenues, are turn-by-turn navigation services, corporate fleet management and tracking solutions. In addition, location-based voice and data tariffs that enable an operator to charge different rates for voice and data services depending on the subscriber's current geographic zone, such as the home or the office, are very popular in some countries.

Most of the service categories that are likely to be successful in the foreseeable future – mapping, navigation and search, social networking and tracking services – are already seeing growing adoption.

Still, high adoption rates will not immediately translate into high revenues.

Many LBS providers intend to fund their services primarily from advertising sales. However, the mobile advertising eco-system is still undeveloped and needs many more years to become mature.

First, there must be a critical mass of active users to work with, and then someone must create a successful model for reaching out to these individuals via their handsets.

After that, the top spenders in the advertising industry must embrace mobile media.

Author: Telecom analyst André Malm joined Berg Insight in 2006. His areas of expertise include location-based services, wireless M2M and personal navigation services.


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