Telematics and mobile apps: Building a big enough market

Telematics and mobile apps: Building a big enough market

In-car infotainment is sizzling, but where's the beef?

No one seems to know just how big this market will be, nor how much money might be made, let alone who will profit.

Here's a clue.

Berg Insight estimates annual shipments of GPS-enabled handsets will reach 770 million units in 2014. Click here

Because smartphones in the pocket or hand are the biggest platform for applications used in the car, this gives us some idea of the breadth of the market.

No matter how much it grows, to the auto industry, in-car infotainment looks like gravy.

It fuels consumer excitement, differentiates the brand and, possibly, brings in some extra revenue down the road.

The software industry may see things differently.

For example, Ford has drawn plenty of attention for its SYNC offerings, and the announcements keep coming.

"Ford's software development kit is an offer that might not be as exciting for developers as it might seem,” says Roger Lanctot, director of business development for the global automotive practice at Strategy Analytics.

“They are developing applications for audiences in the tens of millions for handset makers or carriers, versus around two million for Ford SYNC. That's the big challenge: to attract developers to your platform."

Action on the handset

Apple's iPhone platform is white-hot, with no signs of cooling down.
According to research firm iSuppli, more than four billion apps have been downloaded to the 50 million+ iPhones that have been sold.

For all those phones, there are some 185,000 apps available; approximately 6,000 of those apps include some kind of location-based service.

Google's Android Marketplace holds more than 50,000 apps to date.
"In the near future, the solutions are all about using the smartphone platform," says Danny Kim, analyst and global manager for iSuppli.

Because of the disparity in volume between handsets and cars, the in-car infotainment sector may suffer some chicken-and-egg syndrome.

OEMs like Continental and Ford hope to leverage the Android developer community to create a bustling bazaar of interesting software, but the developer community won't get excited until they see some there there.

"Developers are a fairly jaded lot,” says Mark Murphy, founder of CommonsWare and an expert on Android development.

“We have seen lots of vaporware, and do not necessarily pay a ton of attention until there is actual technology available that we can pick up and shake."
Murphy says the development community trusts Google, which has made steady progress on building out the Android OS.

Despite some problems with Google's Android Marketplace, he observes, "Automotive firms lack this track record, and so developers as a whole will not do a lot just now, until there's something more firm."

The kit is the key

Murphy adds that the auto industry needs to understand that software development shops tend to run lean; they don't have business development executives or marketing budgets.

If the Android development environment is relatively unchanged, it's easy enough to provide the apps.

However, Murphy points out, "Some device manufacturers hammer Android into a shape to fit their needs, in ways that make app developers' lives … unpleasant.

To the extent that app developers need to spend time specifically on compatibility with a manufacturer's models, or even with cars in general, there's a problem if there aren't the numbers to make that worthwhile. If, however, by and large, apps that work on a phone today will work on a car tomorrow, then numbers and penetration are not much of an issue."

There's the rub.

Many OEMS want to differentiate their application offerings; they also need to make sure applications run correctly and safely on diverse onboard systems.
These requirements could result in a fragmented market that can't be profitable for developers.

To build a big enough market for developers and manufacturers, the auto-side players must expend the necessary resources to provide robust and reliable software development kits, or SDKs.

Bullish on apps

There's another potential limit to the size of the in-car app market: the constraints of attention and motion.

The sector was a no-brainer for Pandora, because half of all music listening takes place in the car, according to Joe Kennedy, CEO of Pandora.

"How many great applications are there with an intersection of consumer need and business model?” Kennedy asks.

“There are many Web companies that will look at this opportunity and say, 'Automotive is pretty interesting, but I'm not sure it's a home run for me. On the other hand, in 30 days, I can have an app up at the app store.'"

Susan Yost, in-vehicle infotainment marketing manager for Intel, is more bullish.
She says this potential market could be as big as the total car market; 13.6 million cars were sold in China in 2009, along with 10.4 million light cars and trucks in the US.

Yost adds, "That doesn't even include the aftermarket, replacing your head unit with one where, in the future, you can add your applications. You'll see places like Best Buy and Fry's offering these products."

Yost says consumers are already excited about in-car infotainment, and she gives Ford huge credit for showing what's possible.

She points out that consumers are ever more time-starved and multitasking.
"Now that people understand the potential to use the time in the car wisely,” she says, “I think the location-based services market will blossom."

For more on smartphones and telematics, see ‘What is the best way to deliver in-car telematics?’Cick hereand ‘The Smartphone: Friend or Foe of In-car Infotainment?’. Click here

Susan Kuchinskas is a regular contributor to TU.

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