LBS - locating opportunity in mobile Internet

Location based services (LBS) have been real and fabled components of wireless service for some time now.  Deployments began to emerge in late 2001 using carrier-side or control plane technology - the “smarts” being largely present and controlled in the carrier’s network.  With the evolution of LBS technology a shift has occurred that has resulted in some of those “smarts” being moved into the hands of the user and into the  hands of innovative Internet applications providers.

According to a June 2009 Gartner report, the consumer LBS market will double this year to represent over $2.2 billion USD.  “Factors driving the increase in the next year or so include higher availability of GPS-enabled phones, reduced prices and appearance of application stores,” says Gartner Senior Reseach Analyst, Annette Zimmermann.

As in other areas of the mobile Internet ecosystem, business models for LBS are becoming increasingly more dynamic.  One of the early disruptors of LBS business models was the inclusion of GPS and A-GPS technology in handsets and carrier networks.  GPS enabled handsets have given rise to a host of map and navigation applications.  Initially introduced by digital map and content providers such as NAVTEQ, such applications were adopted as a fee-based service by many wireless carriers.

While fee-based LBS applications like navigation services continue to be very prevalent in mature wireless markets, free or ad-based services are beginning to make a noticeable appearance.  Google’s Maps application is one example of a free-service that is providing considerable disruption to existing LBS business models.  The application is free, it’s easily downloaded to a wide variety of mobile devices and for the most part is understood and largely trusted by a large segment of wired Internet users.  The barriers to user adoption in this case are quite low.  The impact to fee-based business models however, isn’t.

So with a shift away from fee-based LBS services, where is the opportunity for revenue going to be located?  Opportunities for revenue driven by LBS in the future will extend outside of the top-of-mind applications of navigation and mapping.  Location and context aware search can drive opportunities for ad-insertion, mobile coupons, gaming, enhanced CRM applications and more.  For carriers the opportunities can be found in increased adoption of smartphones, PDAs and MIDs and along with it an associated increase in data services revenues.

Outside of the world of users and carriers, the potential for LBS extends to applications developers, retailers, advertisers and mobile content providers.  By introducing location and context awareness to mobile applications, increases in user experience quality and adoption are certain to follow and that presents a huge upside for the entire mobile Internet ecosystem.