What it means for Navigation, Mobile 2.0 and the GeoWeb -- Blair Swedeen is the Principal of Partenza Consulting, a consultancy providing strategy, product, marketing and business development consulting services to the Location-Based Services industry. Previously, he spent three years managing NAVTEQ's pedestrian mobile content product line, Discover Cities. 

The most obvious implication of the vertical integration of map data suppliers with device makers is the impact on the installed vehicle navigation and PND markets.  On today’s investor call, Nokia and NAVTEQ went out of their way to emphasize the continued independence of NAVTEQ stating that “Nokia will operate on the same terms as all NAVTEQ customers.”  This was one of the main concerns from the TomTom-Tele Atlas deal which Nokia has wisely attempted to address upfront.  Despite these assurances from both map companies, customers still face a number of issues from these two deals, analyzed below.

Effect on Installed Vehicle Navigation Market

In the short-term, there will probably not be a significant impact on the installed vehicle navigation business due to the long product cycles in the vehicle market.  However, with the competition from PNDs, and increasingly handsets, this could present increased challenges for legacy system providers such as Denso, Alpine and Harman Becker.

Longer term, car makers seem to recognize the challenge they face with innovating at the speed of the consumer device market as demonstrated by a few small deals between car makers and PND makers.  Eventually, handset- and vehicle-based applications and services will likely interoperate as demonstrated by the prior evolution of other mobile services such as Bluetooth, iPod interfaces and integrated services like Ford’s Sync platform. 

Strategies for Portable Navigation Device Makers

Dedicated PND makers such as Garmin, Magellan and Mio/Navman face a number of key issues and questions following this change in the landscape.  While in many markets dedicated use devices can coexist with converged devices (e.g. music players and digital cameras), in some cases (e.g. PDAs) they do not survive as a standalone device category.  Following the announcement, the reaction from the market was mixed as Garmin ended the day down 10%, while TomTom was up 4%.  While this acquisition means increased competition and reduced supply of a key component, it is also a major vote of confidence in a nascent market.  Below are a few key strategic questions for PND makers and how they might be answered:

These are only a few of the strategic alternatives PND makers should consider as they look to avoid the fate of the PDA and instead evolve along the lines of iPod/iPhone.  The PND industry is healthy with strong growth in sales and cash flow for the top device makers, providing the means to transform the business and capture additional revenue beyond pure device sales which are likely to continue commoditizing.  Adding connectivity is a good first step, but not enough without relevant, fresh, geospatially organized content (think of the Internet circa 1995).

Impact on Internet Players

This Nokia-NAVTEQ combination could also put Nokia and Google on a collision path as Google’s MyMaps and Google Earth/Sketchup initiatives are Google’s attempts at becoming the platform for geospatial web content generation and distribution.  In the short-term however, with Nokia and TomTom owning the only two viable alternatives for map data needed for desktop internet local search, I would expect to see cooperation.  Longer-term, as the desktop local search business grows in strategic importance, players like Google could potentially acquire the combined Tele Atlas/TomTom or invest heavily in open source alternatives such as Open Street Map, much as they did with the Mozilla Foundation to create a viable alternative Internet browser.  However, with the device becoming integral to the actual creation of the map, creating map alternatives could become increasingly difficult.

Meanwhile, the search portals continue to invest heavily in mobile and LBS.  Google will be providing LBS services and applications for Sprint’s open internet model WiMAX service, Xohm, and is rumored to be developing a mobile OS, phone and application suite.  For their part, Yahoo and Microsoft continue to strike deals for internet search and application distribution with device makers and carriers. 

How Nokia-NAVTEQ Could Impact ‘ Mobile 2.0’

While correcting errors in the underlying map data was cited by both TomTom and Nokia as contributing reasons behind the acquisition, Olli-Pekka Kallasvuo, President and CEO of Nokia stated “I see location as a key component in search, navigation, photos, videos, presence and communities.  Location helps build the next phase of the web: context-sensitive services.” 

What has changed is the central role that mobile device users (both actively and passively) will play in creating the emerging “GeoWeb” of indexed, georeferenceable content which is for the most part today non-existent.  Handsets equipped with multiple sensors such as GPS, cameras, accelerometers, clocks and internet connectivity, will likely be used en masse to generate traffic data, navigable street networks, and visual maps with photos, audio and video tagged to specific locations—key pieces of the GeoWeb. 

Location-awareness combined with image and audio capture on the device allows consumers to have a “two-way conversation” with the physical environment. This could be analogous to the emergence of Web 2.0 on the Internet, which was fueled by the availability of zero marginal cost content creation and distribution tools.  As long as Nokia continues their strategy of leveraging open standards and extends it to geospatial content, the door could be opened to ubiquitous contextually aware mobile internet services as third parties innovate on top of the infrastructure (in this case, the map).

Nokia’s Opportunity Beyond Navigation

While the initial opportunity is the portable vehicle navigation market, the implications of this merger are potentially much more far-reaching than TomTom-Tele Atlas. As called out by Nokia’s CEO, this extends to include social networking, mobile local search and discovery, and “pedestrian personal navigation” (for example mass transit directions).  In many of Nokia’s growth markets such as India and China the mobile handset is the dominant method of Internet access, while mass transit is the dominant mode of transportation. Contextually aware, personalized services helping consumers navigate their daily lives—this has been the promise of LBS, and could be the long-term story rather than vehicle navigation.

While it will still take time for GPS devices to proliferate in the GSM market where Nokia dominates, by this time next year Nokia will have “tens of models with GPS and mapping”.  This combination could in the coming years fuel an explosion in location-relevant content generation, organization, distribution and syndication as the mobile web emerges and merges with the desktop Internet of today to form a smarter, more contextually relevant and personalized Internet.  

Contact:

Blair Swedeen

Partenza Consulting

+1.415.513.5650

http://www.partenzaconsulting.com