The central theme, as indicated in the source below, is that cell-phones with GPS will increasingly swamp standalone GPS'. This will have two first order effects: it will cannibalize standalone growth, and it will create a higher scale platform (mobile) that will gain a higher share of the coolest software and innovation.
Of course, the standalone guys will not stand still: for example, TomTom is already building in connectivity into its own devices (strategy 1); building apps/solutions to go into cell phones -notably its iPhone app/service (strategy 2); pushing the envelope into next-gen navigation with smarter and more predictive software (strategy 3).
The cell-phone industry does not have it all its way: for example, the benefit of having two devices is that when you are in the car talking on the phone (which we know you shouldn't), you can also be following a nav's directions. This is much harder to do if both functions are built into one device, especially since the ability to seamlessly multitask is not quite there.
However, the cell-phone has some overwelming factors in its favor:
- Massive scale on which to develop applications and OSs to enable ever smarter nav tricks
- Global distribution via the operator ecosystem
- Built-in connectivity, allowing for information updating and adding of more contextual data
- Business-model flexibility, which might mean that nav might be subsidized as part of a subscription or as part of an ad-supported model
- Pairing GPS with triangulation enhances the accuracy of the core technology.
- Operator's cell-phone and tower network can provide highly accurate primary traffic data
So, in this context, what are potential strategies for a stand-alone player? Clearly the various things someone like TomTom is doing all make sense, but I would add a couple of other ideas.
Begin with some first principles around what Nav is all about:
- Efficiency. The fundamental value of navigation is to make travel more efficient by increasing accuracy by optimizing travel (and reducing rework, stops, etc). Lets posit that Nav Wave 1 has added in the order of 5% efficiency to those who have adopted it. This is a major benefit to the global economy and a high pay-off to those individuals or businesses who have embraced it - in terms of time, gas, wear and tear on the car and so on. Initial indications would suggest that Nav Wave 2 can drive an incremental 5% efficiency benefit, by optimizing based on actuals rather than averages. Those who use Nav Wave 1 already do some such optimization (when you avoid a certain route at certain times of day). So, people starting at zero may have a potential 10% benefit.
- Urbanization. There is a seemingly inexorable process of urbanization (and consequent sub-urbanization), which suggests that the costs of searching and getting to the right destination are only going up for more people.
- Car use growth. The developing world is seeking to catch-up fast with the developed world on car ownership, increasing the population of potential lost (in the road) souls.
- Road construction. One area where there is clear consensus is on the need to build more roads with all this infrastructure money.
- Business drive for efficiency. Businesses are relentlessly looking to extract more value from their assets. This means for example, that they would like to get more employees out in front of customers making more sales, but they need to maximize the efficiency of those employees.
Thinking about these themes, it makes sense why Nokia made one its largest ever investments to buy itself a presence in the Navigation world. Given its leading position in many of the emerging world markets, it is extremely well placed to take a leading role.
Some implications for incumbents in the Nav industry:
(1) Need to own Nav 2.0
(2) Need to figure out a business model to effectively target the growing urban global middle classes
(3) Need to figure out a compelling business oriented strategy
http://blogs.barrons.com/techtraderdaily/2009/09/01/will-smart-phones-crush-the-stand-alone-gps-market/
By Eric Savitz
The days of the stand-alone portable navigation device market are numbered.
By 2014, according to research firm iSuppli, the market for PNDs will be eclipsed by GPS-equipped smart phones. In 2009, the firm says, there will be 114 million PNDs in use, compared to 57.8 million smart phones. But by 2014, the numbers will flip: 305 million smart phones will be in use, versus 128 million PNDs, according to a forecast by iSuppli.
In a statement, iSuppli analyst Danny Kim notes that smart phones were not previously seen as a threat to the PND market due to poor phone battery life, unclear pricing structure and inferior interface design. But he says that as the smart-phone market evolves, those issues are being resolved. New smart phones, he says, offer better GPS integration, better usability, larger screens, built-in connectivity - and new GPS-enabled applications. (He counts 8 GPS applications for the Apple (AAPL) iPhone alone.) By 2011, Kim believes, almost every smart phone will include GPS functionality.
And here’s a sobering thought for investors in the space: iSuppliu thinks that from 2009 to 2013, the number of TomTom (TOM2.AS) and Garmin (GRMN) PNDs in use is not likely to change significantly. “The year 2009 marks the dividing line when sales expansion for the PND slows as the product moves from the growth phase to the maturity stage of its life cycle,” iSuppli contends.
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1 comments:
Dead on --- but don't forget walkers, too. I've been in crowds on HK streets where I could really have used a decent handheld navigation app! I bet it's the same in big Indian cities as well.
The broader thesis (that many originally-standalone capabilities will end up on mobile handsets) suggests there will always be room for more capable products, though --- think of All-in-One printers. They are "good enough" for casual usage, but...
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