I’ve had it. I’ve had enough of projections based on misleading statistics, little empirical
data, “chicken-and-egg” assumptions, and “analogous” historical comparisons whose
relevance are highly questionable.
(Published by WirelessDevNet January 30, 2003) What I’m talking about are projections about Wireless Location-Based Services (LBS). A
certain research firm put the market for LBS in the “(tens of) millions, not billions of
dollars.” Another essentially declared Telematics applications as a no-growth area until
2006. And so on. Detailed examination of the research methods of these firms reveals
large flaws in assumptions and methods, and in particular, a one-size-fits-all approach to
the location services themselves, making no distinction between security services vs.
sales force tracking, paintball-type games vs. public safety. To paraphrase a political
catchphrase: “It’s the applications - Stupid!” This is the philosophy that LBS
stakeholders (carriers, businesses, content providers, middleware providers, and 3rd Party
developers), need to adopt to successfully grow the LBS market, far beyond the meager
projections currently being floated, and much more rapidly.
LBS already have what it needs from an infrastructure perspective to be successful:
Powerful, pleasant-to-use devices enabled for location-based services, with Sprint
PCS alone having sold over 3.2 Million GPS-enabled handsets as of November
2002 (source: FCC.gov);
Strategic trend towards client-based mobile applications, and already sufficient
and rapidly improving network speeds for data exchange, with 2.5G speeds now
broadly available (and frankly little need for 3G speeds);
A regulatory environment neutral at worst for LBS, and in fact very positive in
some areas such as security-related services (at least in the U.S.). Privacy
concerns remain however; in fact, Privacy will remain one of the top issues for
LBS for quite some time.
What we don’t have are the applications, and the back office support for those
applications. Essentially we’re all dressed up, with no place to go.
Key Application Success Factors
When I say we (as an industry) don’t have the applications, this is a mild exaggeration.
“Find A….” (Friend, Restaurant, etc.) type services have already been launched by
AT&T Wireless, Bell Mobility, Orange, and others. While a start, they are unlikely to
make a large splash in the marketplace, for a number of reasons. In particular, for LBS
applications to be successful from a business standpoint, two dimensions are key: 1)
Functionality Packaging, and 2) Niche Product Marketing.
1. Functionality Packaging - Since the core functionality of LBS is similar across
most LBS applications - that is, find a Person, Place, or Thing relative to the
user’s current location - the challenge from a business AND application design
standpoint is to narrow and specialize that functionality for the particular target
market. The focus of a Family Security package (focused on knowing about the
whereabouts and safety of spouses, children, relatives, and even pets) will be
quite different from a College Student package (focused on the whereabouts of
friends, campus events, course/community events, fraternity/sorority functions,
etc). This “trickles down” (rapidly) to the way the menus are arranged, what
terminology is used, how the dialog sessions are constructed, what associated
information links are included, how the information is presented to the user, and
within what type of business model the customer is charged for the service (and
most fundamentally, what the user will be willing to pay for the service). Any
attempt to make ‘one size fits all’ will have limited success or fail outright. It is
ESSENTIAL to treat LBS markets individually, EVEN if the functionality as
a whole is essentially the same. That leads us to the second success factor, niche
product marketing.
2. Niche Product Marketing - Anytime carriers or other large businesses hear the
word “niche”, the first thought is usually “niche equals small”, and the second is
“small equals forget it - I’ve got better things to do.” The natural tendency is to
forget (or want to avoid the internal political argument) that several niches added
together can constitute a very significant market in total, and in the case of LBS, a
very large and profitable total market that has a very high ARPU (Average
Revenue Per Unit) for carriers, with a corresponding “piece-of-the-pie” benefit to
the associated information providers, software developers, and business
enterprises involved.
LBS Business Case Development
“What is your Business Case justification?” - This phrase strikes fear into the hearts of
product marketing and application development organizations everywhere; it is the
Achilles Heal of Wireless Investment in general - not just LBS. In this economic
environment, business cases to justify significant budget allocations must not only be
feasible, but effectively bullet-proof from every angle.
For wireless carriers, “bullet-proof” business cases must address at a minimum the
application’s potential to:
Improve ARPU across some portion of the existing customer base,
Attract new subscribers, as well as bringing existing customers “over to the data side”,
Penetrate new markets (e.g. verticals, geographies, other market demographics), and/or
Reduce churn (always tough to prove, but it is a huge issue for carriers)
For business enterprises, business cases should include the application’s potential to:
Promote purchase or use of company’s core products,
Provide new sources of revenue (unlikely to be large relative to other benefit areas),
Reduce operational costs (e.g. less calls to the call center, less reps per account), and/or
Achieve customer satisfaction improvements (often measured in detailed dimensions in annual
customer satisfaction surveys)
These tasks become much more straightforward when approaching LBS from an
individual application/niche market perspective (NOT a one-size-fits-all market
approach), with functionality “packaging” and marketing to match.
There usually is decent and recent research available at the individual application level or
target demographic that can form the core of a LBS business case. Examples include:
One-third of ALL wireless subscribers state that their primary or ONLY reason for having
wireless service is for (personal) security - Target Applications: Family Security; Target markets:
Parents, Seniors, Singles (data source: NENA.org 2002). This information can be supplemented
by data regarding baby-monitor sales (expectant parent package), single-parent homes (latch-key
/school monitoring package), parent(s) with teenagers (teen tracking package), etc.
The market for games (non-gambling) played on mobile handsets is projected to grow from $255
Million Euros in 2002 to over $3 Billion Euros during 2005 - In Western Europe alone. Target
Applications: Location-Based Mobile Gaming; Target market: Teenagers (data source: Analysys
2002). This information can be supplemented by additional information such as the uptake rate of
ring-tone downloads (a predominately teenager market) and business model information about
ring-tones as well as early results from pioneers in the LBS gaming market such as ItsAlive in
Europe.
Sometimes new concepts (such as Presence) have little secondary research to help
build a business case; in these circumstances it is often beneficial to conduct focus
groups and other types of primary research. However, this type of data is most useful
in the design of the application and selection of the business model, not for building
the overall business case. In addition to primary and secondary market, there are a
few other considerations that can be incorporated into a LBS business case argument:
Substitution vs. Additive Expenditures (e.g. will the application somehow cannibalize existing
revenue, or alternatively, take revenue from other communications providers, such as Wireline)
Productivity Claims (difficult to justify objectively, but good subjective anecdotes are helpful)
Capital Replacements (e.g. customers can avoid purchase of expensive laptops or specialized
handheld devices for sales and field applications)
Public Relations (will the application help build the company’s image/brand in the marketplace
Common Sense (don’t make ridiculous claims, but don’t overlook any benefit)
With respect to LBS public relations, and key infrastructure requirements, none is greater
than the need to ensure personal and business enterprise security, privacy AND ethics. In
this day and age, every demographic will insist on absolute integrity in the design of
applications and security in their delivery. An example would be to include extremely
strong “anti-stalking” capabilities in “Find-a-person”-type applications and supporting
infrastructure, and to lobby Washington and State legislatures for very harsh punishments
of such offenders.
What ARE These Applications?
LBS applications cover nearly every aspect related to human mobility: Navigation,
Health/Safety/Security/Emergency, Convenience, Entertainment, Travel Aids,
Productivity Aids, Mobile Work Force Management, etc, and many aspects related to
human/machine interaction (e.g. Telematics) and even machine to machine (e.g.
automatic emergency calling for car breakdowns, medical implant malfunctions, mobile
wallet). And as you might expect, LBS applications cover nearly every attractive
wireless demographic market, including: parents, teenagers, singles, college students,
online communities, business executives, and entrepreneurs. This also includes
businesses that significantly depend on mobile voice and/or data communications to
operate their business, such as companies with significant field employee organizations,
and businesses dependent on knowing the location of their assets at any moment, such as
trucking and even railroads.
These individual markets have repeatedly demonstrated the willingness to pay premium
prices for communications services, WHEN they feel those services are focused on
satisfying their needs and desires.
A great deal of attention has been placed on what kinds of business models (if any) can
succeed in the LBS world, and the next generation wireless world in general. The
assumption seems to be that some sort of new, exotic business model will be necessary to
make new wireless products (including LBS) profitable. This is nonsense at the most
basic level - the end-user perspective - IF the product meets their specific needs, they
WILL pay, beit on a monthly, usage, per use, or other basis, even if new methods such as
location-based billing are required. If sufficient value is provided, they will pay
accordingly.
The business model discussion becomes more complex as more players appear between
the original application provider and the end-user. The list of potential players continues
to expand: besides carriers, content providers, 3rd Party application developers, and
distributors, the list is growing to include businesses seeking brand placement; and, in the
case of Wi-Fi, players such as national hotspot network providers, real estate owners and
tenants, and even municipal governments. The successful business model in these
circumstances will, again, depend upon the SPECIFIC target market and
applications involved, not a one-size-fits-all approach.
Examples of these applications (again, not restricted to a mobile phone being the device),
with target market(s) in parentheses, include:
Consumer
Business
Public Safety* (All)
E911
Medical Alerts
Amber Alerts
Business Safety* (All)
Employee Safety/
Safe-Zone Monitoring
Business Asset
“Geo-Fences”
Executive “Ethics”
Monitoring
Family Security
(Parents)
Family Locator
After-School Monitor
Teen Tracker; Truancy
Monitor
Child Finder
Pet Tracking
Special Zone Tracking
(Wi-Fi/Location)
§Shopping Malls
§Public Events
§Zoos
Business Functions/Processes
(All)
Field Sales Force
Management
Field Technician
Dispatch; Map Forwarding, Routing
Yellow Pages (Many Permutations, such
as ATM finder, Restaurant Finder, All the various shopping scenarios, etc.)
(Business) Yellow Pages
(Many Permutations
possible, including specialized YP per verticals above)
* NOTE: IT IS NOT NECESSARY FOR THE E911 PSAP INFRASTRUCTURE IN THE U.S. TO BE IN PLACE IN ORDER TO
OFFER EVEN SECURITY-RELATED LBS APPLICATIONS - IT MAY EVEN PROVIDE NEAR-TERM OPPORTUNITIES
Back Office Issues - Particularly Privacy
Typically the phrase “back office” refers to processes such as order processing, billing,
and customer care. While these indeed will become significant issues as LBS volumes
increase, they are not the most immediate issues.
The biggest obstacle remaining to LBS besides the services themselves is the lack of
privacy-protection infrastructure: a combination of intelligent agents, data security
software, and legal constructs that will “guarantee” to the customer that his/her/the
enterprise’s privacy will be protected. These designs exist, the software available, and
the legal research has been conducted, but in the absence of high-demand applications the
privacy infrastructure has not been implemented in any serious fashion, or only partially.
Once one or more of the applications discussed above takes off, the need for such privacy
infrastructure will escalate dramatically, and those businesses ahead of the issue will have
a jump on the market as a whole.
Summary
The time is ripe for location-based services: the infrastructure is here, the markets
primed, the remaining obstacles identified and workable. The key is to package LBS
functionality specifically for their individual target market, construct the compelling
individual business case, and tightly focus the “niche” marketing efforts. With the
appropriate privacy/security back office infrastructure to support these tailored and well-
marketed applications, LBS can finally become the breakout revenue generator that we
have talked about for years. As an industry let us accelerate our efforts on the detailed
development and implementation of the individual LBS applications to take advantage of
their potential sooner rather than later, and close the book on the industry skeptics.
About the Author
David H. Williams is an industry consultant with over 15 years experience with
consultancies Accenture, Booz, Allen, & Hamilton, and Deloitte Consulting. Mr.
Williams provides strategy and technology consulting services to the communications
and high-tech industries, and currently focuses on consulting to businesses, governments,
and carriers on wireless products and services-related issues. He has an MBA from The
University of Texas at Austin, and a B.S. in Electrical Engineering from Purdue
University. Mr. Williams publishes an on-line newsletter dedicated to LBS, e911, and
Wi-Fi issues at www.E911-LBS.com. He can be e-mailed at LBS@davidhwilliams.com.
