Location, location and location: will it pay? - Industry Trend or Event

The 3G network can't happen quickly enough for location-based mobile specialists--in fact, they're no longer prepared to wait.

Location-based mobile specialists are pushing operators to deliver services to customers this year, well ahead of the third generation (3G) networks that promise to really make them fly. Operators, they are gambling, will need to generate revenues from such services now, given stockmarket downturns.

"Operators have to [offer location-based services] now, they can't afford to wait," said Per Englund, vice president, mobile solutions, at consultancy boutique Halogen, Stockholm, which also has a venture capital arm. "It's likely to take off this year because there are now a number of companies in the space with great technology," he added.

But some network operators aren't convinced that such services will generate significant revenues just yet. "Location-based services will only be big when the information for offering such services is available," said Johann Bezuidenhoudt, general manager, new business development, at network operator MTN, of Sandton, South Africa. "Without accessible information, location-based service is irrelevant. You don't see the companies that will be offering the services making the noise, it's the companies with the technology that are pushing the market."

Other technologists agree that accessible, valuable information will drive the market but worry that the market could be adversely affected by poor quality content or too much advertising.

"Aggregating interesting content is the next challenge. I wouldn't be willing to pay for many services I've heard of," said Nail Sudin, senior vice president of product development, Nextron Inc., a San jose, california-based developer of web to wireless content management software. "If spam happens on the cellphone the location-based services concept is dead. The advertising information has to be well targeted and on request."

Launching in the marketplace

Some companies say they aren't prepared to wait for 3G networks to exploit this lucrative market. GPRS or generation 2.5 promises to increase users' appetites for services, and many believe the ingredients are now in place for a mass-market revenue spinner.

"The location-based services market will start this year," said Rafi Katz, chief executive CT Motion Ltd., of Rosh Ha'ayin, Israel, a designer, developer and provider of platforms for location-based m-commerce and information services. "The market will evolve through GPRS and 3G technology, but the roots are in GSM technology."

One of the key drivers behind the expected growth is set to be the ability of location-based services users to take their services with them when they roam. In so doing they will be able to access local information anywhere. "It's really key for the long-term evolution of the market," said Katz.

Halogen's Englund thinks much of the value derived from location-based services will be in services provided while users roam. "When I am in Stockholm I know my way around, but if I'm in London I need local information and that has a real value to me," he said. "The problem is that it's very easy to determine the location of a cellphone when you are within one network, but when you're roaming you are in another network."

Halogen has developed two revenue models for mobilePosition AB, of Kista, Sweden, a service provider which acts as a clearing house and has its relationship with the end users.

"The accuracy of the user profile, time and position means it's very likely the user will respond to advertised information, which makes a service where the advertiser pays viable," said Englund. "Equally, a model where the user pays is likely to succeed as long as the information is valuable."

Bezuidenhoudt at MTN thinks content and information will be the factors on which location-based services will succeed. "The first company to bring a valuable service to market will dominate," he said. "They will probably become a major portal."

COPYRIGHT 2001 EMAP Media Ltd.
COPYRIGHT 2001 Gale Group