LBS Set to Double in 2009, says Gartner

David Murphy

Worldwide consumer location-based services (LBS) subscribers and revenue are on pace to double in 2009, according to a report from the analyst, Gartner. The report, Dataquest Insight: Consumer Location-Based Services, Subscribers and Revenue Forecast, 2007-2013, notes that, despite an expected 4% decrease in mobile device sales, LBS subscribers are forecast to grow from 41 million in 2008 to 95.7 million in 2009, while revenue is anticipated to increase from $998.3 million (615.2 million) in 2008, to $2.2 billion in 2009.
Gartner defines LBS as services that use information about the location of mobile devices, derived from cellular networks, wi-fi access points or via satellite links to receivers in (or connected to) the handsets themselves. Examples are services that enable friends to find each other, parents to locate their children, mapping and navigation. Location-based services may be offered by mobile network carriers or other providers, and are are also known as location-aware services.
The LBS industry has matured rapidly in recent months through a mixture of consolidation, improved price/performance of the enabling technologies and compelling location applications, says Annette Zimmermann, Senior Research Analyst at Gartner. Factors driving the increase in the next year or so include higher availability of GPS-enabled phones, reduced prices and appearance of application stores.
Gartner predicts that advertising-based or free LBS (disregarding data charges) will gain more traction as users adopt it as a way to limit costs. Mobile operators that stick to the current predominant business model of charging users $5 to $10 per month plus data plans will experience high churn rates, it says, as users will look for free alternatives. In North America and Western Europe, the share of users taking advantage of free services is approximately 10-15% today and is expected to grow to 40-50% in 2013.
Gartner expects more compelling and useful applications and services, such as digital coupons to be redeemed in a nearby shop, and points-of-interest search services, to come to market in the next 12 to 18 months. It believes that smaller, niche players will survive in local markets only when they have an established user base and unique offering that larger players cannot compete with. Other players will be acquisition targets for larger vendors.
Gartner adds that LBS market dynamics vary by region. For example, North America is the largest market due to mobile operators strong efforts in navigation services and family-safety solutions. In Western Europe, navigation is currently the most used application, followed by local search and friend finder applications. There is still no significant uptake of safety applications.
Japan will continue to see steady growth, as GPS has been required by law in mobile phones since 2007. In Asia/Pacific, during the summer Olympics, location services were offered for the first time in China. These are now an advertising-based solution and free to the user.
The competitive landscape will change and most mobile carriers need to alter their approach toward offering LBS and dealing with developers, says Zimmermann. Subscriber growth will hinge on free - disregarding data charges - services. Mobile operators initiatives to open up the application programming interface (API) to third-party developers will help them compete against other players in the market, and will also be beneficial to the different parties involved, down to the end user.
Theres more information about the report here.