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Wednesday, June 16, 2010

Fwd: How can mobile LBS survive in a “free” world?

Heike Roettgers is a freelance internet and mobile consultant, helping agencies and start-ups with product strategy and roadmap planning, product concepts, product management and project management.

How can a navigation and location company survive in a market where the largest players are offering their services for free? At the Navigation and Location Summit Europe in Berlin yesterday, Jim Nardulli, SVP Sales, NNG Global Services addressed the problem.

A recurring topic of at the conference was the topic of "free" – how can companies survive in a world, where players such as Google and Nokia start to offer their main products for free? According to Jim Nardulli, the strategy of these companies is to take what their service users (that would be us, folks) rely on for profit, and provide that free of charge. The market will then follow that service. Once you've accomplished that, you have their attention and can sell them something else. In the case of Nokia, it gives Ovi Maps away for free. And since Ovi Maps is an excellent navigation service, Nokia can use that to increase both their market share and the Average Selling Price of their handsets. In Google's case, they give everything away for free in order to create advertising opportunity, and the amount of revenue from AdSense.

Nardulli calls this a "Zero Million Dollar Business" - and compares it to the effect that steam had on the industrial revolution. Steam powered the engines and profits of the revolution - but the steam itself was completely free. In the same way, Google's AdSense will grow at the same pace as the web, and Nokia's Ovi Maps will grow at the same pace as its device market share.

The trend to offer "free" or "freemium" services does not only affect navigation – almost any LBS that grows to sufficient popularity will be targetted to be free. But how do you make money in this world, if you are not Google? Nardulli recommends that companies innovate in niches that are too small or too complex to fall under Google's strategy. To succeed, you need to specialise: find a service or content that is scarce, rather than abundant.

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