LBS Business Models: One Size Doesn’t Fit All
Beyond real-time traffic information services, many other location-based content services are being delivered to location-aware devices such as Portable Navigation Devices (PNDs), smart phones, feature phones with GPS and other one-way or two-way connected devices.
Like other data-communications services, Location-Based Services (LBS) require either a one-time payment,
subscription, or pay-per-use fee. It is hard to tell which business model is most suitable for each LBS segment. Depending on the characteristics of the content services and the communication links that device terminals have, LBS business models vary significantly.
The good news is that in these early days of this emerging industry, service providers and carriers can partner on trials with varying models to assess which solution has the greatest efficacy.
One-Time Payment
Many times, end users pay for a service once and then enjoy a lifetime subscription. For example, when PND manufacturers sell their devices, traffic receivers are either included in the box with lifetime Radio Data System-Traffic Message Channel (RDS-TMC) services or sold separately with the TMC service fees included.
Information guides, such as local tourist guides, also can be purchased with a one-time fee, but like map updates, such information is quickly obsolete as time goes by. The most common map updates are offered via SD cards or CD/DVDs where new map information is stored. People just buy such removable media and wait until new updates become available. Therefore, map updates are not lifetime subscriptions, but a recurring cost for end users.
Therefore, the one-time payment business model is better for location-based services that don’t require frequent dynamic content updates. The exception is traffic information services because there are many dedicated service delivery receivers available, which guarantee real-time content update.
Although the one-time payments likely are more affordable to consumers, the services usually are confined to one-way connectivity and are inferior to subscription-based services in two-way connected device terminals.
Standalone Subscription Services
Annual or monthly subscriptions are common in premium location-based service packages. The most common model is monthly payments where end users receive a discount if they purchase the annual subscription package. The most common LBS segment is the off-board navigation services area. Off-board navigation services utilize the data plan the user has, rather than employing one-time payments. Off-board phone navigation service providers such as Networks In Motion and TeleNav have drawn more than 7 million paying monthly subscribers.
Traffic information services also utilize the subscription-based business model in conjunction with such navigation services. As end-users demand more up-to-date maps, but often neglect the new map products available, map update services—for example from TomTom and Navigon—also increasingly utilize subscription-based models.
Subscription Bundled Service
In the phone navigation space, off-board service providers usually bundle non-navigation services with other LBS content, such as traffic information, local searches, information guides, local events information, weather, destination download and fuel prices. End users can pay a flat fee, i.e., $9.99, for the entire brand service and enjoy all the location-based services along with Turn-by-Turn (TbT navigation services.
Pay-Per-Use
Off-board navigation services also can be purchased for one-day use at a higher price than subscription. This service offering is fitting for consumers who would like to try out any LBS content. This service model is not a main revenue source for service providers, but serves to attract novice/casual users to their offerings.
Traffic information services also could be offered as pay per use, but they usually are tied with off-board navigation services. Destination download services could also be offered per use in the future with enhanced features, but currently it is a free service feature and usually part of LBS service packages.
Ad-Based Model
Except for off-board navigation map updates and real-time traffic information services, most other LBSes are free to the end-user. Domain-expert LBS providers either share their revenues with service aggregators and wireless carriers that allow end users to utilize the data plan, or they make the content space open to advertisers.
The challenges for content providers utilizing advertiser money as a revenue source are two fold: ad matrix and volume.
Finding Your Inner Model
The most appropriate business model for each LBS segment varies depending on data-freshness requirements, everyday relevance to consumer’s needs when using location-aware devices and communication links.
Most LBS content will be better off with two-way communication links for delivering more dynamic and personalized content. However, few navigation devices fully support the capacity of two-way content delivery yet. For example, map updating over the air is still an unsolved issue for navigation devices due to the bandwidth and incremental map update processes.
Content providers should wait until consumers become more familiar with the relevance of these services in their lives and accept the pay structures of such high-end services. In the meantime, one-way broadcasting still will be a valuable delivery format for traffic information, map updates, fuel prices and weather information. But again, off-board navigation, local searches, social networking, info guides and local events will become more relevant when used with two-way communication devices.
TeleNav and Networks In Motion’s subscriber numbers staggered for a period before they began to increase. Currently, the best working business model seems to be such off-board navigation on phones bundled with other relevant services with monthly subscriptions. iSuppli believes that off-board navigation services could continue to be successful with such a subscription model if smartly bundled with relevant LBS.
Like other data-communications services, Location-Based Services (LBS) require either a one-time payment,
subscription, or pay-per-use fee. It is hard to tell which business model is most suitable for each LBS segment. Depending on the characteristics of the content services and the communication links that device terminals have, LBS business models vary significantly.
The good news is that in these early days of this emerging industry, service providers and carriers can partner on trials with varying models to assess which solution has the greatest efficacy.
One-Time Payment
Many times, end users pay for a service once and then enjoy a lifetime subscription. For example, when PND manufacturers sell their devices, traffic receivers are either included in the box with lifetime Radio Data System-Traffic Message Channel (RDS-TMC) services or sold separately with the TMC service fees included.
Information guides, such as local tourist guides, also can be purchased with a one-time fee, but like map updates, such information is quickly obsolete as time goes by. The most common map updates are offered via SD cards or CD/DVDs where new map information is stored. People just buy such removable media and wait until new updates become available. Therefore, map updates are not lifetime subscriptions, but a recurring cost for end users.
Therefore, the one-time payment business model is better for location-based services that don’t require frequent dynamic content updates. The exception is traffic information services because there are many dedicated service delivery receivers available, which guarantee real-time content update.
Although the one-time payments likely are more affordable to consumers, the services usually are confined to one-way connectivity and are inferior to subscription-based services in two-way connected device terminals.
Standalone Subscription Services
Annual or monthly subscriptions are common in premium location-based service packages. The most common model is monthly payments where end users receive a discount if they purchase the annual subscription package. The most common LBS segment is the off-board navigation services area. Off-board navigation services utilize the data plan the user has, rather than employing one-time payments. Off-board phone navigation service providers such as Networks In Motion and TeleNav have drawn more than 7 million paying monthly subscribers.
Traffic information services also utilize the subscription-based business model in conjunction with such navigation services. As end-users demand more up-to-date maps, but often neglect the new map products available, map update services—for example from TomTom and Navigon—also increasingly utilize subscription-based models.
Subscription Bundled Service
In the phone navigation space, off-board service providers usually bundle non-navigation services with other LBS content, such as traffic information, local searches, information guides, local events information, weather, destination download and fuel prices. End users can pay a flat fee, i.e., $9.99, for the entire brand service and enjoy all the location-based services along with Turn-by-Turn (TbT navigation services.
Pay-Per-Use
Off-board navigation services also can be purchased for one-day use at a higher price than subscription. This service offering is fitting for consumers who would like to try out any LBS content. This service model is not a main revenue source for service providers, but serves to attract novice/casual users to their offerings.
Traffic information services also could be offered as pay per use, but they usually are tied with off-board navigation services. Destination download services could also be offered per use in the future with enhanced features, but currently it is a free service feature and usually part of LBS service packages.
Ad-Based Model
Except for off-board navigation map updates and real-time traffic information services, most other LBSes are free to the end-user. Domain-expert LBS providers either share their revenues with service aggregators and wireless carriers that allow end users to utilize the data plan, or they make the content space open to advertisers.
The challenges for content providers utilizing advertiser money as a revenue source are two fold: ad matrix and volume.
Finding Your Inner Model
The most appropriate business model for each LBS segment varies depending on data-freshness requirements, everyday relevance to consumer’s needs when using location-aware devices and communication links.
Most LBS content will be better off with two-way communication links for delivering more dynamic and personalized content. However, few navigation devices fully support the capacity of two-way content delivery yet. For example, map updating over the air is still an unsolved issue for navigation devices due to the bandwidth and incremental map update processes.
Content providers should wait until consumers become more familiar with the relevance of these services in their lives and accept the pay structures of such high-end services. In the meantime, one-way broadcasting still will be a valuable delivery format for traffic information, map updates, fuel prices and weather information. But again, off-board navigation, local searches, social networking, info guides and local events will become more relevant when used with two-way communication devices.
TeleNav and Networks In Motion’s subscriber numbers staggered for a period before they began to increase. Currently, the best working business model seems to be such off-board navigation on phones bundled with other relevant services with monthly subscriptions. iSuppli believes that off-board navigation services could continue to be successful with such a subscription model if smartly bundled with relevant LBS.
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