With interest in location based services (LBS) exploding, the next challenge for mobile networks and software developers will lie in finding ways to monetise the traffic these applications generate.
That's according to Quentin Joubert, product manager at Cellfind, a subsidiary of Blue Label Telecoms. He says consumer interest in a wide range of LBS offerings is growing for a range of navigation, personal safety and entertainment applications, but the revenue model for many of these is still unproven.
"Over the past few years, we have seen consumer interest in a range of GSM and GPS LBS applications explode," says Joubert. "People around the world are using the technology to track friends and family, for navigation, and to find nearby restaurants, entertainment venues and shops. But as yet, revenues remain low, partially because developers and operators are trying to build traction and grow their user bases."
Fitness and health
Joubert says that the global LBS market has seen a flurry of innovation over the past few years, with emerging categories such as fitness and health applications coming to the fore. At the same time, personal safety apps as well as social media services such as FourSquare and Facebook Check In are enjoying rapid adoption among users.
Says Joubert: "The question the industry is facing, is how to monetise these apps now that they are gathering critical mass. End-users are clearly getting value from these services, but they do need to be profitable for the companies that provide them to be sustainable in the long term."
"One of the major challenges is that companies have used a freemium model to get users to sign up to their services, and may face resistance if they try to convert users to paid subscriptions." The model that is likely to prevail is one based on marketing and advertising, he adds.
A powerful advertising opportunity
"The trend we're seeing emerging is that consumers are happy to share location data with people and companies that they trust. This means that they are increasingly open to receiving location-based marketing and advertising - provided that there is some value in it for them. Companies need to tread carefully around privacy issues, but if they get consumers' permission, LBS can be an incredibly powerful advertising opportunity."
"Stores, hotels, restaurants and brands could reward consumers with special offers, loyalty points or vouchers for sharing their location, for example," says Joubert. This is a win-win situation since consumers benefit from perks for sharing their details, while companies get access to potential customers who are near their stores and possibly ready to buy their products or services. In the medium term, the LBS market will be a lucrative one, though the competition will be fierce. Gartner predicts that LBS will generate $13.5 billion revenue by 2015, mobile advertising becoming the major driver of the market. The market researcher projects that there will be 800 million LBS users worldwide by the end of the year.
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