Location-based services to double

By Staff Writer for Gartner

Johannesburg, 06 Jul 2009

Worldwide consumer location-based services (LBS) subscribers and revenue are on track to double in 2009, according to global research firm Gartner.

The firm says 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. Revenue is anticipated to increase from $998.3 million (R7.9 billion) in 2008 to $2.2 billion (R17.6 billion) in 2009.

Gartner defines LBS as services that use information about the location of mobile devices, derived from cellular networks, WiFi access points or via satellite links to receivers in (or connected to) the handsets themselves.

Senior research analyst at Gartner, Annette Zimmermann, attributes this trend to the increased roll-out of GPS-enabled phones, reduced prices and the rise in mobile application stores. “The LBS industry has matured rapidly in recent months through a mixture of consolidation, improved price and performance of the enabling technologies, and compelling location applications,” notes Zimmermann.

Zimmerman adds that subscriber growth will hinge on free services. “Mobile operators' initiatives to open up the application programming interface 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.”

LBS booms

Gartner predicts advertising-based LBS will gain more traction as users adopt it as a way to limit costs. According to the research firm, “mobile carriers that stick to the current predominant business model of charging users $5 to $10 per month plus data plans will experience high churn rates as users will look for free alternatives”.

In North America and Western Europe, the share of users taking advantage of free services sits at approximately 10% to 15%, and is expected to grow to 40% to 50% in 2013.

Japan will continue to see steady growth as GPS has been required by law in mobile phones since 2007. China first offered location services during the summer Olympics, which is now an advertising-based solution free to the user.

Gartner predicts that within the next 12 to 18 months, the market will see an increasing number of useful mobile applications and services, such as digital coupons. However, the firm points out that smaller telco players will struggle to survive in local markets unless they have an established user base and can offer something larger competitors cannot match.