The Future of Digital Maps
Posted Thu, 18 Oct 2007 05:34:36 EDT by Dominique Bonte
A lot has been written about the Nokia-NAVTEQ and TomTom-Tele Atlas deals. Both global digital map providers were snapped up for large amounts of money vertically integrating large parts of the navigation value chain under single brands. If anything this has shown how huge the expectations for location services have grown. Where does that leave the rest of the navigation and location ecosystem? How will the relationship develop between Nokia and TomTom and the many PND providers which will now have to buy their maps from their competitors. Will Nokia and TomTom be tempted to abuse their dominant position by raising or at least stabilizing map license fees or keep the most advanced map features to themselves? The EU’s Directorate General for Competition will surely keep a close eye on both of them.
And are there really no alternatives? Automotive Navigation Data (AND) is an established map provider based in The Netherlands which has been quietly producing maps for areas such as Eastern Europe, North Africa, Central Asia and South America where the two big players NAVTEQ and Tele Atlas were absent. But this has recently changed. Maps of Belgium, The Netherlands and Luxemburg were released on 27 September. Maps for Germany, Switzerland, Austria and France are to follow soon. Days after the announcement of the Nokia-NAVTEQ deal AND CEO Maarten Oldenhof finely remarked in his presentation at the Benelux Navigation Event how rare map makers had become. He obviously was referring to independent map providers! This was soon to be followed by an announcement AND had hired US-based financial advisor ThinkEquity Partners LLC to review their strategy. It is clear AND feels there are new opportunities to grow their business and aim for full map coverage of at least Western Europe. This is important as navigation vendors do not want to source their maps from too many different providers. At the same time users increasingly purchase navigation solutions with EU or North American maps included. VC investors must be lining up to provide AND with the necessary funds as their confidence in the mapping business is boosted by the $8.1 billion to be paid for NAVTEQ. Commercially AND would undoubtedly be greeted as a welcome alternative, providing some very necessary bargaining power for navigation vendors when negotiating price with the big two. And for those PND makers competing on price the 50 % cheaper AND maps would allow them to squeeze their competitors even further. The supposedly lower AND map quality would hardly be an issue when targeting less demanding, occasional navigation users. Anyway, AND is boasting about its advanced on-line Map 2.0 editing technology which will enable involving user communities to increase and maintain map quality levels via real-time error reporting. To increase their understanding of how map communities work AND is partnering with the OpenStreetMap Foundation donating maps of The Netherlands, India and China. This is critical for AND as they do not have teams of geographers validating digital maps on the ground. All this looks very promising for AND.
However, the window of opportunity for AND may be closing sooner than expected. There is growing uncertainty on how long maps will remain a premium asset for which businesses or customers are prepared to pay large fees. The perception that maps are free is already firmly established in the minds of consumers frequently using Google Earth or other internet mapping portals or benefiting from advertising-funded free navigation software such as AmAze from Locationet. There are other interested parties such as governments which are keen to get involved in mapping and navigation for traffic and asset management purposes. This will add to the trend of maps becoming public domain. It looks like basic road mapping content will become a cheap or even free commodity at some point while dynamic content such as up-to-date POIs or pedestrian type map details will retain their premium value much longer. If AND has any plans to become a global map provider they would better move on quickly, not spending too much time with consultants and advisors.
But this brings us back to the question which has haunted the navigation industry for weeks: will Nokia pay too much for NAVTEQ? The answer is NO! Nokia will buy invaluable time to market more than anything else. They probably realize very well digital maps will become a commodity if not completely free within five years. But by then, based on the high quality maps of NAVTEQ, Nokia will have established a dominant position in the LBS market which in turn will have moved on to different business models based on advertising. The current game in technology is about moving first and constantly remaining one step ahead of the competition. It really looks like this is exactly what Nokia has done! While the rest of the navigation ecosystem keeps pondering on the price paid for NAVTEQ, Nokia is already preparing the next revolution.
At the same time the strategic dimension of the TomTom-Tele Atlas deal can be questioned. From the outside it seems one of the main reasons for this deal was the creation of a strong combined user community to increase the quality of maps. This rather sounds like a more tactical and operational approach, though a very critical one. More importantly, compared with Nokia TomTom seems to own fewer assets in terms of carrier relationships, handset experience and internet portal expertise needed to be successful in the connected navigation and LBS space. Further consolidation can be expected here. One thing is sure: the current focus of the navigation industry on the position of digital maps in the value chain is a temporary phenomenon. Soon the industry will move on to address other aspects such as the generation of new revenue streams based on LBS services.
And are there really no alternatives? Automotive Navigation Data (AND) is an established map provider based in The Netherlands which has been quietly producing maps for areas such as Eastern Europe, North Africa, Central Asia and South America where the two big players NAVTEQ and Tele Atlas were absent. But this has recently changed. Maps of Belgium, The Netherlands and Luxemburg were released on 27 September. Maps for Germany, Switzerland, Austria and France are to follow soon. Days after the announcement of the Nokia-NAVTEQ deal AND CEO Maarten Oldenhof finely remarked in his presentation at the Benelux Navigation Event how rare map makers had become. He obviously was referring to independent map providers! This was soon to be followed by an announcement AND had hired US-based financial advisor ThinkEquity Partners LLC to review their strategy. It is clear AND feels there are new opportunities to grow their business and aim for full map coverage of at least Western Europe. This is important as navigation vendors do not want to source their maps from too many different providers. At the same time users increasingly purchase navigation solutions with EU or North American maps included. VC investors must be lining up to provide AND with the necessary funds as their confidence in the mapping business is boosted by the $8.1 billion to be paid for NAVTEQ. Commercially AND would undoubtedly be greeted as a welcome alternative, providing some very necessary bargaining power for navigation vendors when negotiating price with the big two. And for those PND makers competing on price the 50 % cheaper AND maps would allow them to squeeze their competitors even further. The supposedly lower AND map quality would hardly be an issue when targeting less demanding, occasional navigation users. Anyway, AND is boasting about its advanced on-line Map 2.0 editing technology which will enable involving user communities to increase and maintain map quality levels via real-time error reporting. To increase their understanding of how map communities work AND is partnering with the OpenStreetMap Foundation donating maps of The Netherlands, India and China. This is critical for AND as they do not have teams of geographers validating digital maps on the ground. All this looks very promising for AND.
However, the window of opportunity for AND may be closing sooner than expected. There is growing uncertainty on how long maps will remain a premium asset for which businesses or customers are prepared to pay large fees. The perception that maps are free is already firmly established in the minds of consumers frequently using Google Earth or other internet mapping portals or benefiting from advertising-funded free navigation software such as AmAze from Locationet. There are other interested parties such as governments which are keen to get involved in mapping and navigation for traffic and asset management purposes. This will add to the trend of maps becoming public domain. It looks like basic road mapping content will become a cheap or even free commodity at some point while dynamic content such as up-to-date POIs or pedestrian type map details will retain their premium value much longer. If AND has any plans to become a global map provider they would better move on quickly, not spending too much time with consultants and advisors.
But this brings us back to the question which has haunted the navigation industry for weeks: will Nokia pay too much for NAVTEQ? The answer is NO! Nokia will buy invaluable time to market more than anything else. They probably realize very well digital maps will become a commodity if not completely free within five years. But by then, based on the high quality maps of NAVTEQ, Nokia will have established a dominant position in the LBS market which in turn will have moved on to different business models based on advertising. The current game in technology is about moving first and constantly remaining one step ahead of the competition. It really looks like this is exactly what Nokia has done! While the rest of the navigation ecosystem keeps pondering on the price paid for NAVTEQ, Nokia is already preparing the next revolution.
At the same time the strategic dimension of the TomTom-Tele Atlas deal can be questioned. From the outside it seems one of the main reasons for this deal was the creation of a strong combined user community to increase the quality of maps. This rather sounds like a more tactical and operational approach, though a very critical one. More importantly, compared with Nokia TomTom seems to own fewer assets in terms of carrier relationships, handset experience and internet portal expertise needed to be successful in the connected navigation and LBS space. Further consolidation can be expected here. One thing is sure: the current focus of the navigation industry on the position of digital maps in the value chain is a temporary phenomenon. Soon the industry will move on to address other aspects such as the generation of new revenue streams based on LBS services.