With HERE officially issuing a “come and get me” this week, there is a lot of speculation as to who will acquire the company. The whole thing raises a series of questions, which I am going to attempt to answer below.
Why Now?
Why has Nokia decided to sell HERE now? Or more specifically, why hang on to the asset when selling its handset group to Microsoft (particularly when it wasn;t a clean fit with the remaining Nokia group)? And then look to sell in such a short time frame? One answer may be the Microsoft has decided not to pursue mapping (which doesn’t fit with any plans it may have around local search and ambient intelligence) or it was undervaluing it in negotiations. My betting is the latter. Nokia learned the first time around how rarely a platform like this becomes available, and how it can lead to a major bidding war. Surprisingly, its handset group may not have attracted the same sort of scenario and so it made sense financially to decouple them.
Microsoft has clearly taken the foot off the pedal in its pursuit of Google on mapping in the last 2 years, dropping many of the interesting initiatives it had around street and indoor mapping such as blockview and read/write world. A mapping platform like this will always be of value to a company active in so many areas, particularly when we look at next gen local search and ambient intelligence, but will it be prepared to match its main competitors?
Are HERE Maps any good?
Yes they are. Simple as that. ABI has regularly stated that it is the best competitor to Google in the mobile space. When comparing Google and HERE mapping applications, the one major advantage Google has is the ability to layer in huge amounts of search content, which is why HERE is a ready made platform for someone looking to compete. As the major handset vendor at the time, Nokia was the best placed company to take full advantage of Navteq, its just a pity the handst part fot he business went the way it did.
Is traditional mapping still important?
Firstly, if we look at HERE as standalone mapping company, that it hard to make the point the map licensing is a very profitable business. Despite some major wins, HERE’s revenues remain low versus its operating costs.
While maps are used in a huge number of ways and we see companies like ESRI driving new use cases amongst a greater number of verticals for GIS tools, the real revenue generator is in mobile, as demonstrated to some degree by Google. Today, we use maps in a huge number of the applications we use as well as for local discovery and pedestrian/in-car navigation. The real revenue potential is in local search, particularly as it evolves from “Find me a Restaurant” to find me a “size 9 red sweater that is in stock and on offer” nearby. Location based mobile advertising is still at a very nascent stage, but will dominate mobile advertising over the next 5 years.
The question is will consumers still discover using maps and are companies like HERE the best placed to deliver on these new technologies. The most obvious jump will come with technologies like augmented reality and Project Tango. But while, these technologies are very impressive and rely on layering content over a picture or camera image instead of a map, they still rely on a huge GIS dataset that provides the accurate information necessary to make it work. The way we view the content may change, but the need for high quality content has not. So for me, companies like HERE still have significant value, even if you believe that mapping as we know it today will not be nearly as relevant in the future.
Isn’t Free Crowdsourced Data the Future?
Yes it is and no its not. We are now reaching a point where always-on location technologies coupled with quantified self, personal assistance and ambient intelligence applications will enable companies to gather location data on a continuous basis over a long period of time. This in turn, can be used to drive amongst other things, dynamic mapping. Without doubt, this is the direction that will be taken by every major company that has access to this data, and will facilitate organizations like OSM to emerge as a serious competitor ( I still don’t see it today). But, as above, companies still need a huge dataset sitting underneath to make sense of the crowdsourced information. It will be very hard for someone to start from scratch with nothing but crowdsourced data. On the other hand it would be very easy for someone to take what HERE have and start combining it with crowdsourced data to make sure they are a major competitor in the future.
Is traditional mapping still important?
Firstly, if we look at HERE as standalone mapping company, it hard to make the point the map licensing is a very profitable business. Despite some major wins and revenues approaching $1 Billion, the upkeep of such a database is incredibly expensive, as reflected in its profitability. So the days of profitable standalone mapping companies are probably over.
While maps are used in a huge number of ways and we see companies like ESRI driving new use cases amongst a greater number of verticals for GIS tools, the real revenue generator is in mobile, as demonstrated to some degree by Google. Today, we use maps in a huge number of the applications we use as well as for local discovery and pedestrian/in-car navigation. The real revenue potential is in local search, particularly as it evolves from “Find me a Restaurant” to find me a “size 9 red sweater that is in stock and on offer” nearby. Location based mobile advertising is still at a very nascent stage, but will dominate mobile advertising over the next 5 years.
The question is will consumers still discover using maps and are companies like HERE the best placed to deliver on these new technologies. The most obvious jump will come with technologies like Augmented reality and Project Tango. But while, these technologies are very impressive and rely on layering content over a picture or camera image instead of a map, they still rely on a huge GIS dataset that provides the accurate information necessary to make these work. The way we view the content may change, but the need for high quality content has not. So for me, companies like HERE still have significant value, even if you believe that mapping as we know it today, will not be nearly as relevant in the future.
Isn’t Free Crowdsourced Data the Future?
Yes it is and no its not. We are now reaching a point where always-on location technologies coupled with quantified self, personal assistance and ambient intelligence applications will enable companies to gather location data on a continuous basis over a long period of time. This in turn, can be used to drive amongst other things, dynamic mapping. Without doubt, this is the direction that will be taken by every major company that has access to this data, and will facilitate organizations like OSM to emerge as a serious competitor ( I still don’t see it today). But, as above, companies still need a huge dataset sitting underneath to make sense of the crowdsourced information. It will be very hard for someone ot start from scratch with nothing but crowdsourced data. On the other hand it would be very easy for someone to take what HERE have and start combining it with crowdsourced data to make sure they are a major competitor in the future.
So who will buy HERE?
The Automotive/Utility/GIS companies
Well placed mapping experts have indicated that we might be surprised by a major automotive OEM given how important companies like HERE are to the future of assisted and automated driving, car diagnositcs and driver analytics. The value of mapping to these companies is clear, especially as it starts to go far beyond customer facing applications like navigation, but to me (disclaimer: my colleagues in ABI's Automotive Group are far better placed to comment), it seems a much safer, easier and cheaper option just to license. A mapping acquisition becomes truly advantageous when it is a zero sum game i.e. if I own it, my main competitor doesn’t, as was the case when the original bidding wars occurred for Navteq and Telenav. If car OEMs feel this way then we may actually see them bidding. There is a rumor that an OEM consortium could look to buy which is interesting of also sounding fraught with difficulties.
Uber has also been rumored to be interested, having recently acquired DeCarta. It clearly sees the value in not just providing a service but also owning the consumer/driving data that is otherwise handed to its current mapping provider, Google. It can afford HERE, with a rumored $6 billion bank account, but it would be putting one giant egg in its basket. Also, if it does become the behemoth many expect it to become, it will be more than capable of shifting to a user generated model. Two companies I could see having the scale and competition in this space to acquire are ESRI or Pitney Bowes, who generate significant revenue selling GIS intelligence, and are now looking to move increasingly into new verticals. They already sit on signficant GIS capabilities and the fact they have not been mentioned in other articles suggests they are not in the running, but they are well placed to maximze the potential of a mapping platform given their reach and expertise in GIS.
OS/Handset Vendors
Let’s be clear here, the value of maps to these companies is not really application developer support and navigation/mapping services, rather the consumer data and advertising potential that such a platform presents. In particular, owning the whole location stack means that you own the data, a problem Samsung has grappled with when using Google mapping services. The same problem forced Apple into releasing its own mapping service even though it clearly wasn’t ready for public consumption; that really must have stuck in the craw of perfectionists like Jonny Ive, yet it was seen as the lesser of two evils.
To me, Apple is the most obvious candidate. It has made mapping a priority, but lacks the internal structure, scale and depth to develop something comparable to Google in-house. It has instead looked to how it can compete in next-generation areas like indoor and 3D. It clearly has the money and although it has a history of developing in house it has tried and failed on numerous occasions with mapping. It has also been strongly rumored that it has investigated buying TomTom's mapping division in the last year or so. If it really wants to de-Google iOS and own mapping and local search, it need a solid mapping base, both now and in the future.
Samsung is the other obvious candidate, but to date it has done very little on mapping chosing to license from HERE as a way of somewhat freeing itself from Google and Android. Samsung is not the beast it was 2 years ago when it made a lot of noises about going it alone,. It has bigger fish to fry at the moment in the smartphone business as it loses significant market share. Now Perhaps the only way it will get involved is if it feels an alternative buyer poses a major problem to them.
If anti-competitiveness wasn’t an issue, I’d fancy Google to have a bite as it would then essentially own consumer-facing mapping, but it’s an acquisition that would never be allowed to happen.
Major Technology/Internet Companies
I am never sure of a catch-all term is for these companies but the list includes Facebook, Microsoft, Twitter, IBM, Intel, Baidu, Tencent, etc. Their interest will lie in the merging of social networking, local search, mobile advertising, ambient intelligence, smart home and IoT. Mapping will remain an integral part of this. I would be surprised if Microsoft was uninterested and HERE may be calling its bluff by holding out for an auction.
Facebook is a very obvious candidate, as is any major social networking company. Facebook has made a series of location-based acquisitions in the past and already has partners in place like Pitney Bowes. It has also dropped Bing as its search provider suggesting it is ready to go it alone. It knows that location is core to its long term advertising and SME aims, it is just proceeding at a very slow and careful pace in case it blows what it has. My gut feeling is that it will continue to find partners rather than make an acquisition like this, as mapping is currently not as essential a part of its offering even if it is clearly looking to become a major local search/advertising player. If it is playing the long game, perhaps someone like OSM could be a viable partner. Having said that, I still feel it would be a great acquisition for them and a clear statement of intent.
Companies like Tencent and Baidu have been buying up local mapping and navigation companies for some time, and are now the major mapping players in Asia. I have already talked about how I expect to see a reversal of fortunes in global expansion as Asian companies begin to grow internationally. This is reflected in SK Telecom’s recent acquisition of Shopkick. HERE could be the first major acquisition in the location space, which signals the turning of this tide. A big part of me would love to see a relative outsider enter the fray and liven up the market, so maybe this is more from the heart than the head, but if these companies are serious about going global, they could make far worse investments than this.
Who also stands to win?
Everyone mentioned above is a potential buyer in my view, taking aside the cost of owning versus licensing. What is really interesting is that HERE's availability may force a new potential player or major handset/automotive consortium to show its hand. Depending on who acquires HERE, It looks like TomTom could be a big winner. It may lose a direct client in the eventual acquirer, but it would then become the only serious independent mapping company (I don’t think OSM is there yet at scale). HERE was weakened slightly by its associations to Microsoft but it remained largely an independent company winning some big contracts with what might have been considered Microsoft competitors. With the potential of HERE folding into a major company, it will open opportunities for TomTom. Furthermore, A HERE acquisition may lead to a knock-on scramble on mapping, which could see someone pay a premium for TomTom’s mapping division. TomTom has openly discussed investigations on how to separate its internal groups so that it could eventually sell its mapping group, so it may be open to it if the price is right.
