What are the Latest Developments in the Mobile LBS Market in Europe?

November 28, 2011

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Mobile location-based services (LBS) are gradually achieving mainstream market acceptance. Popular service categories include mapping and navigation, search and information, social networking and entertainment, tracking and location-based voice tariffs. Mapping and navigation services is the leading segment in terms of revenues and number of active users. Free navigation services have been available for several years in Europe, which created relatively little impact on the market until recently. Nokia and Google launched at the beginning of 2010 free applications that instantly resulted in significant pressure on the pricing for premium navigation services. White-label navigation developers are now working with mobile operators to create unique localized offerings and service bundles to be able to compete with these new free offerings. Search and information services are growing fast as more subscribers adopt mobile Internet services and handsets with improved capabilities. The leading social networking services are also experiencing rapidly growing uptake on the mobile web. Increasingly, these services add various forms of location support.  However, the significant growth in usage and number of active LBS users in Europe has not yet resulted in substantial growth in revenues. Total LBS revenues in the EU 27+2 reached € 220 million in 2009 and Berg Insight forecasts LBS revenues to grow to about € 420 million in 2015.

Mobile network operators seek new ways of maintaining revenue growth as mobile penetration is reaching saturation, competition intensifies and regulations drive call prices down. Increased focus on delivering value added services such as LBS, is one means of achieving this. Mobile users in Europe are gradually adopting mobile Internet services and applications. Uptake of data plans for mobile phones is growing fast in Europe, approaching 15 percent of the mobile subscriber base. Other enablers include improved coverage of high-speed 3G networks, as well as increasing penetration of 3G handsets and smartphones. Apple’s highly successful launch of its App Store has influenced other handset vendors and mobile operators to introduce similar services, contributing to significant uptake of mobile applications including location-enhanced applications also among mainstream mobile users.
EU E112 regulations that mandate caller location for emergency calls have driven operators to deploy positioning technology in their networks.  Mobile operators launch commercial LBS and open their platforms to third party developers and location aggregators to leverage these investments. Some service providers, such as Google, compile their own databases of cell tower locations that can be used as free alternatives. Moreover, all leading handset vendors have now introduced GPS-enabled handsets in Europe and more than 100 models were available at the end of 2009. Shipments are growing rapidly as ever more low cost models feature GPS. The installed base of GPS handsets is approaching 15 percent of total handsets in Europe.
An increasing number of services are partially or fully ad-funded and advertising is becoming the main source of revenues for a growing number of mobile developers and publishers. Ad-funding is most likely to become the primary source of revenues also for many location-based services, especially in the consumer segment. However, the mobile advertising ecosystem is still fragmented and complex. Much of the activities carried out are still essentially on an experimental stage. Mobile ad revenues are still very small compared to premium mobile service revenues. Many actors in the mobile value chain show great interest in location targeted ads. Although location can be a very valuable targeting attribute for some brands and campaigns, many other attributes are available that can be more relevant. In addition, several issues – such as user privacy and pricing of location data – need to be resolved before location-based ad campaigns can leave the trial stage and contribute significantly to overall revenues.
Local search and social networking services are likely to become predominantly ad-funded. Other consumer service categories can be expected to remain premium services. Many operator navigation services are for instance likely to remain predominantly funded by service fees and tracking services can be expected to rely solely on premium fees. More and more service providers are also introducing one-time fees or service bundles rather than monthly subscriptions. Berg Insights has also published a more extensive report on this topic.

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