Navigation is the Source

We spoke with Thilo Koslowski of Gartner Inc., who follows the navigation industry, in particular, the mobile segment, about the future of the industry.

More than from Point A to Point B
Navigation will become much more ubiquitous with all kinds of platforms. You will see navigation applications become personalized, intelligent and proactive. Think about a calendaring application - if you schedule an appointment in an Outlook application, wouldn't it be great if the navigation solution could also tell you that you should plan on scheduling that meeting 30 minutes sooner so you can make your second meeting that day as well as to the traffic information or because of other appointments that you have on your calendar. I think that kind of more realistic approach will ultimately allow companies to continue charging the premium for navigation applications. What we do see today is that basic navigation that gets you from Point A to Point B will become so ubiquitous that the prices will come down significantly. And you already see that happening on the PND side, the personal navigation device side, with devices such as TomTom and Magellan. They're all coming down in price. But what if you get out of the car? How about using a cell phone for navigation? How about if you put together a route on your computer if you see a store that you're interested in or an event, or maybe a site you want to visit? Why not start the navigation process when you are outside your vehicle? That will become the biggest opportunity to go forward.

Navigating Evolution
Now that the awareness of navigation is increasing among the average consumers, those customers are interested in the value that navigation can provide as well, but they're not willing to pay as much money for such an application. At the same time, the early adopters are beginning to realize that they're probably looking for more added functionality, more value than they can get from a navigation/transportation type solution. They would be the ones demanding that kind of seamless integration and experience first.

There are some companies that are beginning to understand that they have to evolve in that direction. There's not really any solution out there today that would go that far. All you see is pretty much what you just mentioned.

An example would be TomTom partnering with Eclipse. It also provides a solution to plugging in a PND device into an in-dash unit so that you can use it while driving a car but you can also take it out. These are the first steps in that direction, but they don't go far enough. And we'll probably see some of the major application providers offering solutions that are more holistic. You will see brand new partnerships between different companies in different industries. One example I would like to point out where this is happening to a certain extent is in Germany. BMW partnering with Google to allow a user of Google Maps whose looking for a specific business to send the address information to a BMW vehicle that has a navigation system embedded in it. So that's a really good example of how that connectivity between the web environment or even the work environment and a vehicle can occur going forward. But that's just one very specific example between one dedicated vehicle manufacturer and Google.

Life Cycle
By the end of this year, a lot of in-dash and PND offerings will have to move on significantly, meaning that the companies will not realize the significant profits that they had over the last couple of years. They will be forced to look into other options of how they can really establish and continue to have a longterm premium value to their customers. I think ultimately that we will see, at least in short term, the vehicle manufacturers getting into such relationships that would allow that simply because the vehicle manufacturers have been challenged earlier with the fact that they have to compete now with the in-dash aftermarket and PND offerings, compared to their costly embedded devices. So they're looking at ways to come up with new propositions that give them a little bit of a lead. They also have much more marketing bonus to make those partnerships work. It just takes one company to come up with a better-integrated approach between the different environments and different devices and at that point I think we'll see the whole market taking on that direction.

Biggest Growth in Nav
I think definitely the phone-based navigation market will have an opportunity in terms of the numbers of units. Not necessarily the number of revenues, because cell phone-based navigation offerings tend to be much lower priced than the embedded or PND solutions. Certainly the PND market will also still benefit, based on projections, in the next 18 months. They will be pretty healthy because then we'll see the second wave of consumers catching on and wanting to have those devices. But again, the profits will also come down for that space fairly quickly. We know that most cell phone manufacturers are planning on offering their products goal forward with integrated GPS technology, which means they will be enabled to offer navigation applications in the future. And if you think about how quickly phones are being replaced by consumers, it's really easy, relatively speaking, to have products that will be enabled with GPS technology forward. By the end of 2010, almost 40 percent of all handsets in the world will support GPS or (assist) with GPS. That's very significant from a U.S. perspective - the percentage of phones by 2010 that will be GPS-enabled will be about 88 percent.

Market Saturation
[Product introductions] will eventually slow down as soon as consumers have a better understanding for what other platforms are out there to get navigation. Most consumers are still in the phase of catching up to the fact that they can buy a device, a PN device, that can give them an alternative to embedded navigation solution that is costly from the manufacturer, so that's still something that will continue to happen in this year, but you will see some of the phone-based navigation companies offer more awareness campaigns over the next couple of months. It also depends on the carriers; it depends on the cell phone manufacturers, and so on. And companies that offer third party GPS solutions for Smart Phones, for example. But it is getting much more ubiquitous going forward. The hardware will be there, and the awareness will be there as well. Again, it just takes one device to be extremely successful. As cell phones become stronger, from a computing perspective, they are competing with the PND devices more and more. The portability aspect of a cell phone, I think, ultimately will win over the fact that the PNDs are too heavy and may not provide relevance that consumers are looking for. However, in some cases, if someone goes on a weekend trip or a road trip for a while, in those cases people may prefer having a bigger display and that will justify them to get a dedicated PND. What we'll see, I think, is at the top of the market where you have the high-end consumers looking for navigation as something they want to use on a daily basis for specific purposes, those consumers would probably choose multiple platforms.