Can European Carriers Locate A Business Model For Location Based Services?
By Mike Masnick, Thu Jun 17 21:45:00 GMT 2004

Location based services have received plenty of hype, followed by plenty of failures. Successes in Asia haven't been repeated in Europe, and it may be because the carriers aren't really trying.

Over in Japan and South Korea location-based services are quite successful. They've built out the proper infrastructure, offered the right applications, and already know a thing or two about mobile data business models that work. Of course, there may be a few other reasons why the services have been successful, including the fact that the need is much greater in places where the address system is much more confusing.

In Europe, however, despite a number of recent attempts, location-based services haven't really been able to catch on. A new study about LBS in Europe suggests that, like so many attempts at wireless data services, carriers rushed into the marketplace without really understanding either what the users wanted or business model issues associated with such services.

Instead, they took the usual path that carriers seem to take with wireless data offerings: assume it's valuable, put a price on it, and shove it into the marketplace. The services they focused on have mainly been "where's my nearest..." and charged either a one-time fee or a monthly subscription fee. Most end-users are unlikely to sign up for the monthly service, since they don't expect to be lost quite that often. For the one-time fees, the fees need to be reasonable compared to alternatives (such as calling up a friend or colleague or even just wandering around the block a few times). It's one of those cool applications in theory, but in most cases, users don't value it enough to pay for it.

Instead, the report suggests something quite similar to what OnStar discovered in the US. People don't necessarily see the value in paying for those location-based services that are considered "nice-to-haves" instead of "need-to-haves." Instead, they're interested in safety and security applications. When OnStar focused on those aspects of their service, their subscriber numbers shot upwards. This seems like an obvious application of the technology, but the European carriers are trying to the same tired path that too many wireless companies believe is the best way to go to market: first focus on the business customers (they're the ones with the money) and charge them a lot to recoup initial costs. Then, as they get hooked, and economies of scale kick in, move down-market to consumer applications. The problem is that this pattern very often doesn't work. Many wireless applications first catch on among consumers, who drag their corporate IT staff (kicking and screaming all the way) into adopting it. If the carriers could take a step back from "the how do we recoup our money the fastest?" perspective and look for ways to encourage more people to adopt GPS-enabled phones for safety purposes, while also opening up their platform to allow others to create compelling location-based services, they'll start to find the market grows on its own -- leaving plenty of room for the carriers to profit over time.