Location Based Services - Entry Strategy

8/7/2019 Location Based Services - Entry Strategy

http://slidepdf.com/reader/full/location-based-services-entry-strategy 1/19

2011

Debesh Majumdar 09BM8016

Kumar Bipallav Mani 09BM8068

Vinod Gupta School of Management

4/15/2011

Entry Strategy for

Location Based Services



2

Table of Contents

Introduction««««««««««««««««««««««««««. 3

Positioning Technology«««««««««««««««««««««...5

LBS Value Chain««««««««««««««««««««««««.5

Business Models««««««««««««««««««««««««..7

Players««««««««««««««««««««««««««««.7

LBS Usage in Android & iPhone««««««««««««««««««9

Forecasts for the LBS Industry««««««««««««««««««...11

Porter¶s Five Forces Analysis«««««««««««««««««««.15

Sources of uncertainty««««««««««««««««««««««16

LBS Strategy Framework««««««««««««««««««««...17

Conclusion««««««««««««««««««««««««««..18

References««««««««««««««««««««««««««..19



3

Int ti n

ti n i i t nology i tiliz t ility of obil i to t

it own location to p ovi information and nt r tainment ervices. ey give peo ple t e

ability to share where they are with fr iends and with businesses around them. ome of the

most po pular exam ples of location based services are f inding out the nearest business or

service such as a restaurant or theatre and dr iving directions and traff ic u pdates. Other

exam ples include personalised weather forecasts based on one¶s location, or the ability to

play mobile games against peo ple in one¶s locality. ty pical technology conf iguration of

location based services would look like

n B requires f ive basic com ponents

. Service provider¶s sof tware a pplication

2. Mobile network to transmit data and requests for service

. Content provider to su pply the subscr i ber with location s pecif ic information

4. A positioning com ponent, most likely a G S

. Subscr i ber¶s mobile device



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Location based services can be categorised into three grou s

1. Emergency services ± A cellular o erator can track the location of a mobile user.

Such information becomes very im ortant in emergency situations. Countries such as

US and Ja an have enacted laws which makes it com ulsory for all carriers to be able

to rovide the information if it is available. No such law has been enacted in India.

. Consumer services :

a. Navigation ± Using navigation software, a user will be able to get the most

o timal route from one lace to another. Modern navigation systems take into

account traffic congestions and rovide routes which take the least time.

b. Location based advertising ± This is ush advertising in which a user is alerted

of discounts or cou ons from businesses in the vicinity of the user.

c. Family and friend finder ± It allows users to kee track of the location of other

users. It requires consent of the subscriber being tracked.

d. Location based reminders ± A user u dates a to-do list and each item in the to-

do list is tagged to a s ecific location. When the user nears a location, he is

alerted of the to-do items tagged to that location. For exam le, a user may

have tagged a market to a to-do item called ³Buy vegetables .́ Whenever the

user is in the vicinity of the market, he will be alerted that he needs to buy

vegetables.

e.

Location based search ± It allows users to search for roducts and serviceswithin a s ecific geogra hic area. Exam les include searching for s eciality

restaurants in the city or movies laying in the city theatres.

3. Enter rise Services ± Location based services can hel firms in fleet management,

asset tracking, route and delivery o timi ation and mobile workforce management.

Location based services can also categorised into ull and ush services based on whether the

information is delivered on user interaction or not.

Pull services are services which deliver information to the user based on user requests. Pull

services can be further divided into functional services, like ordering for a taxi or

informational service like searching for the nearest fish market.

Push services deliver information which either has not been requested by the user. Such ush

services are activated when a articular event occurs like a user enters a articular area. An

exam le of a ush service is discount cou ons offered when a user enters a sho ing mall.



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Positioning technology

ver the years, various technologies have evolved to locate a mobile subscriber. We take a

look at some of these technologies

1. Cell of origin ± This is the most rimitive method of locating a user. In this method,

the base station to which a cell hone is connected is assumed to be the location of the

user. It has the least accuracy among all the known methods.

. Time of arrival ± This is a location determination technology which uses the time it

takes for the signal to reach the base station from the cell hone. It is a refinement of

the cell of origin method and rovides a relatively better accuracy.

3. Angle of arrival ± The angle at which signal from a cell hone arrives at two base

stations is calculated and then triangulation is used to in oint the location of the user.

. Enhanced observed time difference (E- TD) ± Handsets having this ca ability

measure the time difference between neighbouring synchroni ed base stations.

Accuracy of 100 to 300 metres can be achieved using this method.

5. Standalone lobal Positioning System ( PS) ± The United States De artment of

Defence started the system of geosynchronous satellites. A satellite sends a signal

to a PS receiver to determine its location. A minimum of 3 satellites is needed to

accurately find out the osition of the user.

6.

Assisted PS (A- PS) ± This system gives an accuracy of 5 to 10 metres. It fixesosition within seconds, has better coverage and can be used indoors. The only

disadvantage of this system is that the handsets are relatively ex ensive.

LBS Value Chain

Location based services rovides o ortunities for a large number of layers. A art from

the mobile o erators, a lication develo ers, location determination technology (LDT)

and gra hical resentation are some who stand to benefit from the roliferation of

location based services. The value chain of LBS is best described by the diagram below



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ere the roles played by the var ious entities are denoted by the rectangles, the revenue

streams are denoted by the arrows and the text on the arrows denotes the way the revenue

is generated. he red dotted line denotes the current s phere of inf luence of a mobile

o perator. oday a mobile o perator plays the role of network provider, service provider

and BS provider. But this may change in the years to come.

he end user may get location based services from a BS rovider. he BS rovider

gets location information and network access from a network o perator. Itgets content and

a pplications from three sources either directly from an a pplication, from a content

provider or from an a pplication service provider. he a pplication service provider in turn

sources from a pplication develo pers and content providers. A s ponsor pays the BS

provider for adver tisements. he BS provides pays to a payment facilitator for enabling

payments. On the other hand, the end user pays for accessing the network through the

service provider which in turn pays for using the network of a network o perator. A

network provider purchases network ing equipment from a network manufacturer and gets

the location determination technology from a rovider. Sometimes an end user,

instead of a cellphone, may use a terminal from a terminal vendor who sources it from a

network manufacturer. In this case, the network manufacturer buys license from a

rovider and uses the technology to provide location based services to the end user.



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Business Models

. Location aware offers In this scheme, the adver tiser pays the LBS rovider for

pushing discount cou pons and offers whenever the user enters a par ticular area. It is

very useful for sho pping malls and highway restaurants.

2. Claim and s ponsor It is a hybr id of the direct adver tising and freemium models. In

this scheme, businesses pay the LBS rovider for claiming a par ticular location. In

turn, the LBS rovider helps the businesses with additional promotion o ppor tunities.

. S ponsored game elements ere some of the game play as pects of the LBS rovider

are s ponsored by the business. or exam ple, in the case of oursquare, par tners pay

oursquare for creation of branded badges which are given to users when have an

accom plishment. A hy pothetical exam ple may be Café Coffee ay paying oursquare

for creation of a badge called CC an´ for users who frequently visit CC outlets.

4. Vir tual goods In this model, vir tual goods are dis played whenever a user is near a

business. he user is given discounts if he checks in and buys the real goods.

. Collective buying s pace Com panies like Grou pon negotiate stee p discounts with

local businesses in return for volume guarantees. hese deals can be pushed to users

in a cer tain location.

. Mobile Adver tisement networks Location based services which do not have their

own adver tisers bank u pon mobile adver tisement networks to feed them with location

based adver tisements. he revenue generated from such adver tisements are shared

between the LBS rovider and the ad network.

. White Label Model his is a B2B2C model in which a pplication develo pers create

a pplications for enter pr ises which the enter pr ise then allow the users to use.

layers

acebook laces

Who, What, When, and now ... Where´. his is how acebook

laces descr i bes itself. It allows users of acebook to u pdate

their location on a real time basis. If the user is at a place which

he likes, like a restaurant, he announces to his fr iends about the

place. Status u pdates can be tagged to a place. or exam ple, if someone is attending a



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concert, he checks in to the concert and sends a status message. He would also be able to see

some of his friends have also checked in to the same lace.

Although it was a late starter in the LBS field, it enjoyed a huge ca tive audience of 500

million users. Detractors say that out of this 500 million, only 50 million are mobile users and

even out of these, only a miniscule ercentage use Places.

Foursquare

Foursquare is a location aware a lication launched in

March 009. It has more than 6.5 million users. It is based

on checking into various locations. The various conce ts

used with Foursquare are

a. Badges ± Badges are created by the administrators and assigned to users based on

s ecific accom lishments within the Foursquare ecosystem. The badges earned by the

users are dis layed on the user¶s rofile.

b. Mayorshi ± Mayorshi of a location is given based on frequency of visit to a

location. If a user checks into a venue more than anyone else in the last 60 days, he is

crowned the mayor of the venue. In order to increase com etition, Foursquare notifies

users of the number of days left before he becomes the mayor of a venue.

owalla

Although owalla is similar to Foursquare, there are im ortant

differences. First, users don¶t have friends on owalla. It is more of a

game. Users go around the city, checking into different laces and in the

rocess collect ³stam s´, ³icons´ and ³ ins of glory´. A stam is

similar to ass ort stam ing. ne gets a stam whenever one visits a

lace. When one checks into a lace, various icons may be available. For exam le, if one

checks into a ub during ha y hours, a Ha y Hours icon may be icked u from the ub.

Pins of glory are icons that re resent significant achievements such as com leting a tri . A

tri can be made by checking into at most 0 different venues of the same category such as

shrines or nature hikes. Second, owalla is more recise in geolocating than Foursquare.



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Yelp

Yelp runs a local search and review ca pability for its users.

or exam ple, when a user searches for a Chinese restaurant

in ark Street, he is shown all Chinese restaurants in that

area, peo ple who have visited those restaurants and the

reviews they have wr itten. All business sites registered with

Yelp contain address, hours o pen and other details such as park ing. Yelp also has a social

as pect.

Google Latitude

Google Latitude is a location aware mobile

a pplication develo ped by Google. With Google Latitude

a user can allow cer tain peo ple to view their current

location. sers can o pt into the G S feature or allow

only s pecif ic fr iends or family members to follow their

travels. Once an agreement is reached, users will be able

to see their fr iends' prof ile pictures a ppear on a ma p through their mobile device or desk to p

com puter. What differentiates Latitude from other services is that it can be used to contact

other users with SMS, Google alk or Gmail.

LBS sage in Android and i hone

Android and i hone form a large por tion of the current o perating systems on which LBS

a pplications run. It is im por tant to understand that users of Android and i hone have distinct

tastes and this is ref lected in their usage of LBS a pplications as well. Any LBS a pplication

develo per will have to take into account this difference before he designs an LBS a pplication.

irst let us look at the most po pular LBS categor ies in Android and i hone.



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he above diagram de picts the different a pplication ty pes andtheir po pular ity in the Android

ecosystem. We note that travel is the most po pular, followed by tools, lifestyle and social

network ing.



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The above diagram de picts the usage of LBS on the i hone platform. otice that the usage is

considerably different from what it is in the Android platform. ere local search forms the

bulk of the usage, followed by routing and travel.

So de pending on the target platform, you would have to create a pplications which are most

po pular on that platform.

Let us now look at the free and paid a pplications on both these platforms.

Even in terms of paid versus free a pplication, the Android and i hone platforms differ

signif icantly. Around % of the a pplications in the Android platform are free and the rest

2 % are paid. Quite the o pposite is seen in the case of i hone. ere % of the a pplications

are paid a pplications while only 2 % are free LBS a pplications.

orecasts for the LBS industry

Gar tner predicts that location based services will be the 2nd

most po pular consumer mobile

a pplication for 2 2. According to the agency the to p consumer mobile a pplications are

. Money transfer

2. Location based services

. Mobile search

4. Mobile browsing

. Mobile health monitor ing

. Mobile payment

. Near ield Communication services

. Mobile adver tising



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9. Mobile instant messaging

10. Mobile music

In its re ort, the agency says ³Location-based services (LBS) form art of context-aware

services, a service that artner ex ects will be one of the most disru tive in the next few

years. artner redicts that the LBS user base will grow globally from 96 million in 009 to

more than 5 6 million in 01 . LBS is ranked No. in artner¶s to 10 because of its

erceived high user value and its influence on user loyalty. Its high user value is the result of

its ability to meet a range of needs, ranging from roductivity and goal fulfilment to social

networking and entertainment.´

Forrester believes that location based a lication users are

y Influential - eolocation users are 38 more likely than the average US online adult

to say that friends and family ask their o inions before making a urchase decision.

y An interesting target grou - They are ty ically young adult males with college

degrees.

y Heavy mobile researchers - They are also far more likely to search for information

about businesses and roducts, as well as read customer ratings/reviews of roducts

and services

In terms of generation and demogra hics, the LBS users can be broken down as follows



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Total LBS service revenues in E 2 +2 2 Euro pean nion countr ies and two candidate

countr ies) was Euro 2 4 million in 2 . Berg Insight forecasts LBS revenues to grow to

about Euro million in 2 4.



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E-Marketer estimates that there were 63 million location based services users world-wide in

008 and that this number is going to rise to 86 million in 01 .

Year LBS Users, mn % Change

2007 18.9

2008 61.3 224.1

2009 134.0 118.8

2010 215.3 60.7

2011 329.0 52.8

2012 486.0 47.7

The overall mobile search and mobile advertising market will be growing ex onentially as

shown in the gra hics below. Along with it, will grow the LBS revenues.



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Porter¶s five forces analysis

Threat of new entrants: High

The threat of new entrants is very high in this industry. This is because very little investment

is required to set u an ecommerce business based on LBS. The time to market is low. A

business can be set u in less than 3 months. The entry and exit barriers are also very low.

Bargaining power of buyers: High

The bargaining power of buyers is high because there is availability of com peting products in

the market place. Each of them provide very similar features. Switching cost is very low.

Users can very easily switch from one LBS a pplication to another.

Threat of substitutes: High

The number of products fulfilling the same need is very high. There is very high uncertainty

over future technologies. Disru ptive future technologies may make the current cro p of LBS

a pplications com pletely redundant.

Rivalry in the industry: Moderate

The rivalry in the industry is moderate because each player in the market is trying to position

itself in a niche area.

Threat of su ppliers: Low

Here telecom o perators, handset manufacturers and mobile OS develo pers act as facilitators.

Since LBS a pplication develo pers do not directly interact with any of these entities, threat

from these su ppliers to interru pt the business is low.



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Sources of uncertainty

Any business model based on LBS presents uncertainties on all dimensions. These

uncertainties are tabulated under each of the dimensions.

L B S

M a r k e t p l a c e

Demand for mobile services historically difficult to predict (voice,

SMS, WAP) ± driven by mix of market pull and tech push

Little mass market ex perience with LBS and widely varying estimates

of future market si e

Privacy and security concerns

S e r v i c e s

Requirements definition due to the unknown user context, device diversity and ability to match with technical ca pabilities

Delivering wrong value pro position

O r g C a p a b i l i t i e s

I n t e r n a l Availability of relevant skill sets

Ability of organi ation to communicate value pro position

Ability to reach decision makers in target consumer segments

P a r t n e r s

Availability of partners with the right ca pabilities Com petition from potential partners

Incom patible strategies and visions Ability to reach an acce ptable revenue and cost sharing arrangements

T e c h n i c a l

C a p a b i l i t i e s

Infrastructure is ex pensive, takes time to de ploy and cost is front

loaded Un proven ca pability, reliability and availability of technologies

Rolling out of positioning ca pabilities by o perators

Integration of networks and other infrastructure

C o n t e x t

Economic growth

Privacy/security regulation

Legal liability for service failure

Unantici pated social/behavioural im pact



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LBS strategy framework



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Conclusion

Location based services is one of most promising business o pportunities in the Web 2.0

s phere. A major chunk of advertising revenues in the future will be s pent on location based

services. There are a few major players in the market but unlike the search market, there is no

clear leader in this s pace. Com panies are still jostling for s pace, coming u p with new and

innovative ideas. There still is sco pe for some more players in the market. Like in any other

business, it is im portant to satisfy customer needs in this industry as well. The key is that here

the needs are local and the solutions have to be local as well. Unlike the search market,

revenue generation in the location based services industry is rather easy. As ex plained in our

re port, there are various avenues through which revenues can be generated. Before entering

the location based services industry, one must use the LBS strategy framework given earlier

to find out the suitable business model.



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References

1. A framework for selecting a Location Based Services strategy and Service Portfolio ±

David Tilson, K alle Lyytinen, Ryan Baxter

2. http://www.ibm.c

m/deve¡

pe ¢ works/ibm/library/i-lbs/

3. White pa per on Location Based Services on Mobile in India ± Indicus Analytics Pvt

Ltd.

4. Location based services market and trend analysis ± Enter prise Mobility Ex perts

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Location Based Services - Entry Strategy