LBS Market Will More Than Double In 2009: Gartner

Worldwide consumer location-based services (LBS) subscribers and revenue are on pace to double in 2009, according to Gartner. Despite an expected 4 percent decrease in mobile device sales, LBS subscribers are forecast to grow from 41.0 million in 2008 to 95.7 million in 2009 while revenue is anticipated to increase from $998.3 million in 2008 to $2.2 billion in 2009.

Gartner defines LBS as services that use information about the location of mobile devices, derived from cellular networks, Wi-Fi access points or via satellite links to receivers in (or connected to) the handsets themselves. Examples are services that enable friends to find each other, parents to locate their children, mapping and navigation. Location-based services may be offered by mobile network carriers or other providers. They are also known as location-aware services.

“The LBS industry has matured rapidly in recent months through a mixture of consolidation, improved price/ performance of the enabling technologies and compelling location applications,” said Annette Zimmermann, senior research analyst at Gartner. “Factors driving the increase in the next year or so include higher availability of GPS-enabled phones, reduced prices and appearance of application stores.”

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Gartner predicts that advertising-based or ‘free’ LBS (disregarding data charges by mobile carriers) will gain more traction as users adopt it as a way to limit costs. Mobile carriers that stick to the current predominant business model of charging users $5 to $10 per month plus data plans will experience high churn rates as users will look for free alternatives. In North America and Western Europe, the share of users taking advantage of free services is approximately 10-15 percent today and is expected to grow to 40-50 percent in 2013.

Gartner expects more compelling and useful applications and services to come to market in the next 12 to 18 months such as digital coupons to be redeemed in a nearby shop and points-of-interest search services. Smaller niche players will survive in local markets only when they have an established user base and unique offering that larger players cannot compete with. Other players will be acquisition targets for larger vendors.

“The competitive landscape will change and most mobile carriers need to alter their approach toward offering LBS and dealing with developers,” concluded Zimmermann. “Subscriber growth will hinge on ‘free’ – disregarding data charges – services. Mobile operators’ initiatives to open up the application programming interface (API) to third-party developers will help them compete against other players in the market and will also be beneficial to the different parties involved, down to the end user.”