A few months ago I wrote an introduction about the opportunities in indoor navigation. Please read the comments as every single one adds an additional piece to the puzzle. My question today focuses more on the business perspective and less on the technical solutions. Who can make it happen? What can we learn from the evolution of Location Based Services in general and Personal Navigation in particular?

Inferences from the LBS industry

If you look at the automobile industry, you will find a defined ecosystem with clear roles and niches. There are auto makers, spare parts manufacturers, dealers, authorized shops, independent mechanics, parts distributors, etc. There are also customers that know exactly what they want. You, the customer, can actually enter any dealer and leave driving.

While comparing the LBS industry with the Auto industry, my impression is that in the LBS industry you have many Auto Parts manufactures, but no Auto Makers. If you want to provide a service (drive anything), you need to buy parts and preassembled kits to build your own car and hope that every piece is compatible with the other. Moreover, when you need a “LBS mechanic”, they usually know how to fix specific parts for specific models. Does a LBS ecosystem actually exist?

“…While comparing the LBS industry with the Auto industry, my impression is that in the LBS industry you have many Auto Parts manufactures, but no Auto Makers…”

James Moore introduced the concept of business ecosystem in 1993. In his book “The Death of Competition” (1997-p26) he defines ecosystem as:

“…An economic community supported by a foundation of interacting organizations and individuals—the organisms of the business world. This economic community produces goods and services of value to customers, who are themselves members of the ecosystem. The member organizations also include suppliers, lead producers, competitors, and other stakeholders. Over time, they co-evolve their capabilities and roles, and tend to align themselves with the directions set by one or more central companies. Those companies holding leadership roles may change over time, but the function of ecosystem leader is valued by the community because it enables members to move toward shared visions to align their investments and to find mutually supportive roles…”

Can we include the LBS industry into this definition? Are there any organizations that foster the “LBS world inner laws of nature”? Are there any central companies that the community look as leaders and is aligned to? Are those companies leading us to a shared vision? Is there any shared vision?

“…Are there any [LBS] central companies that the community look as leaders and is aligned to? … Is there any shared vision?…”

In his 1993 paper “Predators and Prey – A new Ecology of Competition” published at the Harvard Business Review, Moore identifies 4 distinct stages for an ecosystem: birth, expansion, leadership, and self-renewal or death. During the birth of an ecosystem the companies try to figure out what customers want, the value proposition, and how to deliver it. After so many years the new LBS industry is in the dawn of the birth stage, trying to figure out the differences between users and customers, how to create cooperation channels and dreaming about certain standards that can unify the community to the second stage (expansion) where suppliers and partners work together to achieve a mass market profitable for all.

Indoor Navigation – The Big Bang

The indoor navigation is – literally – an uncharted territory. There are a few companies that started to produce small components, filling localized and specific needs.

In order to materialize as a profitable business a leader must emerge. This leader will set the roots of the indoor navigation ecosystem, provide the platform technological direction and create the conditions where developers, providers, consultants, contractors, customers and others can gain some benefit.

Going back to Moore, there are two conditions for an ecosystem to expand “(1) a business concept that a large number of customers will value; and (2) the potential to scale up the concept to reach this broad market”. I’m convinced that condition number 1 already exists. The challenge is to identify the organization with the capability and willingness to scale up the concept to a mass market.

There are many companies in the market capable to implement core technologies, foster innovation, attract partners to cooperate and support the right birth and growth of the indoor navigation ecosystem. The only question remains, as usual, where is the money? What are the business models that will support the ecosystem? This is the topic for a third article; and if you consider your company as a viable candidate to lead this new business opportunity I’ll be glad to exchange some ideas with you.

@schapsis Indoor Navigation: The new Gold rush? Part-2 – Ecosystem and opportunities. www.bdnooz.com http://ht.ly/1Q6EP

Comparing D LBS & D Auto industry, my impression is: D LBS industry have many AutoParts manufactures, but no Auto Makers http://ht.ly/1Q6EP

Are there any LBS companies that the community look as leaders and is aligned to? Is there any shared vision? http://ht.ly/1Q6EP

Is Indoor navigation a viable business? What R D main biz factrs that will determine D adoption of indoor navigation? http://ht.ly/1Q6EP

I’ll post my comments here after the event.

If you had the opportunity to participate, I’ll appreciate your feedback. What do you see in this map now?

Thank you!

Claudio Schapsis

This is a time of WAR.

The New York Times published in October Stops and Starts of GPS Apps “… those portable devices [GARMIN TOMTOM etc] are under attack from a new source: the smartphone, and particularly Apple’s iPhone. The newest version of the iPhone’s operating system supports turn-by-turn navigation …  According to a report from the iSuppli research firm, GPS applications for smartphones are about to explode, growing from 2.5 percent of users today to 10.5 percent in 2013. And half of those will be iPhone owners…”

Even Forbes Magazine refers to this trend in warfare terms Google’s Navigation Bombshell “…Location-based service providers suspect the search giant is working on a free navigation app… Google, which generally gives its software away for free and recoups its investment through advertising, would likely sell ads within the navigation application rather than charge users… In early October, Google decided to use this data for its U.S. maps, ending a licensing agreement with map provider Tele Atlas…The shift is telling because companies like Tele Atlas require partners (such as Google) to pay fees for each person who uses their data…”

Having Google in the market with free navigation applications redefines the battle. Companies will need to be really brave to fight this giant. Without any doubt Google gave a completely new meaning to “The Land of the FREE and the home of the Brave”…

If War is what we are speaking about, Sun Tzu teaches us three valuable lessons. The first is that “…in war, numbers alone confer no advantage…”.  The second is that “…as flowing water avoids the heights and hastens to the lowlands, so an army avoids strength and strikes weakness…”, and the third is that “… those skilled in war subdue the enemy’s army without battle …. They conquer by strategy…”

If this is about strategy, this is my game!

Avoiding the competitor’s strengths and striking at their weaknesses

All (accurate) navigation systems are based on GPS data. If the weakness of GPS receivers is that they need a clear view to the sky to successfully determine location, the strategy is to attack the indoor world. Additionally, the GPS accuracy lies between 50 to 500 feet, the strategy then is to find customers that need higher accuracy (~10 feet). The third, but not the last weakness, is the need for maps. As we saw before, Google has generated large amount of map data, and in general the market is dominated by TeleAtlas and Navteq. The strategy is to navigate to “uncharted territories”.

Redefining the Battleground – Embracing indoor navigation.

A few weeks ago I was approached by an inventor with a (published) patent. The general idea calls for an indoor navigation system that uses no GPS data. His idea is very good and to my judgment relatively easy to implement.

The system automatically detects a signal directly from sensors, without requiring the communication with a central system, data plans, or even cellular communication. These sensors are small pocketsize Bluetooth transceivers. There is no need for pairing as every Bluetooth device’s tag has a unique ID. This ID can be used for locating the tag.

Indoor navigation – A winning strategy that redefines the navigation ecosystem?

There is infinite number of indoor navigation applications. The most intuitive one is a person walking into a mall that wishes to locate a specific store, or a particular aisle in a department store or even a specific item on a shelf! From here, you can apply the same principle to a customer looking for a specific conference room, a particular booth in a tradeshow, a ride in an amusement park, or a known piece of art in a museum. If not for the convenience, do it to save a tree. No more printed maps. Go Green!!!

The advantage of using Bluetooth is that this technology is ubiquitous, it’s implemented everywhere. Additionally, is a low cost, low power technology, and when it’s relatively free of obstruction it can provide a ~2 meter error range. Furthermore, a Bluetooth infrastructure can be used for purposes like remote monitoring and control among others.

The ecosystem is completely redefined. An architect with CAD drawings is now a map provider. Every single facility is now a navigable site. Every big retailer willing to drive customers to specific products is a potential customer (they can “route” them through the sales isles if they want).  Every shopping property management firm is a customer, as well as convention centers organizations or associations like the Global Retail Executive Council.

We have an ecosystem where the traditional navigation giants are not necessarily present, and there is no defined leader (yet-11/09).

The business opportunity – define a new market

Indoor Navigation redefines Location Based Services as we know them today. The first companies to enter this market will be able to define, create, implement and license ($) new standards and applications. Imagine this: I installed an indoor navigation application in my phone/PDA and subsequently downloaded the map of the mall I usually go to. Next week I’ll visit San Francisco, and upon arrival I would like to visit a local shopping center, or use it at the convention I’ll attend. My application will be useful ONLY if the map of that SF mall or convention center is compatible with the one installed in my phone. For sure I’ll NOT install an additional application per site I visit. This is just the tip of the iceberg.

Sounds interesting? Ring a bell? Would you like to exponentiate these ideas?  Maybe invest time AND money?

Give me a call! (And leave your comments).

While there are many different approaches (and we might present some of those in the future), Xtify, a company based in New York City, caught my attention. They are creating a cloud of location information where authorized service providers can make available services using the location of their subscribers.

As usual, I was more interested in the business perspective of their operation. The following is a synopsis of my conversation with Josh Rochlin, CEO of Xtify.

I want to thank again Josh for his time and kindness to open up his business for us to learn. I believe many will have much to comment and say.
Follow up.

What is the difference between Xtify and other companies providing similar services?
We are currently the only company that is deriving location persistently from mobile devices and then building business rules around it. We source the location directly from the mobile device, rather than through the wireless carriers. This allows us to make location information available on a persistent and affordable basis.

Normally, you will need to pay per dip if you source from the carriers themselves – currently in the US, this is only possible from Sprint – with other carriers working on their own solutions). This approach can only work when you require location data occasionally. If you want to take advantage of persistent user location, a per-dip model becomes unaffordable.

“We are …deriving location persistently from mobile devices and then building business rules around it…We source the location directly from the mobile device…This allows us to make location information available on a persistent and affordable basis”

Xtify allows the mobile user to (1) persistently publish their location to a “cloud” and then (2) provide permission for a third-party to access their data in order to provide location-related information and services.
An example on how Xtify can be implemented is at http://www.seemywhere.com – which requests the latest location of the user.

So I can see your position all day long without your permission?
No! SeeMyWhere is designed to expose my location only to those with for whom I choose to share it.
Another example can be seen in at http://www.myeverymove.com. This application keeps a diary of your locations throughout the day. Because Xtify sources persistent location, I can choose to have the diary automatically update, without any user input.
These applications are only examples of services leveraging our push and pull API’s information from the “cloud”. A typical implementation using Xtify might not provide this level of visibility into my whereabouts. The location information would simply be used by an algorithm to inform a service, message, or advertisement.
To try www.seemywhere.com or www.myeverymove.com you can point your smartphone browser to either of these sites and download the applications.

Can you give me an example of a commercial application
Take, for example, companies that provide text-based mobile content (i.e. www.4info.com, www.chacha.com/, and http://pingmobile.com/). The way they work is that the user sends some these services a question, and the service replies with an answer, usually through SMS. I was trying out one of these services recently and I received strange answers to my question “Hotels in Manhattan.” The “IN” was interpreted as Indiana (a state in the USA) and the results came for hotels in Manhattan in Indiana. Then I asked for “Hotels NYC” and the results where close – I received hotels in Upper East Side of Manhattan. But at that specific moment, I was in the SoHo district of Manhattan, several miles away.
What Xtify can provide today is the capability to geo-tag an SMS that comes to the system and do this in such a way that the system will know where I am; replying with answers (and advertising) that are geographically-relevant and will therefore garner higher advertising rates.

“What Xtify can provide today is the capability to geo-tag an SMS that comes to the system and do this in such a way that the system will know where I am; replying with answers (and advertising) that are geographically-relevant and will therefore garner higher advertising rates.”

Can you elaborate on the implementation?
As I mentioned before, Xtify sources location from the mobile device. We use the best available source, GPS, Cell Tower and Wi-Fi information to determine your position and push that information to our secure servers. When a user sends a question to an SMS service, they could route that message through the Xtify database, then correlate a location-relevant advertisement to be included in the response. Xtify can communicate that “this phone is currently in SoHo, NY” and that service provider can associate an advertisement that was paid for by a business in SoHO, New York. Now the answer and the advertising have complete geo-awareness.
The market has been waiting for a solution that adds location context to their service – a solution that Xtify now provides.

So how do you make money?
We charge based on the value we bring to a customer and on the basis of the volume of transactions or processes. Let me illustrate this with another example. On many occasions, Madison Square Garden (MSG), an arena in New York City, could have unused tickets before a concert or a game. We could provide a service to MSG to set up promotions based on time before the concert and distance from the MSG arena. We can set radii around MSG (i.e. 5 blocks, 15 blocks, 1 mile). We then set time intervals (i.e. 3 hours, 2 hours, 1 hour before the event). Xtify can then push a promotional message to the people who are proximate to the venue and who have asked for a discount ticket promotion from MSG.

“Xtify can … push a promotional message to the people who are proximate to the venue and who have asked for a discount ticket promotion … This model applies to any business that has perishable inventory such as empty restaurant tables”

This model applies to any business that has perishable inventory such as empty restaurant tables.
Of particular importance to our business model is the way that Xtify is shipped on every Peek device [www.getpeek.com]. This allows developers to create services similar to the one we’ve just discussed, as well as services similar to www.peekmaps.com.

So, is it fair to say that your business model is only a B2B business model?
Absolutely, we are not a customer facing company. We provide persistent user location information for use by marketers, business developers, and web application providers. We have products and API sets that offer the ability to take an action (i.e. send a text message) based on the location of customers and users. We also look forward to working with carriers and handset manufacturers in the same way we have integrated with Peek.

How is the location relayed from the phones to the cloud?
We install a small application that pushes location information into our secure servers (“the cloud”) using TCP/IP protocol via your mobile data connection. We have intelligent algorithms that adjust the reporting frequency as necessary. That means, if you are stationary, there is no need to continually resend the same information. This minimizes the data transmitted.
Note that Xtify works today only on smartphones. Xtify requires a mobile device that can run the Xtify process in the background. We currently function on Blackberry, Windows Mobile, Symbian, and Android Devices. Once the iPhone allows background processing, we will run there as well.

“…we need to encourage service providers to rethink the way they collect and access location and realize that a much affordable solution exists…”

Who do you think are your competitors today?
The biggest competitors for us are time and intertia. Meaning, we need to encourage service providers to rethink the way they collect and access location and realize that a much affordable solution exists. Additionally, other companies will soon realize the benefits to our approach and attempt to enter the market.

A question about privacy. How are people reacting to the fact that 100% of their location information is going to be recorded and available somewhere in a cloud?
We believe the user must have complete control of his privacy and location information. Our location servers do not collect any personally identifiable data, and therefore we don’t know who is in the cloud. There is no profile, phone number, or personal email that can identify the person. All we can see is a bunch of secure user IDs running around the world. The user opts to have a trusted relationship with a service or advertiser or any other business. The user then shares their information with that service provider based on the conditions of that trusted relationship.

But the system is prone to misuse, isn’t it? What can block me from installing the application on that person’s phone without their knowledge and track them all the time?
We specifically chose to include a shortcut / link / bookmark on the mobile device so that the owner of the mobile device will know that it is there and can turn location notification off if desired. However, there is nothing that we can do about human nature, any technology can be misused.

“…We believe the user must have complete control of his privacy and location information. Our location servers do not collect any personally identifiable data, and therefore we don’t know who is in the cloud…”

Is your application for domestic applications only?
There is nothing about our business that is only domestic. Our system can work any place a mobile device works around the world. We welcome companies outside the United States to leverage Xtify for their local or global business needs.

So there is a reason for you to come to Miami to speak with the Latin American operators at LBS LATAM 2009
Absolutely! I am looking forward to participating at the event.

Personal Notes after the meeting:
It was hard for me to process during the conversation the concept of “know ALL my personal where” available in a cloud. Then I understand Josh’s point on inertia. I remember then Newton’s First Law of Motion that, when translated to business terms, can be defined as, “The tendency of the market moving in one direction, to remain in that motion direction, unless it is compelled to change that state by forces impressed upon it”

I can see now many forces that can influence this process, but this is a subject for other conversation (and for your comments).

Buckley Brinkman – Change Catalyst

These platforms and the technology behind them make the entire world much more visible. Experts will still be valuable, but expertise will become more widespread. The holes in our knowledge will become much clearer. My Dad calls this understanding the periphery of our ignorance. Clarity both makes our individual weaknesses much more visible and collaboration much more important. The ability to embrace the tools and become comfortable with our own personal shortcomings will be the difference between success and failure in the emerging economy.
I believe one of the keys to success is understanding what translates from platform to platform and how each platform works. One advantage for us is that there are no experts. There is a mismatch between management perspective and knowledge of the technology. Younger people generally know the technology and what it can do, but do not have the experience to apply it effectively. Senior managers understand business and have the C-level perspective, but don’t understand all the implications of the new technology. There are no experts. They are being developed day-by-day as we all learn.

Buckley Brinkman

…

Peter Kemp – Managing Partner

“The funny thing about mobile marketing is that the technology that makes it interesting also makes it irrelevant. Mobile marketing is a bit of an answer looking for a question. The web has generally made physical location irrelevant for everything but the most basic functions – and ones you are unlikely to need unless you are traveling out of an area you live or work in and already. I think it is a big idea as a marketing tool for travelers (business and leisure), but it may only be a very tactical tool, but then it is really only valuable for businesses for which I already know the quality – starbucks, pizza hut, kinkos – or I need someway to evaluate the quality (telling me there is a chinese restaurant around the corner is almost useless to me unless I know the quality of it. On the other hand, combine it with facebook, twitter, or even Match.com and it suddenly becomes an interesting social networking tool…or a creepy big brother stalking tool. Overall, I think it will be another tool, but not a game-changer.”

Peter Kemp
Managing Partner, Old greenwich partners
www.oldgreenwichpartners.com

…

Jonathan Paisner – Founder and President

As our tours appeal as much to locals as they do to tourists, location based social networking has increasingly gained our attention. To date we have had the most success among bloggers with our Rock and Roll Tour of Manhattan, reaching out to those who show an affinity for rock music and history. We will continue to foster relationships with subject matter pundits and thought-leaders, particularly as we reach out into new geographies with our tours. Locally focused community sites are a great way for us to build word of mouth and to look to share the enthusiasm that our customers have for the products. This is less a matter of buying media and more a matter of fostering a dialogue and relationship with opinion makers in local regions. Beyond marketing, we will look to these new networks of customers to help us identify new product opportunities and to engage them in spontaneous events that can add a new dimension to our user experience.

Jonathan Paisner
Founder and President – CityListen Audio Tours
www.citylisten.com

…

Mike Wittenstein – Consulting Chief Experience Officer

“In my opinion 90% of marketing dollars are wasted. Why? Because we have to communicate to people who have no interest in a particular product or service when it is mentioned to them. Location Based Services may save marketers more than half the wasted effort and expense by using “where-you-are-and-where-you’re-going” information as context to interpolate interests and intent. So, the right information goes to the right person with a need to know in the right format at the right time. It’s the way advertising should be!”

Mike Wittenstein
Consulting Chief Experience Officer
www.mikewittenstein.com

We are witnessing a new evolution in the online world. The “WHO are you” and “WHAT are you doing” is rapidly evolving to “Who are you” “What are you doing” “WHEN are you doing” and “WHERE are you”. We can fairly say that the WWW became the WWWW

The When and Where pose many questions, most of them associated with privacy. For example:

1- How is the location captured: Automatic by the system, Others on demand, You on demand
2- What type of location notification: Descriptive text (i.e. “At gym”, “at Starbucks”), area in a map, zip code, exact address, a point in a map
3- How is the sharing: Reciprocal, one way, only on authorization
4- Location History: Movement patterns, Tracking, Monitoring
5- Location Ownership: Resale and/or disclose of the information

But the same concerns for privacy were raised before we published our family photos and videos to the world. The fact is that the accessibility of technology creates communities and services. The simplification of web page building facilitated the rise of communities like FaceBook, MySpace, LinkedIN and others. The commoditization and accessibility to digital cameras, camcorders, and webcams has paved the way to communities like YouTube and Flicker or services like SnapFish. GPS devices became a commodity, and soon GPS in a cellular phone will be as common as a camera. As a matter of fact, you can get your position without a GPS (see Google maps) and Location Based Services can simply be added as a feature to mass social networks like Facebook. Location Based Social Networking is not a question of IF, it’s a question of WHEN and the when is NOW.



“A social network service focuses on building online communities of people who share interests and activities, or who are interested in exploring the interests and activities of others. Most social network services are web based and provide a variety of ways for users to interact, such as e-mail and instant messaging services”. [1]

The key of the social networks is interaction, and mobile interaction = money. Who is going to pay the bill?

Virtual meet Mobile: Interaction in the virtual world is free. On the other hand, interaction in the mobile world is expensive. On the virtual world all messaging services are free (MSN/AOL/ICQ/Yahoo messenger) but in the mobile world you pay for every single SMS. On the virtual world email is free (Gmail/Hotmail/etc…) in the mobile world your BlackBerry pushed email comes at extra charge. Even voice services are free in the virtual world (Skype/Jaxtr) but that’s far from reality in the mobile world.

In my next article I’ll address some business models and we’ll see that everyone in the value chain has something to gain: wireless carriers, handset manufacturers, application developers, maps providers, etc. The ultimate question is “What is the real value for the end user?” I doubt you can base your business model on the hope the Facebook / MySpace “exhibitionistic” generation is ready to buy “stalk/being stalked” as a main added value.

As I mentioned above, the accessibility of technology creates communities and services. So, is there a case for Location Based Social Networking? Yes. But as I wrote in my first post, before you start wondering about your business model (profit), think about what is the service and real value you provide to your customers. Otherwise, after the novelty period they will run away or simply stop using it – particularly if they need to pay for it.

Have you read PART 1? I’ll strongly recommend reading part 1 first.

As mentioned in part 1 the main components in the LBS Value Chain are: the location based service provider or developer (LBS APP), the data carrier (a cellular provider like T-Mobile, AT&T, etc), and the customer.

As Part 3 will talk about Web 2.0 strategies for Location Based Services and particularly for Location Based Social Networking, we need to completely understand every piece of the puzzle. Otherwise your model will be leaking money (pouring in some cases). Moreover understanding the players and trends will allow you to craft long term solid strategies.

A more comprehensive value chain shall include:

Location Based Services complete Value Chain by Claudio Schapsis

MAPS: Most LBS applications utilize maps; therefore their cost shall be added to the equation. The map market can be considered a duopoly dominated by Navteq and Teleatlas.

Consider: those companies were acquired recently by Nokia and TomTom.

Ask: How can they affect your business by controlling the LBS market. Can your application change the map provider easily? Do they cover all the areas you plan to service? Can you grow to other markets (internationally)? Does your international strategy fit your provider’s existing maps? What are their plans of expansion? How are you getting charged? What layers of information are included in that charge? The list of questions doesn’t end here and is closely related on the type of service you are planning to offer.

MAP INTERFACES: If you want to use map providers like Navteq and TeleAtlas you will need to pay a premium price to companies that provide interfaces to those maps – such as Autodesk, Decarta, etc. Your applications can also be based on Google maps (TeleAtlas data) or Microsoft maps (Navteq data) API’s.

Consider: 1) This factor is almost unavoidable and in some cases the API selection will link you to a specific map provider. 2) While is true you can freely use Google and Microsoft interfaces, bear in mind you will need to pay them for the use of the maps when you start making money.

Ask: What is the price structure? Is the payment per map? Are you getting charged for each customer you serve? (oh yes, you do). Can your API support other map providers? Can you add your own maps? How much will cost to add specific regions? Do the charges include Points of Interest? Does the price include point to point routing capabilities? Can you provide PSAP information? What platforms do you support? How will you display information in different types of cellular phones?

Remember that once your development is committed to one of these platforms, it will be expensive to migrate to other. Again I strongly recommend checking their pricing structure. Most start for free but you will “pay the price” later.

M2M PROVIDER: In most cell phone based services, the communication costs are paid by the customer (SMS or IP-Data). If your service is based in a specific device (like a pet tracker) you will need to include a cellular operator or aggregator to fulfill the mobile communication. You will probably use a GSM provider and your device will include a SIM Card. Those carriers are known as Machine to Machine providers (M2M). Today the M is interpreted in many ways – Man-to-Machine, Machine-to-Man, Machine-to-Mobile, Mobile-to-Mobile, Mobile-to-Machine, etc. Usually M2M providers are small mobile operators with roaming agreements and/or mobile resellers/aggregators with services provided in the background by companies like AT&T, Telefonica, T-Mobile, Verizon, Vodafone, etc (Big Carriers).

Companies that fall in the M2M category are  Jasper Wireless, Kore Telematics, Wyless and many others. As these companies usually buy large quantity of network capacity, or have roaming agreements, the solution you will get is usually better, more focused and cheaper than approaching directly the Big Carriers. Moreover, many Big Carriers require particular certifications, and with these M2M providers, the process is usually transparent.

Consider: 1) Choosing a M2M provider is a long term commitment. Imagine you have thousands of devices in the market and you need to recall them to change their SIM card (I don’t think so…) 2) You can use SMS and/or Data transmissions (TCP / UDP). Each one has pros and cons. Just remember to use the * symbol in excel you will be amazed with the numbers. For example, if your model is based on SMS (let’s say $0.08 per SMS), and you have just 5000 units, reporting every 5 minutes half day; your annually bill will be more than $20,000,000 (yes, twenty million). Is your projected income covering that?

Ask: What is the price structure? Do you have a minimum volume commitment? Can data (or SMS) be pulled? If using data, what is the rounding per session? Do you provide VPN services? Will your device have a fixed IP address? Do you have an activation portal/API? Do you charge activation fees? If SMS, do you provide SMPP gateway services? Do Mobile Originated and Mobile Terminated messages have different prices? What type of certification do you require (FCC, PTCRB, EC, etc)? Does your service require non standard certifications (particular of a Big Carrier?) Do you provide roaming? How much will you pay for roaming? Where do you roam? Can you permanently roam?

GPS ENABLED DEVICE: Now you need to write the application. If your service is not installed in a cellular phone, you will need to provide your customers with a device with GPS and mobile communications capabilities i.e. most Personal Locator Devices (PLD). This is a topic by itself and I’ll devote a different post for it.

Bottom Line: The sum of all those expenses + YOUR PROFIT is what the customer usually will pay for some Value Service. This is your Average Revenue Per Unit (ARPU) or your Customer Acquisition Cost depending on the business model you choose (see part 1). If your customers are reluctant to pay your fees, or your investors consider the burning cost and risks associated too high, most probably you have done something wrong along the way.

Having almost all the components clear, I’ll elaborate on part 3 on Location Based Services business models based on Web 2.0 strategies particularly free Location Based Social Networking and their specific value chain.

TO THE READER: as my list of considerations and questions is limited for readability I’ll appreciate your comments, particularly on:

What else would you recommend to consider for each category?

What else would you recommend to ask to the providers in each category?

Thank you again!

In the first one the LBS APP provides an application to the carrier and the carrier provides the service to their customers for a fee – or free of charge to encourage the use of data services. For example companies like Loopt are offering their LBS social networking services through carriers like Verizon Wireless, applications like Autodesk family finder, and others.

Location Based Services Value Chain 1

The main challenge for the LBS APP is to find one of the mobile operators willing to buy and offer the application through their network. Once the service is running, all the promotion, billing and collection is performed by the mobile operator. The LBS APP revenues can be smaller but the risks are reduced as the investment in infrastructure and operations are minimal. On the other hand, the ownership of the customer usually remains with the mobile operator, minimizing the LBS APP possibility to up-sale other products.

On the second scenario the customer pays a fee directly to the LBS APP and they take care of the costs of the wireless service fees. For example companies like ID Conex, Zoombak, Laipac, and other Personal Locator Devices have the customer pay directly to the company.

Location Based Services Value Chain 2

In this case the LBS APP carries most of the obligations, liabilities and risks. They need to develop, promote and market their products, maintain the logistics (delivery, billing, collection, customer support, etc), and create a communication infrastructure that allows them provide the service. If the LBS APP succeeds to establish a large and stable customer base, the business receives a recursive cash flow for the life of the product or the subscription and the company keeps the customers’ ownership.

The third scenario is based on web 2.0 paradigms. The customer pays the cellular carriers for the internet access. The LBS APP offers a free product/service with the vision of creating some collective user value. Most LBS social networks work under this business model.

Location Based Services Value Chain 3

The LBS APP enables a service through internet connection (fixed and or mobile) assuming the customers already have a data plan with their mobile operator. The service is usually mobile operator agnostic, and the LBS APP needs to invest in basic infrastructure and development/maintenance of the application. As the service is free of charge, the LBS APP is investing towards the future value of the network and the information generated by the users such as people’s locations, movement habits, etc. – just figure out what are they going to do with the information collected about your location.

The story doesn’t end here as there are many other factors to consider in the costs. These include among others M2M communication providers, maps providers, and interface to maps developers, who do care about their profits.

In part 2 and 3, I’ll elaborate on the extended Value Chain and Location Based Services models based on Web 2.0 strategies and their specific value chain.

As usual YOUR COMMENTS ARE WELCOMED.