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

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).

I also found a few social networks closing or going through difficult times and struggling to survive. Then I remembered last Friday I was saddened to find one of my regular lunch places out of business. I just entered the Subway next door and had a sandwich. Today I found a “coming soon” sign at the same place.

Is there any parallel? Certainly there are LBSN for many tastes. There are gourmet types of Social Networks, others that appeal the masses, some that serve particular type of people, some are for dating, some are for business, some you need certain hardware to get in, and others that are by invitation only.

The fact is that in both cases the owners invest a considerable amount of money to get in, they dream to have fun and be unique, and in some cases they understand very little about the business model and end loosing all their savings.

That’s why I tried to contact some of the companies going through difficult times, to understand their process, check if I can help, and see if we can all learn something from their experience. I couldn’t find those willing to share their struggles yet. On the other hand, I had the opportunity to talk with two of the most successful Location Based Social Networks in the market and they shared their vision and experience. This will open a series of notes, that I hope will give some perspective for existing and planned Location Awareness Networks to be.

Not long ago I had the impression this market will soon consolidate to a handful of companies. Now I have my doubts. There is place for a diversity of LBS based networks, and they are as varied as people tastes for food. Now I’m going back to the list of LBSN and I still see much of the same flavor.

What do you have in your menu, how is your business different from the others, how do you make customers to come back, and how do you build a name in a difficult industry. (Am I talking about food or technology now?). Bottom line, there is still a huge space for good marketing work to be done. Power to the marketing department!!!

If you are around here I will invite you to a good restaurant, and we can talk about business, just give me a call or drop an email I’ll be glad to help.

On a final note I wanted to have a restaurant; in fact my friends say I cook very well. I talked with a chef friend about my plan, the environment, marketing, ideas, and he said to me “You don’t understand, the money is not on the tables, the money is in the kitchen.” Yup, I didn’t understand much about their business model…

I believe one of the most important results in a post is the readers’ comments. They enrich and bring new perspectives to the initial approach. Skipping over those comments and the exchange of ideas is like ordering a banana split and eating only the ice cream.

I would like to refer you to the readers’ contributions on my post on business models for navigation devices combined with social networking. There, new applications were exposed, a few questions remained unanswered (wireless guys, your input please), and there is an amazing exchange of observations on what is Presence Marketing – how to use it combined with Location Based Social Networks, the extension of RFID applications, and Privacy concerns (my next topic).

My remarks on CES and notes on the Privacy Factor on new business models can wait a day or two.

I encourage you to read the comments to the end and most important, leave yours.

I have nothing more to say but THANK YOU!

Press HERE for the post.

I’ll assume through this post that you have read the preceding articles (LBS Marketing Concept / Value Chain 1 / Value Chain 2 / Location Based Social Networks 2.5) as many of the keys for further business models discussions reside there.

In my first post I defined the “Location Based Service concept” as the company’s effort to transform geographical positioning information into valuable and relevant data for a customer, to make a profit. The question here is: who is the customer that is willing to pay for that data?

Tim O’Reilly defines in “What is WEB 2.0” Data is the next Intel Inside and he presents a key question: Who owns the data? And I would add, What Data?

In the following Business Model the LBS service provider owns the data. I reviewed many Location Based Social Networking sites and in most cases “some kind” of lack of privacy is the base of their business model. Differently from carrier fee based pushed services (top – down), this model is based on bottom-up. The LBS provider enables a platform for people to interact for free. In this scenario the handset is usually subsidized by the carrier, interested in generating traffic. The free service is now growing in viral mode and at this point the customers should be called by their real function: “data collectors”.

The idea is to collect your customer location, and delete identifiable information (name, photo, address) but keeping the demographic (sex, age, likes, dislikes). This customer’s “Location Information” can be indeterminably retained by the LBS service provider. The data can be aggregated, and provided to interested third parties willing to pay for certain content, segmentation, information about people movement habits, and many others. Are you starting to get the picture?

Let’s figure some scenario

Location Based Social Network Raw Data

Segmentation - Location Based Social Network

The <– left figure shows the data collected in NYC in one month time. The right –> figure shows different types of segmentation of the same data. Now with the valuable data on hand, you just need to find your real customers, those ready to pay for the information. For example, a person planning to open a few coffee shops would find valuable where and when its target demographics meet and hung out. Retailers would like to know where their potential customers meet, what their usual routes are, where they stop, for how long they stop, etc.

The concept of Location Based Advertising gets now a new dimension. Most companies tried to implement on cellular networks the same advertising models used in desktop computers to discover that customers are much more resistant to receive any kind of adds in their cellular phone. Additionally, the cost of sending coupons or ads to every potential customer walking by your store makes this model almost prohibitive.

Do you remember the movie The Minority Report? Tom Cruise walked through some screens and the advertising shows up completely customized to his person. The mistake with today’s Location Based Advertising is to assume that the media used to collect your location information should be the same as the media to deliver the message back. Your cell phone is good to know where you are, not necessarily to receive ads. The second mistake is to assume the message needs to be completely personalized. The ads displayed (billboards, info kiosks, signs, etc.), can target certain population according of the demographics visiting the area.

Going back to our business model and to provide an example from real life, we can mention Google maps for mobile devices. While this is not a LBSN application it still fits the model mentioned above. Google lets customer use their Mobile Google Maps for free. Every time a customer with a GPS enabled phone (the data collectors) used the application, Google maps collected information about closest cellular towers. Today, and thanks to the help of million of free data collectors, Google can provide Location Services in their system, using the cellular tower information collected, also to customer without GPS enabled devices. LBS Developers (the customer) can use this features now, for a fee. Brilliant!

As I expected when I start writing this post, I still have many topics to talk about this issue, i.e. can companies that offer LBSN survive only on that feature or will they be swallowed by the big ones (Facebook, MySpace). Is privacy overrated? Will the marketing/advertising agencies have to add more technical/engineering people to their staff?

Be expecting more than one post a week! And please link / share / comment . THANKS!