Why Google didn’t buy Navteq: Profiting from map-makers, not maps

From: http://garrygolden.net/2007/10/11/why-google-didn%e2%80%99t-buy-navteq-profiting-from-map-makers-not-maps/

Last week Nokia, the world’s largest mobile phone maker, spent $8 billion to acquire Navteq, the world’s second largest maker of maps used in car-navigation devices and handhelds.

Is it time for us to reconsider the economic value of maps? Or, better yet, the value created in map-making?!
Read more below…

While some were shocked by the price, the move was not a surprise. After TomTom acquired TeleAtlas, the other major map maker, in July – most geolocation industry analysts suspected Navteq would be next. Navteq’s stock price shot up quickly.

Some speculated the obvious- ‘Garmin will buy Navteq’; more creatives who follow media on the ‘geo-browser’ suspected Google, Yahoo or Microsoft might spend the money. But alas, it was Nokia, a mobile hardware company, who paid a high premium to become a big player in location services.

What is the story being covered by the business media? And what piece of the tale is missing?

Mobile devices

The move confirms an industry reality – mobile hardware is a tough space to compete. Nokia is wise to hedge its bets and push into software side of mobile computing. Software and service are the growth areas for mobile computing in the next decade. We are moving quickly beyond the era of phone calls and picture taking as the dominant value-added activities.

The main competitive driver is ‘convergence’ of software/services. PC producers and software companies are all creeping into the mobile device market. They have no choice given lower profit margins in their respective industries, and the reality that mobile devices offer a faster way to reach new consumer markets (e.g. India/China) when compared to PCs. These emerging economies are already leap-frogging into the mobile computing era. In the US and Europe sales of GPS devices for automobiles are expected to grow by 30% in the next few years. And it is only a matter of time before all mobile hand helds use location as a key feature for new web services. Right now ‘location’ is only just starting to matter in the world of web services.

So, a wonderful example of solid foresight by Nokia executives… in the future mobile industry landscape, you can sell more services than devices. But have they tested their assumptions about maps and the role of users with access to 3D geospatial authoring tools?

“Maps are a strategic asset” – or is it ‘map-makers’ are the strategic asset?

Nokia is betting on the ‘map’. Google is betting on the ‘map-maker’.
Only time will tell where the real value in location based services is found. But there is no shortage of forecasts.

Of course, your answer will be based on your assumptions related to future uses of maps. In a 2D world of traditional maps that are simply digitally enhanced and passive (static) in nature – Nokia’s strategy makes sense. Maps are the asset.

But in a 3D (‘geo-browser’/metaverse) world, maps themselves are easily created, manipulated and driven by users themselves – not by paid cartographers and GIS vans. In this world, maps are built from the bottom up based on data and images collected from users and their everyday interactions in the physical world. It is human activity that matters most. The asset is your relationship with the user (’map-maker’). This is where Google and Microsoft might lay down their poker chips.

If Nokia is right- and the masses prefer to simply look at 2D maps, then they might earn back their investment. But my long-term bet is that services will be valuable because people reveal aspects of their lives based on location, not because they have access to accurate maps.

Of course, in the short term – maps are a great asset. A Forbes article states:

“In a mobile, connected world, maps are becoming a hugely strategic asset. All kinds of burgeoning digital revenue streams are being created on the backs of maps: local search, friend finders, family tracking, location-aware advertising and turn-by-turn navigation. If you control the map, you control the game.”

Pay attention to the last line: ‘if you control the map, you control the game’.What if Google is right- the users control the maps? (Hence their open API stance with Google Earth and creation of K-XML protocol)

In a Bloomberg article – analyst Wing-Yen Choi was quoted:

“After TomTom’s Tele Atlas buy, there are not too many mapmakers anymore”…

Yes, based on current technologies in map-making, the statement is correct. But taking a slightly longer view (2010-2015), I think we underestimate the role of geo-web software tools and ability of users to add tremendous detail to 3D maps. Forget about the accuracy of remote roads in northern Maine, real profits will be made on the roads and streets that people use everyday. And that information (whether about a congested road, a crowded restaurant, or new release at the movie theater, et al) is dynamic. It is not only ‘location matters’ - but human activity that matters! And right now Google is a more trusted brand for organizing our lives, than Nokia.

My friend Jerry is found of saying ‘wiki-city’! The assumption here is that map-making will be a common web/computing activity and structures will be develop to aggregate and validate activities in the physical world. It is based on a ‘wisdom of crowds’ view of the world.

Assuming map-making software tools continue to evolve, we can see that there are tens of millions of map-makers out there – waiting to realize that they are, indeed, map-makers. Nokia is just spending $8 billion to get a head start.

The big question is – what is a ‘map’? Is it 2D or 3D?

In 2012, will a ‘map’ look like a 2D satellite image or an immersive 3D world?

The early adopters of location based services will likely be young people – who are increasingly jumping inside virtual worlds and involving themselves in user-driven content creation and management. Websites are shifting to ‘web worlds’. 3D is a growing platform for web environments, but the key will be user interaction.

The Forbes article continues…

“Google is hedging its bets. Michael T. Jones, chief technologist of Google Earth, Maps and Local, says the company never considered buying Navteq. Instead, Google could simply recreate the data far more cheaply by tapping the mapmaking skills of its hundreds of millions of users — a wiki of maps, he suggests.

“Every day more people use our product than watch TV,” he says. “They could go outside their house and draw a line on a map for us.” Drivers wouldn’t dare use such a user-generated map unless it was 100% reliable, but it would suffice for local search.

Nokia’s image of a map… Old School with a twist:

 

 

Google’s image of a map… 3D world / ‘metaverse’

 

 

Future of Location-based Services

Today, without location-enable devices and geo-related software, consumers cannot imagine organizing our world based on location. We can’t imagine learning about the traffic jam from people on the road- because we expect it from a centralized news source. We cannot imagine walking in a strange city with full awareness of what restaurants and stores lay around the corner. We have not confronted the identity and relationship issues associated with living geo-transparent lives. Remember when ‘email me’ or ‘look at my blog’ seemed a strange offer to a new friend! Well, how about - look at my google map?!

Today, the ‘internet’ is something we access from our desktops and laptops. Maps are only useful if you print them out as a static sheet. No real economic value there.

But in five years, most people will be carrying around mobile devices that have fantastic (accessible) location-based software- and maps will be the platform for communicating information. And they will be dynamic… valuable only if people input information and perspectives.

I’m thrilled that Nokia has put ‘maps’ on the map… and more people will now take mobile web applications more seriously.

And as with the first version of the ‘internet’ – there are plenty of industries that could soon feel the transformative power of location-based services. The most obvious applications are related to - advertising, tourism, transportation, security/safety, insurance, et al.

From an innovations standpoint – the question is – what/who are we missing?

How might city’s transform themselves around a culture of map-making?

How might relationships change (friends, parent/child and marriages)? What does it mean to be ‘connected’ when we know and reveal our location to those we love (or work with..!) What about the next generation of young people who grow up expecting to know the location of their friends and family?

How will industries respond? What about: schools, automobile companies, ISPs, or public policy makers?

And new categories might emerge out of this new platform?

Strange days. ‘Maps’ might soon become the next great social disruptor?