What’s Next for the Location-Based Services Sector

May 18, 2011. The acquisition of Where by eBay’s PayPal division in late April 2011 and the proposed purchase of T-Mobile by AT&T stand to have a very large impact on the location-based services (LBS) industry. With the increasing number of mobile device users and, concurrently, a greater usage of social media to engage in communication, entertainment, work-related activities, LBS providers will continue to take advantage of this technology that gives instant access to information about users’ physical and constantly-changing surroundings. With larger players entering the fray, where is the industry heading to next?

eBay’s purchase of Where is particularly significant because it joins one of the largest facilitators of e-commerce (in PayPal) with North America’s largest location-based media company. As Americans shop more and more online, services like Where are blurring the lines between online shopping and in-store shopping meaning customers can make more informed buying decisions from anywhere and through any channel.

With such a large and pervasive e-commerce site like eBay investing more in LBS, the implications and possibilities are abundant. What makes the deal with Where so unique is the marriage of big e-commerce with local merchants not previously “wired in”.

Depending on the success of the merger and its reception by not just customers, but more importantly local merchants, the PayPal-Where merger could have a huge impact on the way local retailers operate, compete, and advertise. If PayPal can promote the Where service to markets where there are high concentrations of local merchants (like large cities with clusters of boutique shops) with limited online exposure, not only could the service be a huge boon to those local merchants, but it could help PayPal penetrate the hyper-local merchant market that would otherwise not utilize PayPal and its related services.

While the proposed AT&T ““ T-Mobile deal does not involve an LBS-focused firm, it stands to have a huge impact on the LBS/geolocation industry. Notably, a combined AT&T/T-Mobile means more customers, 130 million subscribers in total, on a single platform. With all these customers needing LBS, the industry can evolve faster and become more ubiquitous under a single platform with access to so many users. In addition to more customers, the merger means greater network reliability, which means fewer dropped calls, and more reliable access to customers and their location ““ very important to LBS developers looking to extend the scope of their apps. Finally, with only 29% of the US market owning smartphones, the combination of AT&T and T-Mobile’s device portfolios will make LBS easier for LBS app developers looking to crack the other 71% of the market.

Other than mergers and acquisitions, other industry players are moving in to take advantage of what LBS can offer. Microsoft and Nokia for instance, are partnering each other on a broader scale, with location-based services and search being part of their collaboration plans.

What’s next

With the range of users going beyond the younger generation (who defined and popularized the market first with LBS-involved social media like Facebook, Twitter, and Foursquare) to older users, the potential of LBS will go beyond social applications to work-related fields and mobile commerce. As long as people continue buying mobile devices, LBS providers will likely continue finding new ways to take advantage of this technology.

Figuring out a way to take advantage of geolocation technology for applications that are unrelated to the social, entertainment, or B2C sectors is the next big challenge. While there does not appear to be any upcoming mergers of LBS firms engaged in the B2B market, there is certainly potential for B2B applications.

LBS data allows marketers to see what their contacts are doing beyond just the interaction with their brand. Once LBS becomes more universally used, mining this data will allow brands to see how consumers interact with their brand, as well as their competition and other local businesses.

Therefore, based on LBS-derived information, there is a lot of potential for marketing in the way of businesses forming partnerships with non-competitive local businesses, collaborative sponsorship and advertising opportunities, and identify event opportunities with other businesses in your industry.

In short, in the same way LBS puts merchants and consumers in touch, LBS can put businesses in contact with one another that may share similar marketing aspirations, while also keeping businesses informed on their competitors’ doings. Convincing businesses of the advantages of LBS for promotional purposes though will require extensive use of LBS amongst potential customers and their competitors. Without ubiquity of use, this B2B sector will struggle to develop further.

Though slightly detached from the LBS market, the recent purchase of network security company Astaro by Sophos could have a significant impact on the LBS industry. While Sophos already produce mobile security software for mobile devices, the acquisition of Astaro will further bolster their security capabilities in the mobile device realm. As more and more businesses become technologically equipped to conduct business remotely through the use of mobile devices, the need for secure mobile networks will be greater. With these enhanced security measures over mobile networks, geolocation services catered to B2B may become more prevalent as businesses become more confident in the security systems.

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