Planning a trip or raring for a night out in town? Wherever you go and whatever you do once you get there, you’ll probably find a location-based mobile application to make the experience more rewarding and personal. By 2014, location-based apps are expected to reach more than $12.7 billion in revenues, according to a recent report by technology analyst firm Juniper Research. Location-based apps pinpoint your and/or your friends’ geographical position and then use the data to provide all sorts of services. Sounds promising, but what exactly does this mean for the travel industry?
One: Improved ease and efficiency for users
Using apps downloaded on their smartphones, travelers can now book reservations and automatically check into airports and hotels, get online maps and driving instructions, organize their travel itineraries, keep track of expenses, network and locate nearby friends and businesses, get up-to-date travel alerts, check the weather forecast and currency exchange rates, take advantage of personalized concierge services, and more. Indeed, a report released in 2009 by travel industry research firm PhoCusWright found that 67 percent of travelers and 77 percent of frequent business travelers with Web-enabled phones have used the mobile Web to find local services and attractions. The report also predicted mobile travel bookings to reach $160 million by the end of 2010. Examples of travel companies capitalizing in on this trend include Southwest Airlines, Hilton Hotels, and Kayak.com.
Two: The rise of “layered” information
Forget traditional guide books: There are now location-based apps that provide travelers with “audio walking tours” and even immerse them in “augmented reality,” wherein they get additional information about whatever sight or place they’re visiting by simply pointing their smartphone cameras to whatever they’re looking at. The phone’s camera basically “recognizes” the object or place and proceeds to “overlay” data (for instance, historical backgrounds and images, Wikipedia descriptions, travel reviews from other users, a list of nearby attractions and their distances, deals and promotions, etc.) onto the phone’s screen. Examples of travel companies capitalizing on this trend include travel publishers like Conde Nast and Lonely Planet, and Malaysia Airlines.
Three: Increased opportunity for targeted, “real time” ads
Users of location-based apps are likely more receptive to receiving targeted ads relevant to their current location and activity. A May 2010 survey by mobile audience media company JiWire found that 76 percent of mobile app users prefer free apps that have advertising over paying a fee for the same apps. Additionally, 84 percent would be just as likely or more likely to engage with an ad relevant to their current location; 53 percent are willing to share their current location to receive more relevant ads; 52 percent acted on an ad in an app in the last 30 days, while 18 percent made a purchase because of it. Examples of travel companies capitalizing on this trend are InterContinental Hotels Group, and JetBlue Airlines (in partnership with GateGuru).
The challenge?
While location-based apps are indeed getting lots of attention lately, they still lack mainstream appeal — at least for now. A 2010 report by technology and market research firm Forrester Research notes that less than 5 percent of U.S. online users have ever used a location-based mobile app, and almost 85 percent said they were not familiar with location-based apps at all. So while location-based apps can and will likely transform travel as we know it, we still have quite a way to go before we “get there.”
Ad revenues for traditional media like print, radio and TV shrank in the past year, according to major marketing communications company WPP Group. Even online, once promising, has slipped during the past two quarters, says global market research firm IDC. Mobile, however, has shown a steady — albeit slow — growth. In fact, telecoms analyst firm Juniper Research predicts mobile ad spending will exceed $6 billion worldwide by 2014, up from about $1 billion in 2008.
With this shift in ad spending comes a necessary shift in strategy. Combined with rising peer-to-peer influence due to online social networking, as well as the availability of mobile apps, mobile users have more control than before. This means that ads need to be more interactive, collaborating and adapting to what consumers want, when and where they want it. As interactive marketing firm OgilvyOne and messaging firm Acision say in a recent white paper: "Mobile advertising in 2020 will be mobile directed advertising which is selected and chosen by the individuals themselves.”
This is already happening to a much lesser extent. Users, for example, can get updates and offers from companies they choose to follow on Twitter or be a friend or fan of, on Facebook and MySpace. Users can also download a GPS-based application like Outalot, which sends coupons to their phones based on their current location and preference.
But the OgilvyOne/Acision report goes even further by envisioning mobile advertising in the context of hyper-connectivity. Basically, subscriptions would to be tied to the user and not to the device or network being used, and mobile ads could cross boundaries between devices, not just limited to mobile phones. For example, as users watch TV, they could get details or promotions sent to their mobile phones regarding specific clothing or products used on the show. Instead of billboards changing, relevant and personalized ads would pop up on users’ devices as they pass by. All these, of course, will be controlled by user permissions and preferences.
Granted, there’s still a lot to do before (and if) mobile advertising reaches this optimal point. Technology has to improve, not only to allow hyper-connectivity in the future, but also to create a better user experience today, especially for Web browsing or playing rich media. Measurement and metrics have to be standardized for proper data analysis. And companies need to strike the right balance between respecting consumer privacy, and collecting enough user data to empower advertisers to deliver targeted and relevant ads.
Advertisers who want to master the mobile market need to start mobilizing as early as possible. With consumers in control, it becomes even more crucial to tap into social networking communities, establish strong communication and feedback channels, and keep a finger on the consumer’s pulse. It’s a tall order, sure. But if consumers stop seeing ads as force-fed nuisance, and more like information they actually seek, use and advocate, the potential payback to advertisers might even be more valuable.
Microsoft and Nokia have teamed-up to offer Microsoft Office software on Nokia’s E-series phones, and eventually on other handsets, starting in 2010. Technically, both compete in the smartphone market with their separate operating systems for mobile devices. Microsoft has its Windows Mobile platform, while Nokia has its Symbian sytems. So why join forces now? Because both are using the move to defend their lead on different fronts.
Nokia’s fight: smartphone dominance. "This is really about creating a formidable challenge for RIM," said Nokia EVP for Devices Kai Öistämö at the official press conference. He’s referring to BlackBerry-maker Research in Motion, which holds 18.7 percent of the smartphone market, according to technology research firm Gartner.
While that’s less than Nokia’s 45 percent market share, the BlackBerry is seen as being favored by businesses, largely due to its emailing and productivity features. In fact, a recent survey of 300 high-end users by investment firm Goldman Sachs (as reported by tech publication ZDNet) found that 57 percent of respondents owned BlackBerries. Of those, 32 percent were subsidized by their companies. By offering Office software on its phones, Nokia hopes to appeal to more business users.
RIM, however, is not the only challenger to Nokia. Gartner also reports that iPhone 3G S sales are a big factor. iPhone sales were the most impressive out of all the smartphones launched in the 2nd quarter of 2009, including Nokia’s N97. It also says Apple had the biggest market share growth in the past year, from 2.8 to 13.3 percent.
Some industry analysts attribute this success to the iPhone App Store, among other factors (see our previous post on App Stores). Indeed, telecoms analyst firm Juniper Research predicts mobile app downloads will approach almost 20 billion per year by 2014. To compete, Nokia launched its own app store, the Ovi Store, in May. The store’s selection, however, is still sparse. The addition of Office software could give Nokia phones the boost it needs among users seeking productivity apps. BlackBerry too has launched its own App Store.
Microsoft’s fight: dominance in communications software. Microsoft Business Division President Stephen Elop says the partnership is part of a strategy to “provide the best productivity experience across the PC, phone and browser.”
Microsoft’s Business Division, which includes Office, has recently reported declining revenues. As Office is a top moneymaker for the company after Windows OS, a lot rides on its continued success. Office, however, faces increased heat from competitors like Google’s free, Web-based productivity apps. “Google's initiative is forcing Microsoft to change its business model,” said Sandeep Aggerwal of the financial advisory group Collins Stewart, in a Dow Jones Newswire interview.
Indeed, Microsoft appears to be covering its bases while it can. Back in July, the company also announced plans to launch free Office Web apps in 2010. Gene Munster, analyst at investment firm Piper Jaffray, thinks it’s a wise move. In an interview with The Wall Street Journal, Munster says making sure people are still using Microsoft products is more important in the short term than risking revenue.
Verizon Wireless knows this: Software sells hardware, and hardware plays a role in your choice of wireless network. That’s why it’s building its own app store. Just consider:
Among the smartphones launched in the past quarter — including Nokia’s N97, Apple’s iPhone 3GS and the Palm Pre — iPhone sales were the most impressive, netting one million units within its first weekend, according to a recent report by technology research firm Gartner, Inc. Sure, Apple’s strong brand image helped. So did pricing. But the biggest contributing factor to the iPhone’s success may be the App Store.
“The App Store business is a facilitator of hardware sales,” according to Shaw Wu, an analyst from technology and media investment firm Kaufman Brothers, in an interview with The Wall Street Journal. Indeed, users have downloaded more than 1.5 billion apps from the App Store within its first year.
How is that affecting Verizon Wireless? Since it signed an exclusive contract with the iPhone, Verizon Wireless’s long-term rival AT&T has grown its subscriber base substantially. In fact, AT&T reported more than 2.4 million iPhone activations for the second quarter, 35 percent of which were new to AT&T.
To defend its market lead, Verizon Wireless is launching its own app marketplace, the V CAST Apps Store, by year’s end. “We are intent on making the Verizon wireless platform the choice for developers,” Verizon Wireless CFO John Killian said during the company’s earnings call.
Verizon Wireless says developers could potentially reach a wider audience through V CAST because, as part of the “Joint Innovation Lab” (JIL), Verizon Wireless and other carriers like China Mobile, Vodafone and Softbank would push for common standards, enabling developers to create apps that could work across different operating systems, including RIM’s Blackberry, Google’s Android, the Windows Mobile, Palm and Symbian (used by Nokia).
Verizon Wireless also promises developers a simplified and speedy app approval process that would take no longer than 14 days, a jab at the App Store’s own vetting process, which more and more developers say is too restrictive, too mysterious and sometimes lengthy.
And to further sweeten the deal, Verizon Wireless is offering a $50,000 prize in an application development contest.
Will V CAST be able to cut into the iPhone’s market share and significantly help Verizon Wireless? V CAST might stand a chance if it can attract some of the best app developers to switch to its camp, something that, considering the App Store’s popularity and first-mover advantage, may not be an easy feat.
