But the technology was dogged by privacy concerns and LBS did not to live up to the hype. Now some investors say LBS has matured enough to take another look. According to Berg Insight, the European LBS market, worth just €274 million in 2005, could expand to €9 billion by 2009.
The question of privacy
One concern that has hounded LBS is privacy, especially in Europe, where some see a potential for infringement of civil liberties and privacy.
What if you don’t want your telephone company to always know where you are? “I think the personal privacy issues are still too great or unknown,” says Martin Fiennes, at the UK-based VC Top Technology Ventures, which has no investments in LBS companies.
But Trobough says, “Privacy concerns are overblown and, in any case, not a barrier to investment in LBS.”
Gardner agrees, noting that, “Since 9/11, US regulators have blown a hole in privacy issues. In the United States all handsets must be locatable for emergency services and fighting terrorism, so network operators have had to enable their networks to do this. So some people ask, ‘If the government already knows where I am, what's the point of fighting it, especially if they offer services?’ ”
A problematic business model
Like many technology companies after the stock crash of 2000, LBS start-ups saw funding evaporate. “During 1999-2000, there was a lot of money chasing a lot of ideas that were not so well thought out. So many businesses went bust that investors became wary,” says Peter Gardner, communications sector head at 3i Venture Capital.
For LBS applications to work on wireless handsets, telecommunications operators needed to invest in building the infrastructure. Or handset manufacturers needed to invest in global positioning system (GPS) chips. “But investment from the operator side has not really happened and very few handsets had modules embedded,” says Artturi Tarjanne, a partner at the Finnish venture capital company Nexit Ventures.
Gardner adds that “If you ask consumers about ATM locating and other possible LBS services, they say ‘Yes, I’d be interested.’ ” The networks say, yes, those services would be interesting to consumers. But ask if they will invest in the infrastructure, and they say they are waiting until they see market demand!"
A new approach
The cost and battery drain of GPS chips has been the hurdle to equipping mobile phones with the capability. Gardner says 3i has recently invested in a new approach – software-assisted GPS – developed by the Swedish company NordNav. “There’s more software than silicon in their product, bringing the cost down to 30 per cent of a chip-based approach,” he says. “NordNav is sampling its software and it should be available by mid-next year.”
For Gardner, over-hyping of data services can hurt take-up of good technologies. “Look at WAP [Wireless Application Protocol]. They tried to shove that at us, and nobody wanted it. But people do have their BlackBerries, and technologies like WiFi do catch on.”
One of the biggest cheerleaders for LBS is Openwave, a specialist in mobile software, into which it has sunk many millions of dollars in acquisitions and investments. This includes the 2001 purchase of SignalSoft, for its mobile positioning software, which uses signals received from operators to determine a user’s geographic position.
“We’ve been through the dark ages with LBS in the last three or four years, but we are starting to see a resurgence of VC interest in the LBS market, driven by lower costs for technology-assisted GPS solutions,” says John Trobough, vice president of location-based services at Openwave.
So what changed? Several things, says Trobough. “The handsets are better, with good colour screens. We didn’t have that in 2000, so the navigation experience wasn't as compelling. But most important, people are starting to make money.”
He mentions an early Openwave investment that has gone on to success, France-based Webraska, which among other things, makes mobile GPS navigation solutions. Another success story, according to Trobough, is @Road, a specialist in mobile resource management.
HandheldsToday, services promised back in 2000 are beginning to be available. “We’re going to see a lot more GPS on handhelds in the next 12 to 18 months,” says Gardner. “You’ll be able to call up maps for car navigation. Your phone will actually point out restaurants, bars and buddies. Operators are starting to commit to making these services available.”
And in Finland, Nexit has found another interesting location application not based on telephones. Since 2001, it has invested $10 million into Finnish company Ekahau, which works in real-time location services. Using WiFi or other radio technology, this can locate expensive assets or people in a warehouse, shopping centre or hospital, to one metre of accuracy, says Tarjanne.
“It’s more of an indoor solution using independent tags, so there's no operator investment,” says Tarjanne. “The use depends on the market. For instance in large public hospitals, where personnel security has become an issue, staff can carry tags that allow them to call for help or to be located.”
The outlook
“For about ten years, location-base services’ fantastic potential hasn’t really materialised,”says Hadar Cars, of Teknoinvest, a Scandinavian VC based in Norway and focusing on Nordic companies. “There haven’t been any companies doing particularly great so Teknoinvest has taken a wait-and-see approach.” Still, says Cars, “From a pure technology point of view, LBS is definitely in our field and things are starting to look better in terms of infrastructure, applications and equipment. It might be time to take another look.”
Says Trobough, “There’s now a recognition of location being an important value for the end user in and of itself, combined with delivery of local content and local media delivery. There’s much more of an advertising twist than five to six years ago. The Googles and Yahoos of the world recognise that’s there a significant advertising opportunity in LBS.”
“Now, Web 2.0 allows truly user-generated Web experiences. We’re combining location with other wireless services. For example, MMS messages can send pictures with geo tags attached, which you post in a personalised photo album,” says Trobough. “Or maybe I am looking for restaurants in Paris, I can click on a friend’s favourite restaurant list see if any are near me.”
“It’s likely that by 2015 we’ll all have LBS on our phones and won’t even think about it,” says Gardner. “But between now and then, it’s hard to say when it will actually be implemented. Meanwhile, we’re always on the lookout for a company that’s got a secret source to make a difference.”
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