Who Will Control Indoor Location Apple, Google, or Walmart

While WIFISlam is not the first company to uses Wi-Fi for indoor location, the acquisition of the company by Apple does signal a major player validating the importance of the technology. With more precise indoor location gaining traction, the infrastructure to support the blending of online and real world is taking shape. A battle is brewing on who will control this infrastructure and the indoor experience.

One of the most lucrative benefits of precise indoor location is targeted advertising tied to a specific location. Presenting offers and promotions on products when users are within reach or steps of the physical product can be an extremely powerful way to drive new sales. This type of proximity marketing has been tried in the past where advertisers have broadcast messages via Bluetooth or SMS with limited success. By integrating precise indoor location with applications and consumer data, ads can be much more interactive and targeted.

Indoor location has significant value to brands trying to promote their products as well stores looking to trigger impulse purchase. Industry estimates show that 40% of all sales are impulse purchases and surveys from Integer Group show that 90% of shoppers buy items that are not on their list. Brands invest significant money to position their products to be seen by shoppers who are increasingly looking at the screens of their smartphones. With mobile devices able to distract an otherwise semi-captive retail customer, store and mall proprietors need to leverage in store location and mobile apps to recapture consumers’ attention and generate value from their physical presence. Location aware apps have the ability to do this.

Wi-Fi location systems such as WIFISlam use the signal strength of a Wi-Fi router and the mapped location of that router to determine the location of a user. In order to calculate location, apps like WIFISlam need information about the router broadcasting the signal. The owner of the router controls this information who, in a retail environment, is often a store or mall owner. While Apple is snapping up WIFISlam, competitors in the indoor positioning market are taking a different approach and working with retailers and building owners to help them take control of their physical environment and its connection to the digital world. This allows retailers to better control the content, offers and promotions that are delivered to users in their store.

Companies such as Wifarer are building indoor maps and then selling advertising to merchants within the map. They are also providing technology that will disrupt Wi-Fi signals so competitors such as Google, and now Apple, cant accurately map a location using Wi-Fi. This ability to control the online experience in their building through controlling location data provides brick and mortar retailers ammunition as they battle online retailers.

Through control of precise location, retailers can regain the attention of mobile phone users in the store by presenting an interactive digital layer that is powered by precise location of the user. For example augmented reality experiences can be created that are anchored to the physical world by precise location and visual cues in the store. Retailers could not only create new experience to incentivize users to visit a location but sell brands better exposure within these experiences.

The effectiveness of banner advertising is worse on mobile than it is on the desktop but presetting the right message at the right time in the right context will be the key to the growth of mobile advertising and Google will work hard to control this ecosystem. Better targeting will be achieved thought algorithms factoring location, which is controlled by the retailer, and past behavior and preferences that will be predominantly controlled by Internet players like Google. In order to most efficiently present offers, these players will have to realize the value each brings to the table and cooperate. Unfortunately for Apple they do not collect data on consumers so they have limited leverage on shopkeepers. Without a revenue stream to support indoor location, Apple will not lead in this space but will follow innovation from Google. 

Google Glasses will help expand access to wireless networks through tethering

It was confirmed last week that the Google Glasses, available by the end of the year, will tether with Android devices and iPhones. Google Glasses will not include a cellular radio but will leverage the 3G/4G connection of the smartphone. The need to keep the glasses light weight and minimize battery drain is a big reason that Google Glasses is piggybacking on the capabilities of peripheral devices. 

This development perpetuates the trend toward greater access to cellular networks. The market has decidedly stated that users do not want multiple data plans to go with their collection of mobile devices with tablets almost exclusively Wi-Fi only. Unauthorized tethering has been a cat and mouse game with hackers finding new vulnerabilities as fast as OEMs and carriers can patch them. Restricting mobile tethering is a losing strategy. This has caused carriers to shift business models and rethink use cases to enable these devices to generate value from their networks.

The decision of Google to leverage existing connectivity infrastructure will help drive the openness of wireless infrastructure. Many carriers have endorsed the tethering trend and adjusted their business models to better align with this change. Verizon and AT&T have shifted business models to shared plans to align revenues with data consumption instead of the number of devices used by an individual. The increased openness of mobile devices to connect to any network, fixed, wireless and mobile more dynamically will increase data flow adding value to users and revenues to network operators. The more dynamic use of wireless spectrum will not only improve reliability but also create new opportunities for vendors to optimize the use of bandwidth across a more interconnected wireless ecosystem. 

At the end of the day, Google benefits from this increased data flow as it drives more engagement from users and advertising opportunities. Tethering also allows Google to circumvent the carrier distribution channel with their Google Glasses hardware offering as they enter the brick and mortar retail market.

Telefonica Driving Innovation

The rise of the open mobile web presents new opportunities for carriers to regain greater influence in the industry after the launch of the iPhone reshaped the market but they need to innovate. Traditionally, carriers have been unable to compete with Silicon Valley based companies due to their inability to advance new technologies and attract mobile developers. The failure of WAC and the closing of carriers sponsored app stores such as Verizon’s recent app store closing are typical of operator efforts to play a significant role in the application economy.  One company that is bucking the trend is Telefonica and its Telefonica Digital business division. Since its launch in September 2011, the operator has made significant moves to drive innovation and create a more open mobile ecosystem:

• ·         In February 2012 Telefonica Digital partnered with Mozilla, to bring to market the Open Web Device, a smartphone that runs an operating system based on HTML5.
• ·         In May 2012 the company launched TU ME, an Internet based all-in-one communications app that runs over the top of carrier networks.
• ·         October 2012 Telefonica Digital bought TokBox, a service that lets developers integrate group video chat into their web applications.
• ·         September 2012 Telefonica Digital cuts a deal with Aurasma to integrate its augmented reality platform into its media services.
• ·         November 2012 Telefonica Digital made a strategic investment in Everything.me, a technology platform that is improving the mobile experience by creating a new approach to mobile search.

Any one of these moves is somewhat uncharacteristic of wireless operators but all these bets on unproven technology show Telefonica’s ability to really innovate instead of just giving it lip service. Each of these technologies also has the potential to significantly disrupt the current ecosystems, but together and with backing from the deep pockets of a global wireless operator business, Telefonica is well positioned to drive change in the market.

• ·         Everything.me has the ability to change how users discover and use applications and content on their mobile phone. The app searches the web and presents results in the form of icons or apps. The application is also able to search the open web as well as multiple app stores.
• ·         TokBox is the first to market with a platform that leverages the new WebRTC standard providing developers the ability to integrate video chat and conferencing capabilities into their websites. The company helped pioneer WebRTC technology that enables video calling from within a mobile web browser or web app with no plugins.
• ·         Aurasma is a computer vision based augmented reality platform that can create an augmented reality experience anchored to an object that the platform is able to recognize. This technology is much more advanced than browser or location based augmented reality technologies such as Layer or Wikitude.
• ·         TU ME is an OTT messaging app that competes directly with SMS messaging, a significant source of revenues for carriers like Telefonica. By bringing to market this type of IP based messaging service, Telefonica shows its ability to get in front of new technology participating and shaping the market instead of protecting aging yet profitable services.

With consolidation in the industry gaining momentum and large players acquiring innovative and successful companies, the opportunities to invest in these technologies and provide scale will help bring them into the mainstream. The problem arises when large companies acquire innovative teams; risk adverse executives tend to squash the innovation that they acquired. By separating Telefonica Digital physically and potentially spinning the unit off into its own entity will help negate these risks. 

If Telefonica is successful in supporting and advancing innovative teams and technologies, they will be in a strong position to affect significant influence on the industry and drive adoption of the open web. This is particularly true in Latin America where they already have a strong presence, economies are growing quickly and markets are not dominated by one or two mobile operating systems. This trend could lead to much more innovation in the mobile web originating in countries like Brazil where more opportunities will exist to experiment with new technologies and business models.

Implications of HTML5 in mobile applications

The arrival of HTML5 is expected to have significant impact on the mobile application ecosystem. A number of new features will be incorporated into the standard but a few particular improvements will have the most affect on the mobile software market. The ability for web applications to store data on the device, standardized API's to access location data, and easier control of video and audio content without plug-ins will make it easier for developers to create robust applications that are easily ported across devices. While developers' jobs will get a lot easier with HTML5, demand for browser plug-ins and native applications will remain strong, especially in high end devices.

Work on HTML5 began in 2004 to standardize technology that was cutting edge then but is now more main stream. Running video and audio on the web and accessing location data on devices are technologies that have evolved over the past six years and incorporating it into the Web standard is overdue. As we gaze into the future and innovators dream up new user interfaces, HTML5 seems to be standardizing yesterday's technology.

The ability for web applications to store data on devices and access location API's will allow these applications to compete with today's mainstream native applications but innovation in device UI's will provide plenty of opportunities for native developers. Only native applications will be able to leverage device sensors such as gyroscopes, accelerometers, digital compasses, and cameras, components that will be key to applications that create a differentiated user experiences. These differentiated experiences, among other things, will incorporate gesture commands and improved location accuracy through dead reckoning.

Emerging technologies such as augmented reality will drive continued demand for plug-ins and provide plenty of opportunity for companies such as Adobe and Microsoft to provide add on capabilities to standard browsers. Innovative companies will continue to develop new plug-ins that support computer vision technology that dynamically meshes data from the real world with the internet. This may be the new way we interact with the web, providing opportunities for new technologies which will eventually make their ways into new standards.

HTML5 will have a much larger impact on lower end devices that run proprietary operating systems and do not include sensors. The new standard will allow developers to manage platform fragmentation which is much more prominent in the non-smartphone market. As applications built using HTML5 move into mass market adoption, mobile advertising will become a more popular way for developers to generate revenues. Users of lower end phones are also less willing to pay for applications limiting subscriber based business models.

Developers that are looking to compete in the ultra competitive smartphone application market should not give up on plug-ins like Flash or native platforms as they will provide support for the most differentiated experiences. Media companies and developers targeting mass market phones with advertising based business models should be focusing on HTML5.

 

Mobile Widget White Paper

As part of our research of the mobile widget market we recently released a white paper providing an overview of the market and presenting a business case. You can download the paper here. http//www.arcchart.com/reports/widget_wp.asp

Could Google Buy Motorola?

Now that Google is in the device business, could they be looking at Motorola's handset division as an acquisition target?.... Don't laugh it could happen. Here's why.

1. Google gains hardware expertise– While Google has great software developers they do not have a clue about how to build a great mobile phone. Some of the limitations of the HTC 1 emerged due to Google's insistence on dictating all the hardware specs to HTC. The Nexus One is reportedly very fast and designed by a 3^rd party design shop so it seems that Google has learned their lesson. Regardless of Google's increased self awareness, competitive pressures emerging between Google and hardware manufactures will restrict the integration of the best hardware and best software technology to create industry leading devices. An integrated hardware & software company can freely exchange IP, leading to more innovative and efficient offerings. A combined company will also provide Google complete control of all implementations of the Android OS on Motorola devices reducing fragmentation.
   

   
   

2. Google competitors are device manufactures – Nokia is competing against Google with OVI, Microsoft has the Danger hardware business, and Samsung is increasingly competing with Google through its app store and new proprietary operating system. And of course there is Apple and Palm. Apple's acquisition of Quattro Wireless last week unmistakably signals that Apple is gearing up to go head to head with Google.
   

   
   

3. Device manufactures may abandon Android – The launch of Nexus One is a clear indication that Google is not afraid to compete with its partners. Motorola's recovery strategy is based on Android and Google has torpedoed this strategy by launching the Nexus One. The new Google device is based on Android version 2.1 which will compete with the Motorola Droid based on Android 2.0. This puts the Droid at a diminished competitive position. It is becoming clear that if Google keeps the most advanced Android code for its own device experience, Motorola will have a hard time competing with a consistently inferior OS. Other leading OEM's are not taking the bait and are investing in their own software platforms so they can differentiate their offerings. Samsung has announced "bada" and Nokia is overhauling S60. HTC also announced today they are launching a Smartphone based on BREW of all things which may be anther indication of waning support for Android. Without major device manufactures launching compelling Android devices, Google looses influence in the market and will not have to power to change it. Google's ultimate goal.
   

   
   

4. Google can afford Motorola and it is for sale-For more than a year Motorola has had the for sale sign out side the handset business which is probably worth $ 1-2 billion USD. Google has over $21 billion in the bank.
   

I think Google would rather not be in the hardware business but it seems they are already in it, why not go all in.

Droid May Compromise Android's Long Term Success

Next year will be a pivotal year for the Android platform. Between 50 and 75 new Android phones are expected to be announced at the Mobile World Congress in February and version 2.0 also has some exciting new features. While the platform is gaining traction, some troubling developments are posing real risks to the long term success of Google Android. These risks are exemplified in the aggressively promoted Motorola Droid phone. The Droid OS is an enhanced version of Android, which leads the platform down the fragmentation path. Also, the device launched on the Verizon network includes a Google navigation application that puts Google in direct competition with developers…..developers they are trying to attract to their platform.

Fragmentation is not new to the mobile software industry and has kept many a mobile executive up at night. Google has taken steps to manage fragmentation but market forces are driving vendors like Motorola to enhance the platform to differentiate their products. Motorola has wrapped their entire strategy around their Android handsets and will make sure these products are well differentiated from other Android based phones. Further more, the OHA licensing terms do not require Motorola to contribute their IP back to the association, opening the door for multiple distinct Android operating systems battling for market share.

Along with the Droid launch, Google announced "Google Maps Navigation," a turn by turn navigation application which the company is offering free of charge. Turn by turn navigation applications have been some of the most successful in the mobile application market. TeleNav's announced IPO filing on Monday just shows how successful these 3^rd party developers have been. Google seems to want in and has launched a free application that is a direct competitor to existing navigation developers. The folks at Networks in Motion are particularly upset by the Google Maps Navigation launch on the Verizon network. NIM is the software developer behind Verizon's successful VZ Navigator application which it gets $9.99 a month for; of course Verizon gets its share. In an interview last week, Steve Andler of NIM points out the difficult position the new Google app puts developers in and how they are jeopardizing the growth of the Android ecosystem. Steve correctly points out that if developers create a very successful application on the Android platform, Google is in the position to build competitive functionality into the core of the Android platform and give it away for free. This makes it very risky for developers to create innovative applications on a platform whose core code is controlled by a company that can and will destroy partners' business models. And, more importantly, VC looking for the 10X return will not invest in applications built on Android.

Over the years, Research in Motion has been very deliberate not to compete with developers within their ecosystem. By only incorporating commoditized functionality into its platform, RIM is not providing cutting edge applications that compete with their partners. This strategy reduces the risk to developers and provides economic incentive for them to create robust and advanced applications that help sell BlackBerry devices. Google is not in the device business but the advertising business and has not pursued the same strategy. Google Maps Navigation seems to be a very innovative application that will present stiff competition to mobile navigation developers.

It is quite interesting that TeleNav has announced an IPO filling as its market is threatened by such disruptive forces. The company does have an Android version of its application, putting them in direct competition with one of their platform providers. I am not sure I would want to be the investment banker selling that story.