Way back in 2001 we said that "Location Based Services" is something of a misnomer. Why? Because while there are powerful applications that are uniquely enabled by the availability of automatic, high-precision location information, their number is small. In contrast, there are orders of magnitude more applications whose value increases meaningfully when automatic location information is available — "Location Enhanced Services" is a more accurate term.

But among the small number of applications that can only function with location information, by far the one that will see the broadest adoption is navigation. Today in North America 31% of adults own some form of navigation device, dominated by the 18% who own a devoted Portable Navigation Devices (PND) from TomTom, Garmin, etc. Yet it's clear to us that, in the long term, mobile phones will be the dominant tool for real time navigation — we think this takeover will occur by 2013.

This morning Google poured some accelerant on this shift, as it announced Google Maps Navigation, extending Maps to include real time turn-by-turn directions. In their post Google rightly points out that, while Google Maps is a powerful application, its usefulness declines precipitously once you start driving. In that regard, Google Maps is not much of a direct competitor to the subscription-based navigation services like VZ Navigator that carriers offer today. Google Maps Navigation changes that, and while today the effect is barely a pinprick in the navigation revenue balloon, that hole is going to expand rapidly.

Google's announcement is no surprise, clearly real time navigation was on the roadmap for Maps and it was only a question of 'when' not 'if' — just as the question for navigation vendors like TeleNav and carriers like Sprint is not 'will Google eat into your navigation business?' but 'how will you extend navigation with additional value to compete with Google's navigation offering?'

The pace at which Google will eat into others' navigation revenue is partially under the control of carriers and platform vendors:
  • Carriers must weigh tradeoffs in Android. Since Google Maps Navigation is only available on the Android platform today (and only on version 2.0), expanding the Android portfolio carries a new tradeoff. No carrier has yet chosen to release an Android phone that is not also "with Google" but that is certainly an option. To date, this has been an easier choice but now releasing an Android phone automatically kills a revenue stream that operators care about. In particular, such an application may cause Verizon some mild indigestion over its embrace of open platforms and software.
  • Platform vendors must decide on accepting the Google app. Google's all about reach so it's likely that they will create versions of Google Maps Navigation for the iPhone, BlackBerry, and possibly Symbian and other platforms. It will be hard for Apple to make the same "replaces basic functionality" argument about Google Maps Navigation that it made in rejecting Google Voice. RIM, Nokia, and Microsoft will face a similar decision should Google bring the application to their platform. All will be hard pressed to find a valid reason to say no.
But it's indisputable that the value of turn-by-turn navigation is going to zero with Google's offering. It will decline slowly since Android's share is quite small. Providers of navigation solutions need to focus on the value they offer beyond what Google does. For TomTom and Garmin that includes their deeper understanding of how consumers navigate in different regions, their better hardware and accessories that contribute to a better navigation experience than what's available on phones, and bringing their solutions to existing platforms like the iPhone. In the future their challenge is extending beyond navigation to include social connections, breadcrumbs left by those social connections, and leveraging behavioral data to better make recommendations based on past, current, and future locations.

In my experience PND owners are an incredibly loyal lot who couldn't imagine switching to a phone-based solution. And those who have a system built into their car will never buy another car without one. Where do you fall on the navigation spectrum?