The Commoditization of GPS & the Golden Age of Location-based Services

Updated: A few months ago I speculated that location-based services and the infrastructure they require were headed for a major upswing in 2008. My optimism was based on a sharp increase in the number of mergers and acquisitions taking place in the sector. But lately I’ve been feeling like I may have been too conservative with my outlook for the location-based services revolution.

The main reason is the ubiquitousness of mobile phones; the sheer number of them that get shipped each year guarantees LBS a huge audience. Of course, in order for LBS to be on mobile phones, we need applications, which is where I believe the iPhone plays a vital role. Its large screen and built-in GPS (and now its 3G speeds) enable and encourage truly interesting LBS applications. The subsequent success of independent applications makers — Pelagao and Sense Networks, for instance — will in turn push other platform owners to find interesting LBS applications, too.

Along with the iPhone, some of the newer devices like the LG Vue, the Samsung Instinct and about half a dozen others will serve to radically increase interest in LBS services. That will force the current device makers — namely Garmin and TomTom — to consider opening up their ecosystems to applications that offer more than just maps and traffic services.

As if the rise of cell phones-as-personal navigation devices weren’t enough, Microsoft yesterday announced plans to offer an embedded operating systems for PNDs, aka Windows for GPS devices. Welcome to the first day of the rapid commoditization of the GPS device business. And while it may look like Microsoft’s just trying to get traction for its mapping service, I think this is a bit more disruptive than that. It’s the culmination of the three major technology trends of our times: cheap computing, inevitable connectivity and the easy development of software to put it all to work.

For car makers desperate to add value to their vehicles, Microsoft is providing yet another way to offer a navigation system on the cheap. Beyond the auto market, however, the new operating system is going to prompt dozens of Asian manufacturers to build cheaper PNDs, which will hurt the volumes of the market’s two biggest players quite drastically.

Indeed, Garmin and TomTom need to figure out a way to add more intelligence to their systems. Custom versions of their devices aren’t enough — they need to embrace the concept of connectedness. One way would be to buy Silicon Valley-based Dash Navigation, which has a connected device that puts Internet data to very good use. Here’s what I wrote about them back in December 2007:

The Internet is not just about the browser, but rather it is about data and how one can use it to build clever products. I think Dash, much like Amazon’s Kindle and RCA’s Small Wonder video camera, is part of a movement that is breaking Web 2.0’s browser shackles.

Yesterday, I asked the company if they were worried about Microsoft’s foray. CEO Paul Lego responded to me via email, saying:

“As you know, with the Dash Express we are already delivering all of these kinds of connected features and more in a very integrated way. In fact, with our new API, we have an open platform for the car today…We welcome innovation and look forward to seeing how these features get expressed by other PND vendors, including those that adopt this new Microsoft platform.”

Those are fighting words, but I’m sure even he knows that despite having raised $42 million from well-known VCs, his startup can’t play the hardware game and may need to partner with the bigger device makers. After all, Dash needs to worry about the cell phones-as-PND platforms, too. One way or another, this is going to be a market to watch, one that promises lots of innovation. Not that there’s anything wrong with that!

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