When Nokia released a free version of its Ovi Maps application in late January, many saw it as a major blow to personal navigation devices. After all, Ovi Maps can do practically everything a sat nav can do – it has talk and drive navigation, turn-by-turn guidance and updated traffic information. More importantly, it can be downloaded free to smartphones already owned by millions and is due to come pre-installed on new handsets this month.
But the vendors involved are not so convinved of the threat. Following Nokia’s announcement, Garmin told PCR that it was unconcerned as it already had “a large amount of competition” in the sector, not to mention a GPS-enabled mobile phone of its own. TomTom, meanwhile, issued a statement insisting customers were “willing to pay for the best user experience”, and that’s a view the firm continues to subscribe to.
“I’ll give you a simple analogy, and that’s digital cameras. Most phones have cameras built in, yet people still buy digital cameras because they do the job significantly better than the devices trying to do several things at once,” TomTom’s vice president of sales and marketing for the UK and Ireland, Damian Woodward, tells PCR. “The way we look at mobile phone technology so far is that it’s not really able to deliver a great solution.”
Widget UK’s sales director, Bart Hoorntje, agrees: “Phone applications may work fine, but the screen size, battery life and processor are not built to run a fully-blown GPS application for longer than a very brief period of time. My feeling is that a lot of people will be using them, but I don’t think they replace the PND category on their own.”
And a lot of people are using them. In the first two weeks of its release, the free version of Ovi Maps achieved 1.4 million downloads – equivalent to more than one a second. Nokia told PCR that the move was about “providing the customer with the best technology available”, and “providing the customer with a choice”. Google, meanwhile, has launched a beta version of its own navigation tool, while a similar service is available to Vodafone 360 users.
Thilo Koslowski, research vice president at Gartner, notes that because Ovi Maps’ data is supplied by Navteq – a navigation software company owned by Nokia – it is at a level similar to that of dedicated devices. “What we have is a major consumer electronics company offering a high quality navigation service for free, and that will have an impact on the way consumers evaluate the value and benefit they can get from navigation services,” he says. “I imagine that prices could come down pretty hard. Later in 2010 we’ll see even more aggressive pricing than we saw last year – you may get a pretty decent navigation device for under $100. It may not be fully comprehensive, but it will do its job functionality pretty well.”
However, Woodward argues that the typical cost of manufacturing a PND, combined with consumer demand for top-end features, means that there is little scope for prices to drop further. In fact, TomTom’s average selling price began to slowly rise again towards the end of 2009. “We very much see mobiles as complementary to what we’re doing because, quite frankly, the more people that get experience of navigation, the more likely they are to come and buy a bespoke device,” he observes.
One thing the industry figures agree on is the difficulty of enticing new users to the PND market, which declined in value by 15 per cent last year*. “Saturation of the market is still not very high – a couple of months back you were looking at penetration of around 30 per cent, so there’s still a lot to be had, but you’re getting to a stage where people are repeat buying,” says Hoorntje.
“We’ve kind of got mixed up between trying to get people into the market at a very fast rate – and we’re still talking about a market that’s really only about four years old – and then trying to explain the technologies that are moving us forward,” Woodward adds. “We need to concern ourselves more with getting clarity of messaging on what differentiates us instead of just trying to shove technology in people’s faces.”
Analysts have suggested that, in order to justify their price points, PND vendors need to provide solutions that differentiate them from free navigation applications – such as more location-based tools, social networking options and improved user interfaces. However, Garmin’s answer to the encroachment of mobiles into the sat nav space has been to retaliate by creating its own Nuvi range of phones.
“That would have been a good move if the company had launched it a couple of years ago, before anybody else had done it. Now, because pretty much every new cell phone is capable of running a nav application, it’s a little bit late,” Koslowski points out. “By launching its own phone, a PND manufacturer will have partnered with another hardware manufacturer to build it and it’s also having to compete with other smartphones that are out there. It’s a pretty tough market.”
Woodward dismisses any notion of TomTom putting out a phone of its own. “If you look at how difficult it is for big, established mobile phone operators to bring phones to market, if it’s not your expertise then I suggest it’s even more difficult to bring to market and make it a profitable line for you,” he notes.
While Nokia is the first major mobile manufacturer to offer a navigation tool free of charge, it almost certainly won’t be the last. So, with the floodgates open, is the solution for sat nav vendors to start giving away their applications? Apparently not – despite the fact that TomTom’s iPhone app costs £59.99, it has proved extremely popular. “You can see that it’s still up there among the top grossing applications ever for Apple, so I think we’d be slightly foolish to start giving away what people are very happy to buy at the moment,” Woodward concludes.
*GfK figures, December 2009