NextWala

Disruption in the Location/Local/LBS Stack

Photo source: Dave Mathis

I moderated a panel on location platforms this past Saturday at Cyberposium, a tech conference organized by students at Harvard Business School.  On the panel were: Evan Cohen, GM, Foursquare; Ted Morgan, CEO, Skyhook Wireless; Tom Sexton, VP Sales, Inrix (a Venrock portfolio company); and Stephane de Messieres, Founder, Citizens Market.

I have distilled what I learnt from this panel into the following set of questions that I believe founders of location startups should ask themselves:

1. What market are you in? If you think you are in the location-based services market, think again. Location or LBS is not a market or an industry other than perhaps at the pure infrastructure level where positioning technologies such as GPS chips or location servers are licensed/sold.    You might be in advertising, automotive, retail, enterprise software, local media or something else.  Your business models and go-to-market need to be adapted to which eco-system you are in.
2. How many other similar companies are there in your portion of the eco-system?  Given the hype cycle in location, I'm observing dozens and dozens of me-toos in each segment.
3. What do you do to escape commoditization from the platforms (Apple, Facebook, Google, maybe Microsoft)? And a corollary: how much will your success depend on successful integration, distribution and/or monetization through the platforms (e.g. will you have to give up 30% of your economics like Zynga did to Facebook)?
4. How will upcoming changes impact your business?  including perhaps privacy-related regulation from the FTC; litigation between and from the platform players; and cost-effective availability of positioning for featurephones.

How the market has evolved

Software that derives a majority of its value from incorporating location fixes or location-based data has been around for a while but only in pockets where the Web/Internet had not intruded until a few years ago.  Examples include:

• Automotive navigation solutions: Tier 1 automotive suppliers, auto OEMs, QNX/WinCE as OS
• Digital maps & POI data: Navteq, TeleAtlas, InfoUSA, many other POI providers
• Enterprise/government GIS: ESRI, Autodesk, Oracle/Sybase spatial servers
• Pre-smartphone mobile navigation: Telenav, NIM, many others
• Personal navigation devices: Garmin, TomTom, Navigon, many others

The Google Maps API launched earlier this decade really opened the floodgates to innovation.  And then the arrival of smartphones and always-on broadband connectivity has revved up the developer eco-system even more.  

There is somewhat of a top-of-the-hype-cycle feeling to parts of this market, especially at the apps layer.   In addition, under assault by "free" developer platforms, ad-supported business models, social, "free" location fixes, commoditized location data and always-on connectivity, many of the companies in the segments above have retreated to their high-margin bastions (e.g. automotive OEMs for Navteq) and are facing continual erosion of their markets from startups (or Google in many cases).   However, I believe location will continue to work its way into more and more segments and will become an ingredient in almost every web & mobile service/app.

Here's how I break out the market.  There are of course companies that span multiple layers but I have tried to place companies in their core layer.  Of these, I think augmented reality, while a very early space, has the potential to produce a platform play as it fundamentally changes user behavior and can be a container for a whole set of new apps/experiences.  I also excited about new companies at the data layer and in local commerce/mcommerce.

Layer 1: Positioning Technologies

We've seen offdeck locationing services (based on Wifi or cellID triangulation) emerge - Skyhook, Google, Ekahau etc.  GPS has worked its way into many smartphones through the likes of CSR/SiRF and Qualcomm. And there is IP-based locationing offered by Quova and others.  An exciting development is carrier-provided location fixes, aggregated by Location Labs, Loc-aid and others.  I've seen a lot of indoor positioning technologies in the past year, however almost nothing that's gotten beyond very niche use-cases (i.e. firefighters fighting building fires) and the requirement of changing network infrastructure as well as client-side infrastructure/software (expensive!).

Layer 2: Location-based Data & APIs

The base data layer consists of digital maps, provided by Navteq (now Nokia), TeleAtlas (now TomTom), AND, Autonavi (China) and Satnav (India).  New entrants such as Openstreetmap and Waze have the potential to change the game although Google's move into creating/owning its own map data is a threat.  Social/crowdsourcing is the new trend here in addition to monetization not through licensing of map data but through other models such as advertising and freemium subscription-based applications.  

On tops of maps, there are layers of slow-changing POI data such as from Wcities, Axciom, InfoUSA, AT&T Interactive (Yellow Pages) and others. Even this area is under attack from crowdsourcing-based solutions. I would argue that the real asset that Foursquare, Yelp, Google etc. are building is a proprietary POI database that is far deeper and more up-to-date than conventional sources.  There is an ongoing battle for the best POI database.

And on top of this are dynamic data providers such as road traffic speeds, gas prices, weather, events etc.  Inrix (a Venrock portfolio company), Navteq/Traffic.com, Zvents, Weather.com, Plancast etc. are some of the vendors in this area.

There are a set of location data aggregation services, including Location Labs, SimpleGeo, Factual, Xtify, PlaceIQ and Locomatix (covered in my previous blog post on geo-fencing and opt-in notifications).  Many of these companies not only aggregate but also provide data manipulation APIs of various kinds, including geofencing.

Layer 3: Developer Platforms/Monetization

Platforms provide an audience, distribution, monetization and enabling technologies.  By this definition, one has to include the device OEMs as platforms, including Apple/iOS, Google/Android, Microsoft/Windows Phone, Nokia/Symbian/Meego, Samsung/Bada etc.  

I think media properties such as Facebook Places, Google Maps/Earth, Bing Maps and Mapquest are platforms, not only providing geospatial services but also bringing an audience to consume developer applications as well as potential monetization capabilities.

And finally, I would include enterprise platforms (such as ESRI, Pitney Bowes/MapInfo, Weogeo etc.). and location-based promotions/advertising firms such as Placecast, Where Ads and others in this category from a monetization perspective.

Layer 4: Applications/Services

It's almost impossible to categorize the thousands of location-enabled apps.  Local search (Google, Microsoft, Where - a Venrock portfolio company) is an established category as are local reviews (Yelp, Urbanspoon) and navigation (Telenav, NIM, Waze, Skobler).  

Upcoming areas include social (Foursquare, Gowalla, Facebook Places), augmented reality (Layar, AcrossAir, Sekai Tonchidot), local product search (Milo, Google, eBay/Redlaser), local transactions (Redbeacon - a Venrock portfolio company, Opentable), indoor maps (PointInside, Micello) and digital car (Pandora, Aha Mobile - a former Venrock portfolio company, Trapster, VoiceontheGo). [Addendum: Awarepoint, a Venrock portfolio company, provides a healthcare IT solution that uses location for hospital asset tracking.]

Addendum: Layer X: Monetization

It almost does not make sense to include monetization in this post since there are lots of different revenue models, some B2B, some B2C and most of them not having anything specifically to do with location.  Business models range from per-device fees, per location-dip fees, CPM-based advertisement, annual subscription fees, local transaction fees, software licensing and every other model on earth.  However, the industry sometimes discusses location-based advertising as part of the 'location industry' - so I would include location-based promotions/advertising firms such as Placecast, Where Ads and others in this category from a monetization perspective.

At Leadscon

I just landed in Las Vegas and am attending Leadscon over the next couple of days.  The conference is sold out which is saying something in this down economy when most tradeshows are being down-sized or cancelled.

I'm interested in lead generation in this recessionary environment.  If performance marketing is (somewhat of) a safe harbor in this environment, then there must be several businesses that are benefiting from lead generation / CPA. Digital goods/services providers are benefiting, for sure. I wonder how auto OEMs, consumer electronics providers, durable goods providers and others are leveraging the recession - notwithstanding their own specific industry problems, all of these categories would probably benefit from shifting 10-15% more of their ad spend online (from TV and other traditional media).

Some of these areas that are benefiting include:

• Incentivized rewards - TrialPay, Offerpal, Super Rewards etc.  Incentivized rewards have had a great ramp in the past year, providing a solution to the monetization problem faced by social network app developers.
• Virtual goods - Facebook, Hi5 etc. have all introduced virtual goods and many social network apps vendors as well as MMOGs have embraced virtual goods wholeheartedly.  Leveraging this trend, Venrock is an investor in TwoFish which is a "virtual economy data platform that harnesses powerful post-purchase intelligence to manage virtual economies for leading social, gaming, and entertainment experiences."
• Subscription businesses - Netflix, ShutterFly etc.  One of the takeaways from the recent Jefferies Internet and Media conference was that "more subscription based models are likely to emerge given the current ad weakness."  Based on this thesis, Venrock recently invested in Aria Systems which is a leading provider of on-demand subscription billing products.  

If you are one of these companies benefiting from this recessionary environment and are at the Leadscon show, give me a ping today or tomorrow.

Top 10 list from CES

CES turned out to be quite interesting, albeit quieter (as expected) than last year.  IMO, most of the action was in the vehicle and mobile spaces. Elsewhere, I mostly saw incremental improvements over last year.

Here's a top 10 of the most interesting announcements, from my point-of-view. These included (from best down to good):

1. Palm Pre - The new device seems to be a (temporary?) rebirth of Palm - the functionality is great, superior to the iPhone in some cases. Sprint may launch  this early in 2009.  New Nova OS with multi-threading.  Multi-touch screen, slide-out QWERTY keyboard, 8 GB storage, GPS, WiFI, Bluetooth, removable battery, accelerometer.  No word on an app store concept yet.  Photo: Palm.

2. Ford Sync next-gen, including Venrock-portfolio company INRIX.  I blogged on this a couple of day back here.

3. 3D TV - even though 3D TV seems to make a small comeback every five years, this year the quality of the experience is good. I went to the Sony booth - great experience from multiple angles. Had to wear 3D glasses.  LG, Panasonic and others were also showing their technologies in this area.

4. Toyota-VoiceBox announcement - Toyota announced its new telematics platform - Safety Connect (for Toyota cars) and Enform (for Lexus), with a conversational voice interface provided by VoiceBox and telematics provided by ATX.  The Lexus Enform system will be in Lexus cars and dealerships early this year. I believe that conversational voice will become a must-have HCI requirement for cars in the near future as more and more connected services are brought into the car - there is no way to handle this increasing complexity in the future using a hierarchical, menu-driven approach.

5. TomTom Go740 LIVE - connected PND. Interesting given the demise of Magellan and Dash as PND companies. Good to see connected PNDs hit the market (including Best Buy late last year).  Photo: TomTom.

6. Microprojectors - there are finally some working products in the market, including Samsung's MBP200, 3M's MM200, Nextar's Z10. These are projecting images from between 20 to 50 inches.  I also saw a microprojector embedded in a mobile phone.

7. Boxee - while Boxee had no announcement at CES, they were present at booths at CES - this is worth a mention here.  Fred Wilson, Boxee's investor at Union Square Ventures, calls this a 'Firefox for media centers'.  I have Boxee installed on my Apple TV and Boxee's intuititive UI helps me watch Hulu, Comedy Central and various other Internet video destination sites on my TV.  A platform approach such as Boxee's has a much greater opportunity than individual content widgets built for each separate TV model or media center model.

And finally, it was amazing to see how some concepts from last year have taken hold and have been broadly adopted across the CE landscape.  These provide no real differentation between the different CE vendors but are worth mentioning below.

8. Youtube/Netflix everywhere - seemed to be everywhere. This is similar to how the studios are licensing their content to anybody who is willing to pay the prices and follow the business models that the studios want. In other words, at the end of the day, CE vendors will not be able to differentiate based on the content they can offer.

9. Web widgets on TVs - a number of TV vendors, including Samsung, were demo'ing widgets from Yahoo!, Youtube, Flickr, sports, weather etc., based on broadband enablement of TVs. I don't believe an model-by-model approach or even a vendor-by-vendor approach to web access will scale. There needs to be broader platform approach which WebTV/Tivo tried/are trying and Boxee is going after currently.

10. Green / energy savings - a number of the PC and TV vendors were talking about energy savings but again, didn't seem like a differentiator between the CE vendors.  Consumers, in my opinion, are seeing this as mostly a must-have.

Excellent post on the map eco-system by Paul Smith

Great post by Paul Smith of Everyblock on the map stack. I'm interested in looking at startups with some market traction in all these areas mentioned below.  Where 2.0 is a great place to see the latest and greatest in this space.

Here's a bit of what Paul says in his post:  "...Google Maps fatigue. We’ve all experienced it. It manifests not only when we yawn at YAGMM (Yet Another Google Maps Mashup)...It’s the effect of seeing the same elements over and over again across the web."

"The key to this kingdom is understanding the map stack. Modern online mapping applications all adhere to this architecture...There are four major layers in the map stack, from the highest to lowest level."  These are the browser UI, tile cache, map server, geospatial data. 

I'm seeing innovation occur at all these levels. Companies like Cloudmade are taking geospatial data from OpenStreetMap and adding all the other layers mentioned above.  At the geospatial data level, companies like Satnav (in India), Autonavi (in China) and Zenrin (in Japan) have built out pretty comprehensive databases.  There are many other companies out there that are now taken user-generated data and aggregating that for speed traps, traffic, mountain biking routes, etc.

If you're interested in diving in a bit deeper, there are a number of presentations on location-based services and technologies here.

I'm looking for inspiration at the Consumer Electronics Show (CES)

(Photo from Anthony Catalano)

From the early reports, it sounds like CES will be ~10% smaller in terms of attendees as well as exhibitors, compared to last year.  So why go?

Well, apart from meeting several companies, I'm there looking for inspiration for emerging themes for 2010 and beyond.

One theme that this recession might help encourage is low-cost purpose-built Internet-connected appliances or service-oriented hardware. I would be interested in seeing the Web-ificiation and broadband-enablement of any devices being introduced at the show, including TVs, radios, in-car gadgets, home appliances, navigation devices, chargers etc.  This includes new user interfaces that let these CE devices leverage the web.  Other themes I like include money-saving, green and energy management.

Last year, I was there looking at a number of automotive technologies (telematics, entertainment, navigation etc.) as well as digital home and mobile.    These themes face considerable pressure in 2009.  In automotive, the car market has collapsed (30-50% reduction in sales) and several GPS device makers have restructured or gone out of business. Mobile also seems to be somewhat out of favor, other than the superphone category - iPhone, RIM's Storm, Nokia n97 etc.  Most of the thousands of mobile applications for communications, social networking, LBS, video, search geared toward featurephones are not getting much profitable traction.