Gartner predicts dramatic rise in location-based services

The use of location-based services (LBS) is soaring, and will lead to a doubling of subscribers and revenue over the course of 2009, according to the latest figures from Gartner.

The analyst firm's Dataquest Insight: Consumer Location-Based Services, Subscribers and Revenue Forecast 2007-2013 report predicted that LBS subscribers will grow from 41 million in 2008 to 95.7 million in 2009, while revenue is expected to grow from $998.3m (£615m) in 2008 to $2.2bn (£1.35bn) in 2009.

Despite the fact that mobile sales have dipped slightly, the growing trend to use mobile devices for navigation and other location-aware applications is driving the uptake of LBS.

More and more smartphones now include GPS receivers, but LBS can triangulate a user's position based on cellular networks or Wi-Fi access points as well, thereby expanding the range of possibilities. These might include helping friends to find each other or parents to locate children, along with mapping or navigation services.

"The LBS industry has matured rapidly in recent months through a mixture of consolidation, improved price/performance of the enabling technologies, and compelling location applications," said Annette Zimmermann, senior research analyst at Gartner.

"Factors driving the increase in the next year or so include higher availability of GPS-enabled phones, reduced prices and the appearance of application stores."

The report predicts that 'free' LBS, which are usually subsidised by advertising, will gain more traction as users adopt them over paid services. Uptake will also be helped by the growing adoption of flat-rate mobile data plans.

The share of users taking advantage of free mobile services in North America and Western Europe is between 10 and 15 per cent today, but is expected to grow to 40 to 50 per cent in 2013, according to Gartner.

Interestingly, the reasons behind the uptake of LBS seem to vary distinctly by region. Adoption in the US is being driven by navigation services and family safety applications, while Europeans seem to be most interested in local search and 'friend finder' type services, while largely ignoring applications.

In the East, Japanese law mandating the inclusion of GPS in mobile phones has been accelerating growth, while the summer Olympics in China last year heralded the first introduction of LBS.

"The competitive landscape will change, and most mobile carriers need to alter their approach towards offering LBS and dealing with developers," said Zimmermann.

"Subscriber growth will hinge on 'free' - disregarding data charges - services. Mobile operators' initiatives to open up the application programming interface to third-party developers will help them compete against other players in the market, and will also be beneficial to the different parties involved, down to the end user."

Gartner expects more compelling and useful applications and services to come to market in the next 12 to 18 months. These could include digital coupons that can be redeemed in nearby stores, or 'augmented reality' applications which overlay information on a map or on the mobile device's camera.

This growth is expected to garner greater interest from the big enterprises in the market, either through acquisitions or new applications, but smaller niche players will survive in local markets where they have an established user base and unique offering, with which larger players cannot compete.