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Mobile navigation systems have been one of the most profitable purveyors of mobile content, with subscribers paying an average of $5 to $10 for mobile GPS access. But Google announced today that it will be launching a free turn-by-turn mobile navigation system next week. And the news ought to have navigation companies worried about their future.

Google's system will launch next week on Motorola's Droid phone and will eventually roll out to other phones, including the iPhone. Can GPS companies compete with free?

The search giant has a history of launching free services supported by advertising, and subsequent iterations of Google's mapping program will likely have advertising. But Google is also able to cut costs on a service like this because it is simply less costly for Google, which already has the mapping data to support a directional service. Other companies have to fund comprehensive mapping tools themselves, but Google has much of the infortmation from other products. The company is ending a licensing agreement with map provider Tele Atlas, which charges a fee for each person that accesses its data. It seems that Google now has enough information to go it alone.

Mobile mapping services like Google's have been cutting into the profit margin of companies like Garmin and TomTom, but the GPS devices have been priced according to the notion that people are willing to pay for their functionality and reliability. As Google amps up its product that advantage is drifting away. (And quickly. Garmin's stock dropped 11% on Google's news today.)

Google's new product will have street and satellite views and search-driven voice controls. Also, users who don't have a street address or name can give Google identifying information they do have and the service will give them address suggestions.

According to Forrester Research, 21% of American adults own a personal navigation device, and that market is expected to continue growing at 33% a year for the next five years. But Forrester also says that by 2013, phone-based navigation systems will dominate the market.

And navigational companies have been fighting back in the mobile space. In 2008, Garmin announced it would create its own mobile device. That product, the Garmin Nuviphone G60 from AT&T, is more expensive than an iPhone at $299.99 (with rebates). And features like traffic updates, weather, movie times and gas prices require an extra $5.99 a month subscription.

Navigational software companies have also learned to work with mobile devices, but the price point has remained high. Garmin has a mobile product (including Google Map connectivity) that comes "as low as $99.99," while TomTom recently developed an iPhone app and related car mount at the same price point. Research in Motion's Gokivo iPhone app costs $4.99 plus a $10 monthly subscription, coming out around $120 a year.

Mobile navigation companies may quickly have to change their business models if they want to compete with Google, but even that will be difficult. Google can fund its entry into the market with advertising down the line, and it is miles ahead of any small company when it comes to that.

For now, navigational companies are hoping that reliability and accessability will beat off free products from Google and other mobile competitors. Steve Andler, vice president of marketing at the wireless navigation company Networks In Motion, tells Forbes that the mobile market is different from the Internet, where "everything's free and always in beta. People are willing to pay a premium to have something work all the time on their phones."

But are they willing to pay a $99 premium? Unlikely. And as Google perfects its service, the utility of that arguement will continue to dwindle.

Image: Google

Meghan Keane

Published 28 October, 2009 by Meghan Keane

Based in New York, Meghan Keane is US Editor of Econsultancy. You can follow her on Twitter: @keanesian.

721 more posts from this author

Comments (3)

Tim Watson

Tim Watson, Email Marketing Consultant at Zettasphere

This was the logical next step.

Over the last weeks I've been using Google maps on my mobile and seeing how the routing compared with Garmin on my mobile.

My thoughts were 'if it did turn by turn voice' then for standard use I'd drop Garmin. To really compete Google will need the replan, avoid, POI and go via type features. Where they are short on features, I'm sure they will add them.

Something that Sat Nav companies aren't doing is Latitude, not only track yourself but see where your friend are, using a mobile or computer based web-browser. There are specialist companies that do this, they don't stand a chance now. See http://www.google.com/intl/en_us/latitude/intro.html. My wife watches me on my way home now to see if I'm stuck in a jam!

Latitude goes further and includes routing via public transport as well as car or on foot. The user interface is clean and simple, the Google trade mark.

almost 7 years ago

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Manny Coulon, Director at IdeasForTheKids.com

Interesting development - though one which has been expected for a while.

Though the service is "free", a couple of points to remember:

1. Quality of service. It looks like the service relies on a mobile data connection for the mapping part. If you travel through an area of poor signal (very likely on many journeys in my experience), you'll lose the mapping and maybe quite a bit of the navigation service until the signal picks up again.

2. Is it really free? Unless the service allows you to use maps loaded onto your device (unlikely as I read it at the moment), you could find yourself using up a lot of your mobile data allowance very quickly and could rack up very significant cost.

SatNav manufacturers are less vulnerable (at the moment) in my opinion as the onboard maps and independence from data signal strength are big advantages. Mobile phone manufacturers who offer SatNav through data connections for a fee are more vulnerable from Google's new offering.

Will be interesting to see how this evolves...

over 6 years ago

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Sam

Use a regular old map and plan out your trip prior to leaving.  Distracted drivers playing with toys are extremely dangerous on our roads.

over 6 years ago

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