Application stores are presenting a new, significant channel for the promotion and distribution of mobile applications in EMEA. In recent report Canalys analyzes how important will this channel become for navigation applications, and what opportunities does it present.

“Turn-by-turn navigation is one of the few types of mobile application that consumers have shown a willingness to pay a valuable premium for. In part, this is because these solutions replicate the dedicated, portable navigation device (PND) proposition that consumers are used to associating with a price tag of up to €250 – and even more for some specialist niche products,” says Canalys.

But, encouraged by existing application stores, there is an expectation that the applications found in app stores are cheap or even free: certainly Apple has seen mostly free applications downloaded from its store.

Navigation offerings therefore need to be priced competitively to succeed, while preserving sufficient margins for developers.

Canalys anticipates that as perpetual solution prices inevitably fall, vendors will look to subscription business models, at least for additional premium content, to deliver higher returns from their customers.

“Vendors must also watch closely how free or very cheap basic navigation applications, such as Nav4All, AndNav2 and Roadee, perform. Though lacking brand recognition and usually based on community-generated maps of questionable and varying quality, such as those from the OpenStreetMap project, consumer expectations of these solutions are low and relatively simple to exceed,” analytics say.

Canalys claims if these applications can give a user experience good enough for basic use cases, reviews and ratings and viral promotion could see them taking customers away from established vendors.

App Marketplace

Application stores, meanwhile, are already establishing themselves as consumers’ first port of call when looking for mobile applications or device personalisation and enhancement options.

According to the report, technological and optimisation barriers to mass-market uptake of phone-based navigation in EMEA are continually being eroded. Of the 26.1 million smart phones that shipped in EMEA in H1 2009, 22.6 million (86.7%) had application-accessible integrated GPS chipsets, compared with just 36.0% for the same period in 2008.

In H1 2009, 42.3% of GPS-integrated smart phones that shipped in EMEA used a touch-screen as the primary input method. Meanwhile, Nokia continues to bundle free periods of turn-by-turn navigation with the vast majority of its S60 smart phones and to offer navigation-focused devices or SKUs, such as the 6710 Navigator and the 5800 Navigation edition, respectively.

Other handset vendors, such as HTC and Samsung, as well as some operators, have also now finally started to not just pre-install, but actively promote navigation solutions, usually powered by third-party software.

“All this has helped create a market environment, certainly in the developed markets of Europe, where consumers are now well aware that they can use mobile phones for satellite navigation,” says Canalys.

Combined with growth in mobile application marketplaces and the accompanying consumer interest in browsing and discovering applications, the EMEA market for phonebased navigation offers exciting growth potential.

Canalys forecasts that the user base for phone-based navigation in EMEA will grow by 40% year-on-year to 6.3 million in 2009, and by 54% to 9.7 million in 2010.

How to exploit the new opportunity?

With June’s iPhone OS 3.0 launch, Apple allowed turn-by-turn navigation applications to be developed for the iPhone and sold via the App Store. Navigon quickly got its MobileNavigator application into the store, beating TomTom, which had already shown its application at Apple’s Worldwide Developer Conference, analyzes Canalys.

Navigon evidently saw a first-mover advantage and quickly became a leading application on the German and UK stores, where its brand is established, priced at €99.99 for European map coverage, or €50 to €70 for a single country or group of countries.

The Navigon application, and the similarly priced TomTom solution that followed just over a month later, were positioned as premium applications at price points comparable to entry-level PNDs.

“ALK, however, took a different approach, quickly placing its perpetually licensed CoPilot Live applications in the store at the much more competitive, affordable prices of €33.99 for specific groups of European countries (eg, the German-speaking DACH countries or Benelux), or €79.99 for Europe-wide coverage.”

The research says ALK, with a considerably less well-known brand than TomTom, has managed to become a strong contender among turn-by-turn apps on the App Store through being competitive, and now has the highest grossing paid-for application in the UK.

TomTom’s approach, meanwhile, has been less hurried, for better or worse, and has relied on its brand strength to deliver results and elevate it above a need to enter into a price war. It is also focused on delivering a PNDlike experience as far as possible.

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