Worldwide consumer location-based services (LBS) subscribers and revenue are expected to more than double in 2009.

The growth is being driven by the higher availability of GPS-enabled phones, reduced prices and the appearance of application stores, according to Gartner.

Research from the firm’s analysts shows that despite an expected 4 per cent decrease in mobile device sales, LBS subscribers are forecast to grow from 41.0 million in 2008 to 95.7 million in 2009.

They calculate that revenue is anticipated to increase from USD $998.3 million in 2008 to USD $2.2 billion in 2009.

Annette Zimmermann, senior research analyst at Gartner, said 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.

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

Gartner predicts that advertising-based or ‘free’ LBS (disregarding data charges by mobile carriers) will gain more traction as users adopt it as a way to limit costs.

Mobile carriers that stick to the current predominant business model of charging users USD $5 to $10 per month plus data plans will experience high churn rates as users will look for free alternatives.

In North America and Western Europe, the share of users taking advantage of free services is approximately 10-15 per cent today and is expected to grow to 40-50 per cent in 2013.

Zimmermann said the competitive landscape will change and most mobile carriers need to alter their approach toward offering LBS and dealing with developers.

"Subscriber growth will hinge on "free" – disregarding data charges – services," she said.

"Mobile operators’ initiatives to open up the application programming interface (API) 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 such as digital coupons to be redeemed in a nearby shop and points-of-interest search services.

Smaller niche players will survive in local markets only when they have an established user base and unique offering that larger players cannot compete with. Other players will be acquisition targets for larger vendors.

The Gartner analysts said LBS market dynamics vary by region. For example, North America is the largest market due to mobile carriers’ strong efforts in navigation services and family-safety solutions.

In Western Europe, navigation is currently the most used application, followed by local search and "friend finder." There is still no significant uptake of safety applications.

Japan will continue to see steady growth as GPS has been required by law in mobile phones since 2007.

In Asia/Pacific, during the summer Olympics, location services were for the first time offered in China which is now an advertising-based solution and free to the user.

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