GPS Map Shakeout

Earlier this year, GPS device maker TomTom put in a bid for digital mapmaker Tele Atlas. Today, cell phone and device giant Nokia announced an 8.1 billion dollar buyout of digital mapmaker NavTeq.

These buyouts wouldn’t seem to be a big deal, until one considers that Tele Atlas and NavTeq are the only games in town. Any company wanting digital street maps in their software or device has only two choices to buy from, Tele Atlas or NavTeq.

I suspect that putting the entire source of digital maps into the hands of a pair of device makers has made other GPS device makers very nervous. GPS device makers Garmin and Magellan would seem to be the companies most imperiled. But I think concern over this map consolidation will travel as far as the headquarters of Google and Microsoft. And their reactions to this consolidation could reverberate for years.

Microsoft and Google don’t seem to be direct competitors to Nokia or TomTom, so why should they be concerned? The answer is cell phone street mapping I have a feeling that cell phone street mapping applications are such a ‘killer app’ that they could be the key to making smart phones the single largest segment of the cell phone market. And while neither Microsoft nor Google would seem to be direct competitors to TomTom or Nokia, I’m not sure the new owners of these mapping companies would see it that way

Microsoft makes the Windows Mobile OS used by many of Nokia and TomTom’s competitors And Google has some not-very-secret plans to enter this exact same cell phone OS market More importantly, both companies currently have cell phone mapping applications, available free of charge to anyone who chooses to download them Google has Google Maps mobile, Microsoft with Live Search mobile

Both Microsoft’s and Google’s mapping applications are quickly adding features Google’s product already has GPS support I suspect it is only a matter of time until Google, Microsoft, or both, improve their applications into full-blown GPS vehicle navigation systems with voice driven driving directions

A little secret of those expensive TomTom GPS navigation systems is that they don’t need much hardware to do their magic TomTom 5, with full voice support and real-time moving maps runs just fine on 4-year-old Palm OS machines

Machines of this sort could probably be built today for tens of dollars, certainly no more than $50 If super cheap, commoditized, generic Chinese cell phones and PDA’s were able to run Google’s and Microsoft’s upcoming, probably free, full-blown vehicle navigation apps, TomTom and Nokia’s devices could be priced right out of the market This could leave these companies little to show for their billion dollar mapping purchases.

Unchecked, Google and Microsoft’s mapping applications could quickly commoditize the world of GPS mapping devices The ad-supported software would be essentially free, and the only cost would be the device itself

But Microsoft and Google can’t do this without maps And NavTeq and Tele Atlas own all the maps Nokia and TomTom now own NavTeq and Tele Atlas Add to this the rumors that TomTom is about to get into the cell phone market,, it quickly become apparent that Nokia and TomTom would be crazy to allow the above-speculated commoditization of the digital mapping market.

Nokia and TomTom may be tempted to react to this emerging threat by raising the prices of their maps or by providing customers older maps Knowing this, can NavTeq’s and Tele Atlas’s customers afford to blindly trust Nokia and TomTom to continue selling them the latest maps at a reasonable price? I don’t think Microsoft, Google, Garmin or Magellan can afford this risk So what can they do?

The obvious solution would be for Microsoft, Google, Garmin and Magellan to build their own maps But because each competes with one another, each would have to undertake this task alone

Building digital maps of the entire first world is no small undertaking It requires many fleets of vehicles outfitted with GPS trackers, manned by skilled employees, with all the data checked and edited by hand These vehicles need to drive every street, lane, and country road in every supported country If mapping the entire first world were easy, NavTeq and Tele Atlas wouldn’t have each sold for billions of dollars

One of those four companies seems to have already responded, and is well on their way to mapping freedom While this company hasn’t announced plans to create their own map database, it’s fairly clear that the process is well underway.

So which company has a fleet of mapmaker vehicles hidden in plain sight? The not too surprising answer is Google Google’s fleet of photo taking vehicles has been slowly capturing roadside views of US cities for the past many months These vehicles take photos of the roadside and match them up with GPS data Major cities are being covered right now, but the suburbs and countryside will certainly follow And while these vehicles are not officially tasked to create new road maps, by necessity, these vehicles need almost every single piece of equipment and software that would be needed to make their own digital road maps

I strongly suspect that as Google’s truck fleet covers ever-larger sections of the US, Google will stop buying map data from NavTeq and Tele Atlas and start using their home grown map data.

Microsoft seems to once again be well behind the curve, having made no apparent moves to create their own maps Knowing Microsoft, I expect they’ll try to work a deal with either TomTom or Nokia Wherein they’ll offer TomTom or Nokia cut rate prices for Windows Mobile in exchange for a long-term map guarantee But because maps are quickly becoming the killer app for cell phones, such a deal would certainly mean that Microsoft would demand the maps be available to all their Windows Mobile device makers Many of these Windows Mobile device makers sell some very inexpensive, commodity devices, directly competing with Nokia and TomTom Unless Microsoft was to massively sweeten the pot, I couldn’t imagine either Nokia or TomTom would agree to such a deal.

Microsoft will probably, eventually comes to the same realization as Google and build their own fleet of map recording vehicles Of course, Microsoft probably won’t start on this project until Google has a massive lead on them and doing dozens of unique things with their maps.

Garmin and Magellan by comparison, would seem to be in far more precarious positions I haven’t studied the financials of either company, but it’s obvious neither has the financial resources of a Google or Microsoft Because of this, it’s hard to see how their business can continue to grow if they are forced to purchase ‘the’ key ingredient of their devices from direct competitors For Garmin or Magellan, a buyout, merger, or a severe hit on sales wouldn’t seem too far-fetched

Because if an when Google does finish its maps, their vehicle navigation products will almost certainly run on some very inexpensive hardware In grand Google tradition, the software itself would be ad supported and free to end-users If the history of the desktop version of Google Maps is any indication, they may even allow their mobile maps to be extended and enhanced by 3rd party developers.

For consumers, this could bring a real renaissance in mapping and vehicle navigation For the existing players in the digital mapping market, a massive shakeout may be on the way.


Written by Michael