TomTom’s Mobile Network Strategy?
Let’s continue exploring the potential for TomTom (and TeleAtlas) to move towards integrating a mobile communications strategy as part of the Company’s future growth. As noted previously, we believe that path tracking is one of the core interests of the company and plays a key role in its future. We have suggested that TomTom may attempt to accomplish path tracking using 1) cell phone/cell tower location information, 2) GPS information conveyed by TomTom PNDs (both online and through cellular connections), or 3) some combination of the two approaches.
As noted in our last blog, TomTom’s Traffic HD service already utilizes cell tower fixes as a method of providing traffic information to the company’s subscribers in the Netherlands. In addition, TomTom harvests route information from PNDs (whose owners have opted into the program) during the synchronization with TomTom Home over the Internet. The “Home” synchronization allows users to send to TomTom map corrections through MapShare, receive MapShare corrections from TomTom, upload GPS Quick Fix information and communicate the paths that have been recorded by their TomTom device since the unit was last synchronized with “Mother Drum” (aka TomTom).
Although TomTom has received real benefits from the anonymous sharing of path information that was collected during the running of a route at a previous time (e.g. these data helped generate traffic info and some lane guidance information used in the new TomTom 930 and 730 models), there is no obvious way to turn the use of these data into a recurrent revenue stream. Today, the user does not pay for MapShare, although TomTom Home is a portal that provides the user access to other services (buying new maps, new PND voices, etc). We suspect the revenue generate by map updates may be important, but see no other significant revenue generating portions of the Home service. Please note, I am not disregarding the economic offset that may result from using the data provided to the Company through MapShare, just indicating that it is not classified as a direct revenue generator.
So, what might TomTom do to change the model? All of the assumptions below are based on my belief that TomTom will continue to participate in the PND market, even though the demand for the product will continue to decline.
1. TomTom could expand the type of relationship it has with Vodaphone to other mobile operators in other geographies, but use the service to combine both cell sector tracking and more detailed, real-time, GPS tracked routes recorded by TomTom PNDs. Doing so could allow TomTom to create a near-real-time “killer” application in the “land of traffic”.
2. TomTom could become a Mobile Network Virtual Operator (MVNO) proving the same type of information described above, but as more of a pure play in terms of branding and marketing.
3. At some point, TomTom could forward integrate the strategy described in “2” above into concierge, travel and safety services provided through a call-center. In some ways, this is the OnStar model, with TomTom also providing “voice” services to the consumer.
4. TomTom could decide to provide traffic and routing to mobile network operators directly as a fee-based service. (A business model similar to that of Networks in Motion or TelMap.)
5. TomTom could manufacture line of TomTom phones and provide supporting traffic and routing services directly to mobile networks. The support could be in the form of a “white-label” or a “branded” strategy
Well, I think TomTom is considering trying all of the above, while trying to avoid confusing the market as to the nature of their business. Avoiding channel conflict will be important here, but TomTom has to try something unique. After all, as some famous wag once said, “We invent the future as we move towards it.” TomTom must investigate the potential of these strategies and should be happy it has this opportunity. Conversely, Garmin seems to have somewhat limited options here, but their business model is uniquely different from TomTom’s. (Perhaps we should look at Garmin’s strategy?)
Eventually, however, TomTom will migrate its strategy to deliver items 4 or 5 from the list above. TomTom wants to develop a recurring revenue stream and will not be able to do so only by manufacturing PNDs. Instead, they need to find a way to provide services and service contracts (either directly or indirectly) to consumers and begin measuring themselves on ARPU (Average Revenue Per User) and other metrics used by communications companies.
It is vital that TomTom continue its move towards content and services. Although the Company may do OK financially while offering the services described above, it needs to focus on: 1) where people are going when they travel, 2) determining the services located near these travelers while they are enroute (the traffic link) and 3) finding ways to match these up for purposes of delivering just-in-time advertising. Doing so will allow them to participate in Local Search and the advertising markets – which is where the real money is to be found. Now, if they can just find the right partner in a market that is likely to be dominated by Google.
Google is a force in mobile, not because of its phone technology, but because of AdWords and AdSense. Google’s revenues are built on the advertising model and they know how to wring every dollar out of publishers and the distribution channel. Google will dominate mobile advertising because it knows how to manage an advertising system – of course, it appears not to know a lot about Geography and where businesses are actually located. That’s why Nokia nabbed Navteq and why TomTom will have to follow. TomTom has a difficult path to navigate. However, they have proven themselves quite adaptable. In addition, the benefits that TomTom can provide through TeleAtlas may be a “table-turner”. News at 11!
Next week I will be giving the Opening Keynote at AutoCarto 2008 in the Washington, D.C. area. I will be speaking on User Generated Content and Map Updating. I hope to see some of you there.