Nokia maps out defense in smartphone battle

January 21, 2010

Nokia is mapping out its defense in the battle for smartphone supremacy. The Finnish handset maker will offer free turn-by-turn voice guided navigation services on all of its smartphones. The goal is to boost sales of its high-end devices by leveraging the expensive 2008 acquisition of digital mapping firm Navteq. The move is bold, but has a hint of desperation. Nokia wants to stop rivals such as Google  and Apple from stealing more of its market share.

It’s easy to see why Nokia is frustrated. Smartphones  — internet enabled mobile devices — now account for 15 percent of global mobile phone shipments. That share is expected to rise to 45 percent by 2013. Yet Nokia’s slice of this premium market fell from 44 to 35 percent between the second and third quarters of 2009, according to research firm Canalys.

The new Nokia navigation product trumps rivals’ current offers. It is free, covers 74 countries and installs the map information directly on the handset. In contrast, users of Apple’s iPhone have to pay around $70 to download a similar application from Dutch navigation device maker TomTom. Google’s product is free, but only available to the relatively few users of its Android operating platform and only in North America. It also requires an active cellular connection.

Nokia is paying a high price for this technologically superior offer. Until now, the strategy has been to charge mobile users for navigation services and to sell Navteq’s digital maps to carmakers and rival manufacturers of navigation devices. Any mapping revenues were welcome, after Nokia spent $8.1 billion buying Navteq, an enormous 40 times earnings at the time.

The offer of free navigation will inevitably cannibalise Navteq’s revenues. True, those were only 2 percent Nokia’s total sales in the third quarter. But Nokia will struggle to keep ahead of rivals in the navigation wars. Google is likely to widen the availability of its own map offering within the year and free navigation will quickly become an industry standard.

Maps won’t be enough to set Nokia apart from the crowd.

One comment

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Aha, but with maps come location and activity specific advertising opportunities. Nokia is the only mobile operator of the three, Apple and Google are moving into the cellular space and both have had trouble moving the providers. Nokia should be in a better position, particularly in Europe.

Nokia needs to move into the behavior currency eco-system of the Internet, and gratis is the operative word there. Google gets that, Apple not quite but in return they deliver a fantastic user experience, like a Benz or Rolls-Royce.

I am applauding Nokia: we need a big player to keep Google and Apple honest.

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