Market for Location Based Services Startups in India

By Team YS|3rd Jul 2011
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We at YourStory.in caught up industry experts and VCs to gain some insights into the market for Location Based Services(LBS) startups in India. Below are some bytes from the conversations. This is part of YourStory TechSparks series. TechSparks is a YourStory flagship event supported by Intel, Google, IBM, AWS, National Instruments to recognize product tech startups in India. If you are a location/social media tech startup in India please register here to be take part in TechSparks 2011.

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Here is what Shaheer Ahmed, Founder and CEO, Location Guru has to say about this market, “For a long time the industry has been claiming it to be “The Year of LBS” in India. However, now it indeed is closer to being the year of LBS than it ever was. I say this with great confidence now because the ecosystem components are finally aligning together – Mobile Positioning, GIS content for LBS, Improvement in Handset Profiles, Increased Mobile Operators Interest for new VAS, Increased User Awareness, Development Tools & Platforms.

Mobile Positioning – GPS phones are getting cheaper and more widespread. However, any service depending solely on GPS availability will struggle to find mass-market adoption. The good news is that mobile positioning is becoming more accessible now with mobile operators investing in network based positioning technologies like Cell-ID, ECID, WLS based positioning solutions. This process has also gotten an impetus from Govt. mandate to operators for implementing mobile positioning from regulatory perspective.

GIS content for LBS – Unlike a couple years ago, when nationwide “LBS ready” GIS content was unavailable, it is quite a different picture now. With the entry of two major global GIS players a couple of years ago, both quality and coverage of maps and related GIS content is now readily available for most LBS services.

Improvement in Handset Profiles – The handsets landscape has undergone quite a bit of change with the entry of Indian OEMs in the last couple of years. With increased affordability for feature phones, now most users carry a handset that has some form of programming environment available. This opens up opportunity for application developers to provide richer applications on a significantly large scale.

Increased Mobile Operators Interest for new VAS – With voice ARPUs reaching all-time low, operators are keen to devise newer ways of revenue generation. The heavy investments in 3G also means that there is a higher focus on newer data rich, new age VAS services like LBS. The success of VAS in other markets where LBS now constitutes above 50% of all data service revenues, points to a great opportunity in waiting for operators and developers alike.

Increased User Awareness – One reason for slow LBS growth in India has been the cultural indifference of how Indians perceive maps in daily life. With time and exposure to maps based services like Google Maps, Nokia’s pre-embedded navigation, etc. people seem to be crossing the cultural divide and are now ready to explore LBS beyond just maps and navigation.

Development Tools & Platforms – If you are a developer, you have a much better LBS developer ecosystem available in terms of access to tools, SDKs, map content and support. For example, at LocationGuru, we provide access to our SmartGeo platform that provides easy to use developer SDKs & APIs to build and deploy LBS applications on the web and mobile.

With LBS market in India poised to become $500 Million by 2014 according to a research by IAMAI, and with the impediments finally giving way to a more available ecosystem, future holds great potential for the companies who want to jump on the LBS bandwagon now!

Anil Joshi of Mumbai Angels talks about the market size and its growth rate, “LBS is at a very nascent stage today in India when compared to over 600 million mobile subscribers. Rough estimates suggest that the market today for LBS could be in range of 20 million USD which is low, but the good part is that it is growing and expected to grow over 20 times in 4 to 5 years. ARPU is at all time too low, and going forward all telcos would be dependent on data service. With 3G coming in, LBS would be available with more ease than what we experience today. Also, with smartphones getting cheaper, scope of exploiting LBS would be more going forward. Hence any service which is able to help by addressing the pain points or cutting time for customers will be a wining proposition.”

However, Anirudh Singh of Canaan Partners talks about the challenges in this space, “The primary driver of LBS is data connection and data capabilities. Today, increasingly a large number of people do have smart phones in India, but they do not have data connection and data capabilities. LBS is a very big market opportunity, considering the mobile phone penetration in India, but in terms of capitalizing on LBS, there are two major issues; one issue is lack of data penetration and lack of smart phones itself, other issue is that in the absence of data how do you figure out location. There are two major ways to figure out location. One of them is to tie up with telcos. The other way is to drive through the entire area and map location based on cellphone towers. In India, we mostly use manual method to find the data, which is not very cost effective. So the major problem with LBS is that, we don’t have the ability to figure out location in a cost effective manner. There are companies that are betting on the fact that data consumption and data penetration capability will go up soon. So it’s definitely a very big opportunity but these 3 issues that is lack of data penetration, lack of smartphones, lack of cost effective alternate channels to figure out the location should be addressed.

Manish Kumar, CEO, IncuCapital shares his views with us, “LBS is definitely an interesting space. The services in this space can by and large be classified into two categories – one’s that provide information for the user’s location(and primarily earn through advertisements); and the other’s that actually deliver goods or services and are engaged in various forms of m-commerce(with or without mobile payments).

I believe that in the former model of information services, there cannot be space for very many players and thus it’ll eventually be a play of some bigger aggregators like how Google is for web search. A case in point is the success of JustDial as an aggregator.

In the latter case, I believe there much scope for innovation and direct customer interaction through brand building and visibility to promote loyalty in purchase. Customers generally stick to their known, trusted brands and these brands can be easily reached through internet or mobile apps.

I think there is a lot of hype also around location based services as everyone is trying to take a share of the same. It’s akin to those days when almost all of a sudden there were travel sites coming up almost every week – newer startups with similar or slightly differentiated proposition in same market vying to capture the customer walletshare. I guess beyond a certain period of learning curve and maturing, the market for location based services will also stabilize on lines explained above. Also, there are some things that are about touch and feel, you can have an online meeting but cannot have an online coffee, for instance. There will always be retail oriented services that cannot be made virtual, aggregated or improved – people like them the way they are. This puts a limit to potential markets and possible market penetration of location based services.

However, the game has just begun and no one really knows how it’ll shape up. I’ll not be too surprised if it turns out that I was completely wrong!”

We at YourStory.in had a great time discussing LBS market space, opportunities and challenges with Anil, Shaheer, Anirudh & Manish. We look forward to hearing your thoughts on this trend story. Feel free to write to us at feedback@yourstory.in

Varsha Adusumilli | YourStory.in

( Image Courtesy : Robin Capper , Flickr )

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