TomTom’s marketing machine was in overdrive last week with announcements of a new OEM relationship (Mazda) and advances with existing partners (Toyota, Renault), enhancements to its (European) market-leading traffic solution (HD Traffic) and a traffic manifesto. But undoing all that positive spin was the note that the company still wants to charge about $50/year for its Live Services. It looks like TomTom didn’t get the latest email about automotive value propositions. As connectivity comes to more vehicles, drivers (and passengers) will get more of their content and services from the “cloud.” What this means is that car makers will increasingly have in place systems for sending, receiving, processing and managing all types of vehicle data – the “back end.” (This is not unlike what is happening at your average NASCAR or Formula One event every weekend – without the parking space availability and Internet radio.) The value of this data is manifest to the car makers for better understanding the performance of their vehicles on the road as well as better understanding how consumers use and abuse their cars. The implications for cost avoidance, warranty and recall management are in the millions of dollars of savings. There is no immediate or obvious benefit to the driver. For this reason, this kind of vehicle connectivity ought to be free. (On the other hand, OnStar and others have demonstrated that people will pay for safety and security.) As more drivers shift to smartphones (with mandatory data plans) with access to a wide range of content and services, they will be less likely to pay for any service from the car (or PND) maker that is available for free (or for which they are already paying) via their mobile phone. So how is the industry (and TomTom) going to monetize all this connectivity? Enter the back end value proposition. Auto makers and Tier Ones have gotten the message and recognize that driver and passenger eyeballs and “click-throughs” have value. A driver asking for directions to a restaurant or movie has economic value. A system that knows the location of the driver has value. Beyond this, a system that is able to provide a broader “cloud” perspective of all location-related activity – including everything from prosaic traffic information to “heat” maps of gatherings of people, weather, etc. – has other value-add implications for drivers, passengers and roadway systems and public transportation overall. But in the short-term, vehicle related information for diagnostics, safety and entertainment take priority. Continental, Harman, Visteon, Delphi and Pioneer clearly understand this. All of these companies have introduced systems or platforms that seek to leverage vehicle location information for commercial opportunities. Even Best Buy’s connected PND delivered sponsored links in its Google Search. Unfortunately, Tier Ones face an uphill struggle in trying to get a piece of this action. The telematics eco-system consists mainly of a telematics service provider (ie. ATX), a carrier (ie. Sprint or Verizon) and a system integrator (ie. TCS). Each of these operators is interested in the other’s business – with the possible exception of the call center. (No one wants the call center hot potato – too much cost.) While the call center tends to be shunned, the data back end tends to be either misunderstood or underestimated. But the back end system is rapidly becoming the backbone of the system altering the competitive landscape. The power and influence of back end systems is visible to the consumer in the growing variety of free content and services via smartphones. Google probably has the largest back end system currently influencing developments in the automotive market. With its free navigation, traffic and search and an open source operating system, Google has rattled the industry mightily over the past two years. Carriers, meanwhile, are trying to fight there way in – not content to be simply white label suppliers of bandwidth. Among the carriers sniffing around the telematics back end opportunity are Verizon, Sprint, T-Mobile, Telenor, Orange, AT&T Mobility, Vodafone and Ericsson. All of these companies recognize that their servers are as valuable as their networks. Some of these companies fancy themselves Tier One players. At least three handset makers have the potential to rise to the Google challenge: Nokia, Apple and RIM. Like Google, Nokia is offering free navigation while also seeding the market with open source development tools (Qt), operating system softare (MeeGo) and smartphone connectivity technology (Terminal Mode). But Nokia remains ambivalent about the automotive opportunity. MeeGo is not ready for market and Ovi has not been designed for automotive opportunities. RIM brings a unique value proposition combining its smartphone system experience with its newly acquired QNX automotive expertise. RIM represents the most immediate threat to Google’s potential dominance in the automotive market because of its potential to deploy navigation and traffic applications (based on handset probe data) and its ability to monitor, manage and mine its network data traffic. Apple’s strength lies in its secure systems for managing commerce for downloading applications and enabling the purchase of content. For these reasons, Apple and RIM both have the scope and scale to add value to automotive opportunities. The massive giveaway of content and services by both Google and Nokia is a setup for capturing click-through traffic and back end processing opportunities for creating metrics and analytic output. Google already has the analytic tools in place, unlike Nokia. The current landscape for back end services is highly fragmented and includes companies such as TeleNav, Airbiquity, Hitachi, TeleCommunications Systems, Hughes Telematics, WirelessCar, Oracle and IBM, along with the previously mentioned wireless carriers, RIM and Apple. (Strangely, Microsoft seems to have disqualified itself – having disbanded its automotive business unit. The original vision defined by Microsoft at multiple industry events included integrating more and more Microsoft solutions such as Bing, Tellme, and Silverlight into automotive platforms, but the complete vision – including back end services – never materialized. The one exception to this no-show for Microsoft are the company's ongoing efforts to capitalize on the Bing search engine.) The value proposition of back end service providers revolves around secure management and processing of vehicle and driver data for applications ranging from vehicle performance and safety to content and infotainment and, ultimately, commerce opportunities. Neither OEMs nor Tier Ones are equipped to manage this opportunity and traditional telematics providers lack the scale. The lack of scale is one reason Airbiquity has partnered with Hitachi to service Nissan’s connectivity needs around the world. It is likely that companies such as Hughes and TeleNav will seek partnerships with larger integrators such as IBM or Oracle for the same reason. Nokia, like RIM, already has the scope and scale and like Apple already has the commerce platform (Ovi) but, unlike Apple, has done little beyond the introduction of terminal mode to optimize its offerings for automotive. TomTom is another player in need of a partner to provide the scope and scale necessary to compete in the connected space. The larger organizations that are able to monetize the connectivity proposition will force out smaller players dependent on subscription revenue. If TomTom can enhance its navigation and infotainment platform to include safety and security telematics, it will greatly improve its value proposition and the likelihood of building a devoted subscriber base. Conclusion Google and RIM are best positioned to leverage the back end data processing opportunity presented by the automotive industry. Google faces trepidation among potential OEM customers who are suspicious of the company’s motives and objectives. Google’s failure to validate its Android OS for automotive applications is another stumbling block. Nokia has discrete elements of a solution in place but so far lacks the commitment and execution to challenge either Google or RIM. Apple is a wild card player in a market that remains fragmented with the door open to new entrants. Microsoft's Bing search engine is another contender gaining traction, but, in the end, Microsoft is more of an arms supplier to the contesting parties. Winners in the battle for the back end will be those companies able to bring security and state-of-the-art analytics and commerce management to the automotive industry. Google knows analytics. RIM knows security and network management. It remains to be seen whether Nokia or some dark horse will step forward to challenge these two dominant players, but the race is on. Additional Insight: http://bit.ly/c0OLhT - Consumer Implications for Smartphone-Vehicle Connectivity  - Chris Schreiner - Automotive Consumer Insights http://bit.ly/c1nvTq - Consumer Interest High for Connected Safety and Security Services - Chris Schreiner - Automotive Consumer Insights http://bit.ly/aGJHDj - Smartphone Market Evolution and the Automotive Opportunity Implications -Fitzgerald - Automotive Multimedia & Communications

While major media and cable companies talk about four screen strategies the telematics industry is abuzz over the emergence of a three screen world. This was never more clear than at last week’s Telematics Update event in Novi, Mich. From OEMs to tier ones, software and service providers, the focus is on leveraging handsets, head units and the Internet to create closer and more profitable customer relationships. Companies on hand preaching the three-screen gospel included Nokia, Continental, Airbiquity, WirelessCar, RealVNC, QNX, Google, ATX, Tweddle Group Technologies and Parrot. The solutions demonstrated and debated point the way to a more connected experience in the car where the customer can access vehicle related information from outside the vehicle or on a phone or online when away from the vehicle. Even meta data provider Rovi and HMI supplier TAT offered their contributions to the three-screen vision. Nokia described and defended its terminal mode technology, a European-oriented campaign built around what some term a “screen scrape” transfer of a smartphone’s display along with a shift of device control to the vehicle HMI. Nokia intends to equip all of its smartphones with terminal mode technology by early 2011 and is working through the CE4A coalition to coordinate tier one head unit implementation of the technology throughout Europe, where Nokia’s market share is strongest. Using similar technology, RealVNC showed development tools for extending terminal mode technology into a wider range of devices and markets. While Nokia claimed to have two competing handset makers interested in the terminal mode solution, RealVNC’s more agnostic approach offers a suitable alternative. Airbiquity promoted its in-band modem technology by extending the platform to include a customized user interface, tied to the user’s mobile phone, along with app store functionality and location and user-relevant advertising messages. Airbiquity is increasingly taking on the role of a content aggregator, tying together content and applications in a single user interface. Airbiquity's Bluetooth-based approach was presented as a powerful and low-cost data-over-voice/packet alternative to packet-only solutions which require a payment for dial-up networking or SPP monthly service fees. Airbiquity estimates that OEMs deploying packet-only solutions will limit themselves to 20% of the penetratable market of which only 3-5% will have extra carrier service plan for BT DUN/SPP packet connectivity. On top of the data-over-voice solution, Airbiquity is layering its Choreo cloud service for both consumer and commercial markets. Airbiquity says Choreo allows OEMs to convert the car to an IT platform, creating a global infrastructure for content and service delivery. WirelessCar has also stepped into the content aggregator role, showing a clever vehicle-to-smartphone integration providing some basic vehicle control functionality and information access. The WirelessCar solution suggested the long-anticipated realization of a vehicle portal also accessible via smartphone for sharing vital vehicle data with the owner. OnStar has found this approach, with key vehicle status information, to be a valuable tool for driving customer traffic and service revenue via the dealer channel. To drive home its message, WirelessCar led a panel discussion with Ericsson and Cybercom, representing the wireless carrier and software integration perspectives on the implementation of a three-screen world.  Actually, WirelessCar has been pushing and demonstrating this concept for at least three years. Tweddle Group Technologies – the combination of Tweddle Group with UIEvolution’s former automotive division – is also looking to fill the content aggregator role. The company brings to the table its long history in the owner’s manual business – which itself is transitioning to electronic delivery – along with a relationship with Pandora. The Tweddle solution, which allows for the delivery of text and video content - via head unit or handset - related to vehicle systems has intriguing possibilities if integrated with CAN inputs such as alerts or other status messages. Tweddle has yet to marry these two sources of data, but the concept is certainly a powerful one. QNX has also envisioned sharing vehicle status information with the driver via on-board displays. The QNX LTE Car demo includes a “Virtual Mechanic” for providing the driver with images of vehicle systems and their status. Given Toyota’s recent disastrous recalls, the opportunity for these types of systems to catch on is strong. For its part ATX was demonstrating its new application for integration with Mercedes Benz’s TeleAid telematics service. The app provides for some basic vehicle control along with the ability to remotely send a destination to the vehicle’s navigation system. Continental’s AutolinQ concept may be a little ahead of its time in promising an on-board app store experience in an Android operating system environment. While car makers and suppliers have broadly embraced a variety of Linux distributions, Android is still running up against some industry prejudice over the issue of vulnerability to hacking and other perceived weaknesses. Industry buzz suggests that Android is being accepted and even specified in some RFQs, which is certainly a promising development for Continental. The growing Android momentum in the automotive, mobile and even consumer electronics markets suggests that Continental is on the right track. In support of its campaign, Continental announced an eco-system of solution providers contributing to the platform including Ygomi, Inrix, Navteq, Navigon and Deutsche Telekom. Continental will no doubt be flexible regarding these relationships if it means sacrificing a partner to obtain a new contract. But at least now the Continental vision has been clarified as a fully evolved proposition. Delphi executives attended the event, but did not demonstrate their own connectivity platform: D-Connect. Delphi has been vocal in its support of connectivity to Android devices, but resistance to building Android into the head unit. Since D-Connect has not been publicly announced it is hard to predict how Delphi’s final implementation will arrive in the market. Tier two Parrot showed chipsets optimized for mobile device connectivity including the latest Bluetooth protocols and Wi-Fi. Android also figures prominently in Parrot’s plans including some active programs, according to the company. Google announced additional “Send to” partners at the event – OnStar and Ford. For Google, the message for the industry is that it is a cloud-based world. Applications are no longer launched for desktop computers, they are launched on and for the Internet. Google’s recommendation is clearly that car makers facilitate cloud connections either on board or via mobile devices. OnStar, with the most powerful brand in the telematics industry, faces perhaps the greatest challenge in developing a cloud-oriented strategy. Not only must the company integrate its infotainment and telematics teams – long at odds over key applications such as Bluetooth connectivity and navigation – it must also reposition a brand identified almost entirely in relation to safety and security, not entertainment. The path is far from clear, but the promise of additional revenue from dealer service work to content consumption and, overall, a tighter relationship with the customer has car makers and their suppliers working overtime. All agree, at last, that the future lies in three screens. Leading the way are OnStar and Ford, each of which has defined its own three-screen strategy. BMW and Daimler are the next logical candidates to implement the handset-head unit-Internet approach. All of which points to common elements in future telematics solutions including: app stores (accessible via all three screens), vehicle control (across and between platforms), access to vehicle status information (all screens), content aggregation partner and back-end system provider, cloud-based content and services, and provision for multiple-handset compatibility. The emergence of these common threads are helping to clarify the future deployment of telematics systems speeding the delivery of in-vehicle connectivity. *Editor's note: Airbiquity executives suggested amending the strategy to FOUR screens. This week, Microsoft's embedded software division touted a FIVE screen strategy at the Fachkongress Elektronik in Ludwigsburg. Further insight: http://bit.ly/cMw4f1 - Solid Q4 for PNDs, but ‘Free’ Navigation is Shaking Up Monetisation - John Canali – Automotive Multimedia and Communication Service http://bit.ly/bMeg36 - Global Mobile Handset Navigation Forecast 2004-2014 - Nitesh Patel – Navigation and Location Opportunities http://bit.ly/8Yo4U6 - Nokia & Google Shake Up $3.8 B Handset Navigation Market - Nitesh Patel – Navigation and Location Opportunities http://bit.ly/6FC6W7 - Smartphone Market Developments Shaking Up Automotive Strategies - Lanctot - Automotive Multimedia and Communications

While Nuance reported broad-based Q1 revenue growth across all of its divisions, growth within the mobile segment hit 12.5% YOY accounting for nearly half of total company revenue and surpassing company expectations for the segment. Nuance told analysts on its earnings call it had expected healthcare to lead revenue growth for the company. Recent wins in the mobile segment show Nuance technology moving into a wider range of applications enabling new features and functions on devices and in cars. Among higher profile wins were Ford's announcement that the next generation of Ford Sync will feature significant voice enhancements from Nuance that power the MyFord Touch driver connect technology. The next generation of Ford Sync takes advantage of Nuance’s natural language understanding to recognize more than 10,000 first level commands and provide customers with cloud-based connectivity for up-to-the-minute information and entertainment content, the company stated in its prepared Q1 earnings report comments. In addition, Nuance says TomTom recently selected Nuance text-to-speech for its navigation applications for the iPhone. Nuance recently announced that its Nuance VSuite mobile speech software is now shipping on Dell’s Mini3 Android smartphone line-up in China and Brazil. During Q1 2010, mobile royalties grew, reflecting increased unit shipments as well as increased penetration of Nuance technology on device, Nuance reported. During Q1 2010, Nuance introduced Dragon Dictation and Dragon Search for the iPhone. In addition to driving visibility, the success of Nuance’s Dragon iPhone apps has generated interest from carriers and mobile providers to deliver applications for other mobile platforms, languages and vertical markets. During Q1 2010, Nuance launched its voicemail-to-text offering at AT&T, and announced the acquisition of SpinVox, which positions Nuance to accelerate growth and expand its solutions internationally in the voicemail-to-text market, according to the company. Voicemail-to-text, in particular, was cited as a critical application to impact future company growth. Key customers and design wins in Q1 2010 included Amazon, BMW, Daimler, Harman Becker, Harley Davidson, Huawei, Hyundai, LGE, Mahindra & Mahindra, Medion, Motorola, Nokia, Samsung, Sharp, Sony Ericsson, T-Mobile, TomTom, and Toyota.

According to GPS Business News this week “TomTom unveiled some interesting data about the trend of the Personal Navigation Device (PND) market in Europe and in the world during a press conference in Paris, France. For the first time the PND maker is not expecting this market to grow over the next five years”. Is ‘The future of PNDs in Europe: less revenue, more profitability?

http://www.gpsbusinessnews.com/index.php?preaction=view_nl&nl=56901&id=7796917&idnl=56901

This conclusion supports Strategy Analytics Sep-09 analysis of quarterly PND metrics and market share tracker, which shows a marked increase in Q2-09 operating profit per PND sold for both TomTom and Garmin:

http://www.strategyanalytics.com/default.aspx?mod=ReportAbstractViewer&a0=5010

A key factor for improving profitability for PND players is to widen the distribution channels for navigation solutions. Distribution of navigation solutions to phones is now emerging in 3 clear areas; devices with pre-install, services activated with wireless operator; and apps that can be downloaded from apps stores/direct from the navigation provider. Market positioning of the phone focused navigation solution providers is currently different from traditional PND vendors, and some general clusters of companies are emerging: device pre-install providers – Appello, deCarta, Route66; wireless operator services – TeleNav, NetworksInMotion, TelMap, ALK, Wayfinder; with navigation providers also distributing directly online and via apps stores.

Nokia, by far, has the lead on the pre-install maps and navigation app market, leveraging from its ownership of Navteq, but SonyEricsson is building activity too. For other key wireless devices vendors including LG and Samsung, the issue is about providing desirable applications to show case handset capabilities and making their handsets more relevant and appealing to consumers. It is also about not being left behind by their competitors. If Nokia and Sony Ericsson are offering pre-installed turn-by-turn navigation then LG and Samsung will also be under pressure to take a lead on device pre-installed maps and navigation apps too. This presents significant new navigation apps opportunities.

We are starting to see a shift from leading PND vendors into phone navigation solutions e.g. TomTom, Navigon and ALK CoPilot apps are now available for iPhones via iTunes, with a Garmin solution expected, and Garmin is launching the Nuvifone G60 in the US in Q4-09. But the device pre-install market is still very fragmented across the regions and the traditional PND players have not developed partnerships with wireless operators.

Yet there are some brand and quality issues surrounding the navigation that are available pre-install, via a wireless operator or a downloaded app. A consumer might not know, remember, or just not care, whether the navigation system they installed on their mobile was from their operator, their handset manufacturer, or from a third party; and the navigation brand may easily be subsumed by the overall brand of the device/operator. This opens up opportunities for trusted, well known consumer brands with high quality and robust navigation solutions.

TomTom and Garmin have strong consumer brand perceptions in navigation and this will likely be leveraged more widely into the device pre-install and wireless operator distribution channels for navigation.

This blog summarizes discussions following the recent complimentary Strategy Analytics webinar ‘Navigation Usage Across the Product Platforms’

http://www.strategyanalytics.com/default.aspx?mod=ReportAbstractViewer&a0=5052