PND vs mobile Is landscape shifting?
With the growth of mobile phone and smart phone users and application builds upon it, PNDs are set to face a tough challenge from GPS-enabled mobile phones. While Google and Apple are set to redefine the navigation ambience, with terms like Mobile Internet Devices (MID) getting clearer definitions, it is still too early to say which direction the navigation markets will move in or what niche each one will create for itself. In the sphere of navigation, there are arguments in favor of PNDs but the same holds true for mobile based navigation also. So, the debate remains, is it PND or Mobile or both?
A shifting competitor landscape
On the back of recent announcements by Google and Nokia signaling their intentions to provide free turn-by-turn satellite navigation as applications on their smart phone devices, it is more clear than ever that the satellite navigation industry is on the brink of experiencing drastic changes. Once an industry dominated almost entirely by Personal Navigation Device (PND) manufacturers like Garmin and TomTom, mobile device manufacturers are emerging as a force to be reckoned with.
Critical success factors for smart phone entrants
The increased importance of smart phone manufacturers in the satellite navigation industry is a direct result of two trends – a natural tendency towards device convergence and an increase in demand for Location-Based Services (LBS). In a world governed by Moore’s Law, in which increasingly powerful devices predictably become smaller and cheaper, there has always existed a trend towards device convergence in the realm of consumer electronics.
Device convergence happens consistently, as what was once an independent product becomes just a feature in a set – the combination of an email client and a telephone yield the Blackberry, adding a digital music player and a camera to the Blackberry yields an iPhone. With this trend in mind, it was inevitable that GPS and 3G-enabled smart phones would sooner, rather than later, incorporate turn-by- turn navigation applications, once only offered in PNDs. The inevitability of smart phones entering the satellite navigation industry is further driven by an increase in demand for LBS as in an increasingly interconnected world, ‘where’ people do things is becoming as relevant to consumers and marketers as ‘what’ it is that they are doing. Of course, the eventual success (or lack thereof) of smart phones in the industry is not to be taken for granted.
As in any case of device convergence, the combined tool must perform each task at least as well as the stand-alone device or at the very least, the benefit of convenience must outweigh the loss of functionality. While smart phones, primarily due to their inferior GPS technology and reduced screen sizes, are not yet able to fully substitute PNDs, they are also bound by other critical success factors that may further impede user acceptance around the world.
The uptake of smart phones as satellite navigation devices relies primarily on three key factors – the availability of affordable devices, the affordability of data plans and the reliability of the 3G infrastructure. While in certain advanced markets, like the United-States or Western Europe, for example, smart phones and data plans may be affordable to the average consumer, this is far from true in emerging markets, like most of South- East Asia. Also in stark contrast to the experience of the average American user experience, the issue of data roaming charges in markets in which cross-border travel is frequent can have a significant impact on the affordability of the 3G connection required for most turn-by-turn applications on smart phones. Meanwhile, while the 3G infrastructure is clearly much more ubiquitous and stable than ever before, its reliability is even being called into question in the United-Sates as more and more mobile devices are using it to surf the internet and are consequently overwhelming its current capacity.
With the rise of the iPhone and other smart phones, netbooks and the awaited emergence of tablet computers that all rely heavily on 3G networks, issues of dropped calls and general connectivity problems are all due to worsen and could impose a real obstacle for the use of 3G-reliant smart phones as satellite navigation devices – at least until network providers upgrade their network infrastructure to 4G.
What the future holds
Understanding the inevitable rise of smart phones as satellite navigation devices as well as the factors that will determine their eventual success, it is interesting to take a moment to ponder about the possible effects of this shift on the players involved. Smart phone device manufacturers and application developers seem determined to take as much market share as possible from PND manufacturers by offering their turn-by- turn applications for free. However, these new entrants should not assume that consumers will automatically accept their all-in-one device offerings. It was, for example, assumed that camera-phones would substitute digital cameras; instead, the two are now complimentary products. On the flipside are PND manufacturers that, while they need to be alert to the rising threat from smart phones, but also need to understand that the future is not as challenging as it may seem at first glance. The decreasing cost of PNDs, the currently low penetration levels in emerging markets and the rise of affordable in-car navigation systems all represent areas of growth for PND manufacturers. In particular, PND manufactures would do well to exploit their inherent advantage in the driving navigation segment, a result of their bigger screens and non-reliance on network infrastructures. In terms of the companies that produce the underlying maps used across navigation devices, the future looks bright. Creating a good map database is very costly and difficult and it therefore seems likely that any company looking to provide satellite navigation services – smart phone and PND manufacturers alike – will continue to look to purchase the underlying maps from third parties. With all this in mind, it can be concluded that while the underlying trends and drivers are clear, the winners and losers are far from picked. The winners will be those who can appropriately assess and take advantage of opportunities and defend their positions against emerging threats. These companies will need to develop strategies based on a robust understanding of the new environment, looking at both their internal capabilities and matching those with the demands of the evolving landscape they compete in.
The PND is destined for extinction
Attempts to predict the growth, success and uptake of technology are rife. Accurate predictions, less so. “There’s no reason for any individual to have a computer in his home”, said Ken Olsen, then founder and CEO of DEC in 1977. “I think there is a world market for maybe 5 computers” is apocryphally attributed to Thomas Watson of IBM in 1943.
It’s easy to say “well … duh” with the benefit of hindsight in 2010 but consider this. The first generation of in-car GPS units appeared in 1996. If anyone had told you that 14 years later you’d be running something infinitely more sophisticated and customisable, more powerful than one of Olsen’s DEC VAX computers that I started out on, on a device that you stuck in your pocket and which, by the way connected to a global network of computers and was also a telephone, you’d probably not have believed them or suggested that at a minimum they cut their coffee intake back.
Fast forward back to 2010; the big two mapping data providers, Teleatlas and Navteq, have both been acquired, Garmin, once synonymous with GPS is looking increasingly less and less relevant and both Google and Nokia are offering full turn by turn navigation on mobile devices, for free.
So how will this play out? What will dominate? PNDs, telematics dashboard “info-tainment” systems or mobile phones? It’s probably going to be all three but not in their current form thanks to the headlong convergence of computer, phone, camera, internet terminal and PND.
In 1996 the first GPS navigation systems were the preserve of the high end, executive car marques; both prestigious and viewed as a luxury commodity they were the precursor of today’s infotainment consoles. Skip to 2004 and TomTom’s GO was one of the first of the now ubiquitous PNDs at commodity prices. Six years later and GPS enabled mobile phones are capable of running the same, turn by turn navigation systems but for free and they come preloaded with the handset. Sensing that most consumers are unlikely or unwilling to pay for a dedicated PND when they can have a free navigation system on their mobile the market is reacting and we’re seeing the first interfaces between smartphone and info-tainment consoles such as that from Harman and Nokia (http://www.gpsbusinessnews.com/ Harman-and-Nokia-to-Interface-Carswith- Smartphones_a2248.html).
Surely this means that we’ve come full circle and moving back to in-car based systems? I doubt it. The mobile offering has all the advantages; multi modal routing, pedestrian routing, your music collection, a camera, a phone, an internet console with email and social media apps yet none of the disadvantages; additional subscription cost, another gadget to carry, only works in the car.
The mobile phone and the in-car console are here to stay; the PND is destined for extinction. But like Messrs. Olsen and Watson, I could be wrong.
The PND is best suited for navigation
The Portable Navigation Device, mobile phone navigation and embedded factory navigation all play a role and each has its own unique benefits and tradeoffs. Which system to recommend really comes down to segmenting the market and understanding user requirements. Let’s briefly look at each solution space and discover where it might provide an optimized solution.
The PND has seen explosive growth over the past 4 years. Penetration has reached a point where it is no longer a curiosity for the gadget minded, but a mass market tool that can be relied upon to save time, money and nerves. Mass adoption has come with much lower prices which enables consumers to buy their second and third products which are left in the car, not circulated for family use. As single use device, the PND is best suited for its designed purpose: navigation. It does very well at this. But these affordable systems come with strings –or more accurately, with wires and suction cups.
Navigation on a smart phone is not a new concept, but it has taken off with the launch of app stores. As a multi use device, the smart phone provides the convenience of providing access to many applications. These phones don’t come cheap even if maps are “free”. When network costs area added up, a smart phone can be many times more expensive than a PND. Also, the navigation experience on these devices is not always as useful as a purpose-made device. Small screens and poorly tuned interfaces require user focus which can contribute to driver distraction. Applications are often poorly integrated resulting in conflicts between other features of the phone. Smart phone navigation might be best suited for the occasional/casual user. It is an attractive alternative for the pedestrian, where driving safety is not compromised.
The embedded factory navigation system is best suited to deliver a cleaner and much more convenient implementation. The device is always there in the vehicle. In vehicle systems are also better suited to include voice activated interfaces which reduce driver distraction. Vehicle data can facilitate other services such as eco-routing, eco-driving and to enhance driving economy and driver safety. All these conveniences come at a higher price at the time of vehicle purchase. But some of the cost of on-board navigation can usually be recovered when the vehicle is sold. Also, it has been found that vehicles sell 16% faster when they are equipped with navigation.
Garmin addresses all three embodiments of navigation. Whether it is a nüvi PND, a nüvifone or a Garmin factory navigation system, the central focus is intuitive ease-of- use and a robust navigation experience
PNDs remain relevant
The PND and smart phone industries performed very differently over the last 18 months. Despite the economic crisis that began in the second half of 2008, Canalys estimates that total smart phone shipments hit a new peak in 2009 with 166 million units, of which 81% had integrated GPS functionality. By 2013, Canalys expects 96% of smart phones will have integrated GPS. In contrast, the PND market shrunk worldwide last year after growing 18% in 2008. Canalys forecasts the PND market will continue to grow in Asia Pacific and Latin America between 2010 and 2013, but this will do little to offset the rapid declines in Western Europe and North America, which represented 82% of global PND shipments in 2009.
Assessing the development of the mobile phone and PND industries for the last two years, handset vendors have clearly shown they can satisfy consumers’ needs and deliver revolutionary products. The entry of phones into the mobile navigation space has made it hard to promote the idea of using a dedicated device for turn-by- turn navigation to non-PND users, reducing the potential addressable market for PNDs. Hardware and user interface improvements, together with the wider availability of handset-based applications, have substantially changed smart phones’ positioning and increased the popularity of using them as one of the main platforms for turn-by-turn navigation. The market dynamics were further transformed when Google and Nokia announced their respective free turn-by-turn navigation solutions in the last few months.
Conversely, the pace of innovation in PND hardware and software remained relatively slow over the same period. Moreover, PND vendors made various cost-cutting measures and substantially reduced their marketing spend in response to the poor global economic conditions in 2009.This, together with the wider availability of free or cheaper map updates, has provided fewer incentives for existing PND users to upgrade, extending the replacement cycle for this device category. Connected PNDs, which should provide a more revolutionary user experience, failed to impress the mass market and there are few reasons to believe this will change in the near future.
Despite the tangible connection between phones and PNDs, it is vital to highlight that one should not make a direct comparison between the market performances of the two categories. They are different platforms for turn-by-turn navigation, and a sale of an integrated GPS handset does not equate to one less PND being sold. PNDs and handset-based navigation solutions are optimised and much needed for different modes of travel, especially when the market still lacks a single user-friendly device that can truly provide a seamless, multimodal mobile navigation experience.
Existing PND players are now in a much stronger position to defend the pricing and positioning of their products as the market continues to consolidate. They are also in a better position to work closely with their channel partners and devise more effective and mutually beneficial marketing campaigns. PND vendors must continue to deliver more distinct, revolutionary products – both hardware and software – at a much faster pace to attract existing and new customers.
Ongoing, relevant content developments will be vital to provide additional differentiators for PNDs in the future. Leading vendors, such as Garmin and TomTom, already have partnerships with various car manufacturers in different countries and products for both high-end and mass-market car models, but substantial scaling up of these automotive partnerships globally is desperately needed to increase PND penetration. Canalys does not believe the PND market will disappear, but market players will have very tough battles ahead. It will require considerable perseverance and resilience to evolve with the market and stay in the game.
The balance in favor of mobile navigation
The debate pitching PNDs versus handset-based mobile navigation continues unabated. While until about a year ago there was broad consensus about the strong position of PNDs due to their larger screens, optimized navigation user experience, and low price points several recent events have now shifted the balance in favor of mobile navigation.
Firstly the unexpected boom in smartphones with large touch screens since 2009 – initially driven by the iPhone but soon copied by all major handset manufacturers – has brought the user experience of handset-based navigation much closer to the experience offered by PNDs. Secondly, both Nokia and Google have launched free turn-by-turn navigation on their Symbian and Android smartphones, further undermining the value proposition of PNDs. As smartphones continue to attract more users, mobile navigation will soon become a standard feature. Moreover, both Nokia and Google also offer free traffic information, Nokia even adds free city guides.
However, all this does not mean PNDs will disappear. Rather PND vendors will have to reposition their solutions by adopting a more segmented approach to the market. On one hand they will have to continue to develop state of the art, superior, connected PNDs offering a second to none navigation experience. However, obviously this will only attract the high end of the market consisting of high frequency, demanding users for which navigation is a critical function. On the other hand there will still be a market for very cheap basic PNDs addressing the low end of the market consisting of users preferring an out of the box experience which cannot be offered by mobile navigation.
PND vendors can no longer ignore mobile navigation. A look at the latest financial results of both Garmin and TomTom clearly shows the PND market is saturating in developed regions at best – even declining in regions such as Europe. Asia-Pacific and other developing regions still can expect growth but will also see the emergence of mobile navigation.
Finally, a new category of connected multipurpose portable devices such as MIDs will also eat into the PND market, though in this case they will rather assimilate the PND category rather than displace it.
The PND is facing increased competition
There are now more than 175 million turn-by-turn navigation systems worldwide, including about 35 million factory installed and aftermarket in-dash navigation systems, over 100 million Personal Navigation Devices (PNDs) and close to 40 million navigation-enabled mobile handsets with GPS. The PND device category is facing increased competition due to the adoption of handset-based navigation services and greater availability of low cost in-dash navigation systems. Berg Insight forecasts that PND shipments in both Europe and North America will peak around 2011 at roughly 20 million units per annum in each market respectively and decline thereafter. New markets in other parts of the world will partly compensate for the decline in Europe and North America. However, handset-based navigation services are likely to become especially competitive in markets where relatively few users can afford multiple devices.
In the past, PNDs have often provided a better user experience than handset-based navigation services thanks to larger touchscreens and user interfaces optimised for a particular task. However, new handset models such as smartphones with large screens and user interfaces optimised for touch control have closed the gap considerably. Rapid developments in handset user interfaces, software integration and hardware performance will make handsets even more competitive in the future. This will be true also for emerging low cost smartphones that will enable true mass market adoption of mobile applications. Increasing competition from players such as Google and Nokia is also leading to lower prices for handset-based navigation services.
What is more, handset navigation services are well suited as a complement to other solutions, especially for occasional users and those primarily interested in guidance outside the car. Pedestrian navigation features gradually being introduced include improved map data and multimodal navigation, which will enable users to plan routes taking into account all available modes of transportation including trains, busses and walking. Handsets are also better suited for other types of location aware applications beyond navigation that many users can benefit from on a daily basis.
PND vendors are increasingly focusing on new connected PND models and online services. Connected PNDs that make use of wireless connectivity to access dynamic content can improve the value of navigation devices in everyday situations. Features such as local search, traffic flow information and speed camera locations can be useful in both familiar environments as well as on trips to new places. PNDs are likely to be favoured by the minority of users that need navigation frequently and are therefore willing to purchase a dedicated device for this purpose.
Large screen is important
Users will choose to use navigation on those devices which offer a large enough screen to clearly view map and visual instructions, and also wherein they can have an uninterrupted navigation experience. Whichever device can provide users the best experience will win. What is important to note is that, navigation has become an integral part of the smartphone experience. We see more and more OEMs wanting to bundle navigation, and MapmyIndia powers some of the best smartphones in the business – Motorola Milestone and Micromax W900 to name a few. We see the PND and in-dash markets still growing fast as car manufacturers too want to offer this value to customers.
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