The big news today was not the launch of “Droid”, the new iPhone competitor from Verizon and Motorola, but the free Google Navigation App that runs on it. Shares of TomTom fell 20.8% to EUR8.11, setting a new 52-week low of EUR8.06 in the day and those of Garmin Ltd. (GRMN) fell 16.4% to $31.59 today.
This is probably the best example of disruption we’d ever see. However, although this was expected all along (Read my post “The convergence of handheld gadgets and what it means to you“), to see the stock market react so much in a day is amazing.
Does this mean the end of Garmin, TomTom and traditional GPS as we know it?
Maybe not immediately and it will depend on what strategy these companies adopt.
What can they do?
There are three strategic paths GPS companies can take…
- Move from hardware to software and innovate in that space (Which TomTom has started doing – See video below)
- Move into the smartphone business and compete with Google, Nokia, Microsoft, Apple and RIM headon (Which Garmin has started doing – See video below)
- Move into the Bottom of the Pyramid markets by cutting on prices of GPS devices
The third strategy is probably what I’d recommend. Smartphones today make a very tiny percentage of cell phone sales globally. Even in the US, according to NPD research feature phones make up 72% of the market with smartphones making up the rest i.e. 28%. In countries like India and China, the smartphone percentage would be much much lower.
So there is still a huge segment of the market that cannot afford a smartphone and the expensive 2 yr contract-based data plans from Wireless carriers and therefore, will not have access to something like Google Maps. Obviously to tap into these markets, GPS companies have to be innovative in figuring out the use case scenarios and the pricing.
Here are videos that show the strategic paths each of these companies are taking:
Google Maps Navigation (Pure software approach)
TomTom iPhone App (Taking the software route)
Garmin Nuviphone (Moving into Smartphones)
Nokia Maps (Moving into maps and location based advertising – Competing with GYM)
2 comments
November 3, 2009 at 3:47 pm
HD Shah
Good Article and Suggestions..
January 18, 2010 at 2:50 pm
Forrest
Not so fast.
My Garmin Oregon (550t) GPS unit costs about 3x what an iPhone goes for. This is justified because:
* The Garmin is waterproof. I clip mine to the hull of my kayak and use it as a speedometer. As the months go by, I can do the same distance a little bit more quickly, meaning I’m getting stronger and more skilled. It’s also important for cycling in the rain. You can throw your phone in a pelican case to keep it dry, but then you can’t actually use it.
* The Garmin has a heart-rate monitor. Having this data available immediately, and also recorded in my track log to correlate with distance, climb, and so on, helps me tune my workouts.
* Everything works everywhere. Tree canopy isn’t a problem, nor are steep cliffs. More importantly, when I need the map, I have it available – cell reception or no. There’s no cell reception in many of the parts of Washington state that I like using a GPS – trails on Mount Rainier, and North Cascades, etc.
* Batteries galore – on multiday camping trips, a few spare AAs mean I have all of the data from the trip.
* No spyware. While cell providers keep a record of where their customers have been, and while Sprint made headlines for their sloppy handling of their customers’ private data, my device is unable to tell anyone where I’ve been. I have nothing to hide, but I’m not going to pay someone else to profit from selling my private data.
* No data plan. That $200 iPhone costs $600 a year for the transfer of those fancy maps. With a dumb phone, I simply pay for minutes … and I’m not bothered by emails when I’m busy with the here-and-now.
So while Wall Street had a typical overreaction and then a less dramatic readjustment, I think we’re a long way from needing a conversation about traditional GPS companies being driven out of existence by cell phones.