Nokia moves boldly into LBS

Nokia has always toyed in mobile content, but during the past few months the Finnish handset maker has moved from dabbler to mobile services heavyweight. 

In August, the company launched Ovi, a direct-to-consumer entertainment portal. Last week it purchased mobile ad firm Enpocket and yesterday it rounded out its portfolio with the purchase of LBS software firm Navteq for $8.1 billion. Many predict Nokia's spending spree likely will continue as the company builds its portfolio of Ovi services.

Nokia, like many equipment vendors, realizes it has to be more than a handset maker if it wants to grow. And it isn't alone in its move to incorporate mobile content into its portfolio. Last February, Ericsson launched a multimedia division headed by Jan Wareby with the sole purpose of helping operators enrich their content portfolio. Likewise Alcatel-Lucent a year ago acquired content management software firm Mobilitec to enable personalized content and advertising.

Analysts say the Navteq acquisition is good for Nokia because LBS is a fundamental service that can be merged with other applications to make more personalized products for consumers. With this acquisition, many analysts believe Nokia will start incorporating Navteq LBS apps into all of its handsets.

Carriers are certainly bullish on LBS. David Gill, director of mobile media and senior analyst with Telephia, says the market for mobile LBS is clearly on an upswing. Gill said U.S. carrier spending on GPS/LBS marketing campaigns topped $30 million in the first half of the year and will increase during the holiday season

But will operators balk at Nokia's inroads in the application and content space? That is a possibility, particularly in the U.S. market where operators closely control the mobile content value chain. Typically, operators make the decisions about what LBS services their customers have access to, and I think they are unlikely to give up that control particularly when you look at the revenue figures. Telephia's Gill reports LBS applications command a 2x price premium compared to applications in areas like weather, music and even personal information management applications. LBS apps average a price per month of $9.23, and are responsible for more than half of all application revenue across the national carriers.

The Navteq purchase may be a winner for Nokia. But if the company wants to continue to sell handsets to U.S. operators, it is going to have to continue to navigate the touchy waters of carrier relations. -Sue