Interactive Mapping Services Emerge As Hot Acquisition Target
Uber, Facebook, and Apple have been digging into their wallets to get custom location data. Are AirBNB, Amazon, and Lyft likely to vie for navigation tech purchases as well?
The flurry of M&A and investment activity in the past year around companies whose main proposition is based on the analysis of location data has given veteran geomarketing specialist Marc Prioleau a sense of déjà vu.
Specifically, Marc Prioleau, the managing director of location-based services consultancy Prioleau Advisors, sees 2015 as a repeat of 2007. At the time, Prioleau was an executive at pioneering geo-data platform deCarta, which was acquired by Uber two months ago in an attempt to gain mapping independence from Google’s and Apple’s location offerings.
Invest Like It’s 2007
In citing “2007” as a pivotal moment for location services, Prioleau points to Nokia’s $8.1 billion purchase of mapping software maker Navteq in October of that year. A few months before that deal, Dutch car navigation tech company TomTom offered to acquire of Navteq rival Tele Atlas for roughly $2 billion.
Fast forward to 2015. Aside from Uber buying deCarta, Nokia is putting its mapping unit, dubbed Here, up for sale. While Uber is also reportedly bidding for Here, apparently Facebook may also be in the running since it struck an agreement with Nokia to use its location service to power maps on its mobile apps, including its standalone Messenger and its image sharing platform Instagram.
And just this past week, MacRumors broke the news that Apple was in the process of buying GPS startup Coherent Navigation to quickly broaden its mapping capabilities and sharpen the accuracy of its location services.
These deals are driven by the convergence and mainstreaming of “m-commerce,” hyperlocal marketing, and the “on-demand revolution,” where fulfillment of consumers’ desire for instant discovery, access and payment options for services via their smartphones is considered more and more common.
Underlying that point is the fact that on-demand, local digital services are heavily reliant on other parties’ maps and geo-data — namely Google and Apple. While both have been fairly open in terms of allowing other parties to extract revenue from the use of their respective map and search offerings, both Google and Apple have been ramping up their own specific services to enterprise businesses that could have the effect of pushing out startups as the value of mapping technology becomes even more important to marketers.
“Google, as an example of these leading companies, will always build a great property, but they may not have a specific business’s best interests at heart,” Prioleau said, suggesting that companies in the travel business, hospitality, and real estate categories have a need to customize their own map experiences for their users. “When you just sift through the verticals, where Google has integrated very interesting features directly into their maps, it’s often directly competitive with some of these other verticals. There’s a growing sense that Google isn’t free anymore, nor is it necessarily designed anymore in a neutral way.”
No Overnight Mapping Sensation
Lastly, while accruing map-building assets and technology may seem like a simple thing, it’s actually incredibly complicated and challenging, Prioleau said.
“Collecting and putting together the data for a worldwide, navigable map is a hugely expensive thing to do,” Prioleau said. “When it comes to looking at the potential purchase price of Nokia’s Here, it’s like buying a puppy. It doesn’t matter if you get the puppy at the pound or spend a thousand dollars for some fancy dog breeder; you will spend more money on the life of that dog compared to the initial acquisition price. Maps are kind of like that, too. Whether they spend $2- or $3 billion the care and keeping of a map property at that level is a very, very expensive thing. I think that’s another piece.”
Longevity is one of the most important aspects of a mapping service. As Prioleau noted in his own blog post on the issue, Google has been working on its map functions for a decade, while Apple has been building its navigation features for roughly seven years. For one thing, it’s difficult to keep adding and subtracting maps if a company is just getting started — that’s something Apple discovered when CEO Tim Cook had to apologize following the replacement of the still-dominant Google Maps app with the comparatively incomplete Apple Maps as an embedded feature on the iPhone in 2012.
“People don’t realize that maps of business locations — their addresses, their phone numbers, even whole streets — are often obliterated and reconstructed,” Prioleau said. “Nine times out of 10, the user experience on a business’s map is fine. But that 10th time, if it’s wrong, could cost a company business as users turn to another solution. Therefore, businesses want more control over the map results being delivered to their users.”
Customization And Control
That demand for control — and the need to be less reliant on potential “frenemies” like Apple and Google — is likely forcing other companies in the space, most notably app-based living accommodations platform AirBNB, Amazon, which has been building out its own local presence in major cities like New York and San Francisco, and Lyft, which is positioning itself as a ride service alternative to Uber, to look to do some acquiring and/or investing in the navigation space this year as well, Prioleau said.
“In the not-too-distant past, people and companies just looked at a map, and thought, ‘One’s as good as any other,’” Prioleau said. “But there’s a lot of things that can go wrong. And a lot of things can be made to work better, look better, and ultimately reflect a specific brand in a more differentiated than they previously have. I would expect the bidding and investing in these mapping companies to continue for the next few months at least.”