Part of the transition from Tele Atlas to TomTom has been the desire to shorten the release cycle to get real time apps and to be able to process changes that one identifies in the field quickly
Founder & CEO, TomTom
Can you share with us the genesis, the motive and the journey of TomTom?
TomTom is originally a software company. We initially developed applications for mobile devices but in the late 1990s, we actively started developing digital maps for mobile devices. We were quite excited about it and so were our customers because of the possible applications. Our pioneering efforts culminated into a full-fledged car navigation application in the early years of the new century. That was a breakthrough for the industry, which was technology-driven until that point in time. Car navigation was not new and neither was navigation, but our efforts made it a consumer product, easy-to-use, affordable and accessible to a wide range of users. It changed the life of millions of car drivers, easing their stress in finding the way on the roads.
We soon realised that in order to provide good services, we had to focus on the content in our devices. We observed that information about particular routes was not very sophisticated, because of the lack of understanding of how road networks worked. We knew where the road was, where the crossings were, but we did not know how fast people were driving on that road or what was the fastest route to one’s destination. From 2005-06 onwards, we aggressively developed that technology and it brought us very close to the content. We started involving our users in collecting information and started collecting speed profiles. We started developing live traffic information because we considered it to be an important ingredient. We also started developing feedback mechanisms for customers who found inaccuracies in our data or of any changes in road network.
Around that time, Alain De Taeye of TeleAtlas and I got together. That culminated in a group of companies which is very active in content production, content collection and publishing and technology development to use the content in a cost effective way to deliver good end-user experience and this enables us power different applications.
We are seeing new avenues opening up for content and maps. On the other hand, PND market is on the decline. How is TomTom reorienting itself to this reality?
We had a massive success in the PND market in a short time. But today, PND market is declining and this decline (10-20%) has been difficult. We started reorienting our business in 2006- 2007 with a bigger focus on content and services and started focusing on automotive market, GIS market and enterprise market, where we saw big potential. While there is a decline in consumer business, there is growth in these areas. Today, PND revenue is only 35 percent of our total group revenue. However, we have not been able to compensate yet. One of our targets is to reach a point where new activities will deliver overall growth to the group. We can see that moment on the horizon.
While PND market is declining, the number of people using navigation capability is increasing. How is TomTom capitalising on this situation?
When we entered the market with our products, car drivers had a choice – they either had an expensive in-built system in the car, or they had a PND. And we delivered the PND with a fantastic value-formoney. Today, there is an increase in the number of ways consumers can use navigation, location-based services etc and the way they can consume those services is much broader than ever before. Mobile phones are increasingly being used for these services. More and more content is getting geo-referenced and displayed on a map. So, there is enormous growth in the usage of geographical information systems and data. And there is steep decline in the prices. We are capitalising on this smartphone revolution in a number of ways. We are licensing our content to smartphone makers and developing our own mobile applications. This is a growth area and a big revenue stream for us.
It has been four years now that TomTom acquired Tele Atlas. How have the individual strengths been synergised so far?
We made good progress though there is still lot of scope for improvement in further integrating these businesses. We are looking for synergies and bundling our content with software that we developed in automotive and consumer space. We made big progress in the way we make maps and the way we can include our communities and consumer base to help us create content collectively. A good example is our traffic information product. Going forward, one of the exciting areas is making the use of geographical information and database much easier for people to use. We will bundle that with technology, software and applications. This has already started happening and we made good progress in the enterprise market (where there is renewed interest and investment) and on the GIS side. We foresee our revenues in certain areas growing in double digits every year.
How do you foresee geospatial content getting more live, information collection more dynamic and its transmission into traffic information systems?
That’s an important point. Part of the transition from Tele Atlas to TomTom has been the desire to shorten the release cycle to get real time apps and to be able to process changes that one identifies in the field quickly and be able to publish them in near real-time to get closer to real time mapping. In a not too distant future, we will be able to productise that and go to the market with fresher and easier-to-maintain maps. The changes in data network can be published to our partners in near real time. These partners can be not only governments or enterprises, but also end users in cars or PND users.
Significant research is on to provide real-time geographic data. What is the role of sensors in this?
Talking specifically about roads and traffic, I should say that lot of work is going on. This is based on two themes. Looking specifically at car, we will increasingly start looking at the car as a node in the network. Once a car is connected to the network, there are lots of possibilities. We can turn the car into a sensor. We can detect when it is raining, when it is starting to freeze, if there is a traffic jam and if the direction of traffic has changed. Going forward, we can see cameras in a traffic mission being built-in into a car. One can do some local processing and also give data back to the drivers.
The second important development I foresee is that governments will start publishing their own information in an agreed format, which the industry can pick up and transfer to the customers. So, there is more one-to-one relationship between people looking after roads/road networks and the drivers. Information can be tailor-made for people who are driving on certain routes and at certain times and that would be a relevant and cost-effective way of distributing information, enhancing safety and reducing CO2 emissions.
In the future, there is also opportunity for peer-to-peer communication, where we will see special versions of Wi-Fi protocols being developed for vehicle communication. Peer-to-peer communication can facilitate warnings for traffic congestion, but also exchange of information between the car and the road side equipment.
TomTom has been providing real time traffic data to governments and road transport authorities. How is the response?
There is lot of excitement. For the first time, there is a big database. Since 2006, we have been filling that database with statistical information about driving. It is a massive source of information ready to be mined. We are not tapping it enough but we see lot of interest and people are developing applications on top of the database. But it is only valuable when one can really extract the information as needed and cater to diverse categories like engineering companies, governments and traffic consultancies which are working on making products that help in real time, in real life, to plan for traffic and make for good policies.
TomTom democratised navigation with its PNDs. Do you see such democratisation happening with traffic information as well?
This technology will be a standard equipment in a couple of years. There is lot of traffic information on the shelf that is valuable but it is active routing that is important. We are not selling traffic information; we are selling solutions to get users to their destinations in shortest possible time. By using all those sensors and correct routing, about ten percent of travel time in urban areas and up to 30 per cent of travel time in congested urban areas can be saved. So it is logical and cost-effective.
What about privacy issues?
Consumers can choose whether they want to participate in a programme or not. But we guarantee absolute privacy. If we collect data from a car, we don’t know which car we collect the data from as the car remains anonymous. The data remains anonymous and aggregated. We don’t store anything that can be linked back to the individual driver. Europe has strict regulations but they specify that if you treat that information properly, make it anonymous, aggregate it, you can do whatever you want with it.
In the real world, privacy is not an issue. What we, others, press, politicians need to do, is to learn about privacy – when is it that we need to worry, and when it is okay. That debate is not very sophisticated yet because it is complex, emotional and not always fact-based because it is very difficult to understand what the facts are. You need to be half an engineer yourself to understand what the policies are. I think the privacy debate will evolve. Currently, we have a set of rules that are working fine and five years from now, we might have a different set of rules.
Google Maps and Bing Maps are providing access to lot of free content. How are you competing with this kind of facility available for people?
It is true that there is a lot of free content. But there is a cost associated with making it. And typically that information comes with a certain business model. If you want to use Google Maps, you have to use certain applications.
But we can deliver our content in different formats, ensuring complete privacy. There will be an important business for that type of information that is completely unrestricted in its use and flexibility is in-built.
What is your strategy for emerging economies like India, China, Brazil and South Africa?
We see big opportunity for the content and services we deliver. Customers are already asking us to expand our investments in these countries. Taking India as example, it is still nascent in India but we believe there is great future for car navigation, navigation in general and location-based services. Some of them will be free, some of them will be paid. We want to be there not only as strategic partners to our international customers, but also as strategic partners to our local customers in India. We want to bring all the technology, all the learning and understanding we developed in the international context. We are investing in our content and providing our partners with software to turn that content into great and exciting end-user propositions or business-to-business propositions.
Our most important markets are North America and Europe. At a certain level, saturation is taking place in consumer space in these markets but there is substantial growth in automotive business. And we believe we can repeat that in China, India, Brazil, Indonesia and other countries.
There is lot of investment in that space and growth in areas like telematics and general licensing. It is a very high margin business on a fixed cost which is a map. We will continue to do what we are doing and investing in those areas. Growth will come back.