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European LBS to generate EUR 435 mn revenue

Sweden: Berg Insight, a market research firm, estimated that location-based service (LBS) revenues in Europe will reach EUR 435 million in 2016. It will grow from EUR 205 million in 2010 at a compound annual growth rate (CAGR) of 13.4 percent.

Berg Insight observed that 20 percent of all mobile subscribers in Europe already use some kind of location-enhanced application on a regular basis. Local search, social networking and navigation services are the top application categories in terms of number of users. The social networking category is forecasted to experience the highest growth in the coming years.

About North America, Berg Insight observed that the larger installed base of GPS-enabled handsets and smartphones has enabled higher uptake of LBS. About one third of mobile subscribers now access LBS on a regular basis. Especially navigation apps have become very popular in North America. However, the intensifying competition in the navigation segment will lead to declining revenues in the next few years. The total North American LBS market is forecasted to grow at a CAGR of 2.3 percent from USD 620 million in 2010 to reach USD 710 million in 2016.

“Higher adoption of smartphones is driving usage of mobile Internet services and apps in general. As more and more developers add location support in their apps to enhance the user experience, LBS is now gaining mainstream acceptance among mobile subscribers”, said André Malm, Senior Analyst, Berg Insight. He adds that integration of GPS in handsets is an important enabler. “The installed base of GPS handsets in Europe has reached 35 percent of total handsets and surpassed 70 percent in North America.”

The revenue model for many mobile apps in the consumer segment is shifting from premium fees to ad-funding. This is also the case for LBS where now also navigation services are becoming free for end-users and developers monetise their offerings through ads and various service bundles. However, revenues may not grow at the same rate as usage since the mobile advertising ecosystem is still nascent. It will take some years before a successful model has been established that allows advertisers to reach out to a critical mass of active users. This is especially true for emerging location-based advertising.

Source: Berg Insight