How much do maps cost and what are they worth?

How much does it cost to have the world’s best maps?

The answer may seem simple: $8.1 billion.

That was the cost to Nokia in cash for buying Navteq in October 2007. It would seem that buying that asset (or another one like it) is a cut-and-dried solution to anyone needing a mapping “solution”. But it’s not an answer that is either complete or explanatory of how mapping solutions are valued.

Navteq was not priced as a database for an app. It was a business which was expected to create licensing revenues and profits[1]. The actual price for this business net of cash was $7.7 billion but the following graph shows the net sales and operating profits since Nokia began reporting its performance:

Screen Shot 2012-12-18 at 12-18-3.13.12 PM

The blue area represents the difference between sales and costs and hence the operating expenses–the payments needed to “keep the lights on”.

These total expenses over the 4.25 year time frame totals €6.5 billion. The total operating losses equal €2.6 billion. Therefore, as far as Nokia’s shareholders are concerned, they paid $11 billion for Nokia maps, to date.

What do they have to show for it?

Nothing. The entire company is now worth only about $15 billion. It’s hard to imagine maps being worth 73% of Nokia. What Nokia hoped to get for the product was some value in its devices. As other issues intruded, that value has not been realized. Nor has any external licensing revenue been realized. Net external licensing revenues are actually decreasing.

The situation looks even even uglier when the maps asset can be seen as costing €1.5 billion every year. Why would anyone want to be in this business?

I bring this up because, apparently, everyone wants to be in this business.

Via Twitter I received a suggestion (rumor?) that Google spends about $1 billion every year for maintaining their maps. (Using a conversion from Euros to Dollars yields a Nokia maps burn rate of nearly $2 billion/yr.) Furthermore, there seems to be a burning desire for Apple to also burn this money.

If so, then Apple might have to start spending $1 to $2 billion/yr to merely maintain a data set. That would be a minimum of an additional 7% in operating expenses.

Why would they do that?

If Apple cannot buy or license quality data, there may be no choice. Maps have become a hygiene factor for a platform. Not having them makes a platform repulsive but having them offers no attraction.

Another way of looking at the maps asset is like a component in a phone. A vendor needs a certain class of processor, memory or screen or battery. Not having a minimum level of functionality makes the product uncompetitive but having it does not guarantee success.

What’s worse, the market may have been cornered—there may be no suppliers. Unlike hardware components, the maps component is not a commodity with a market of suppliers. The work needed to maintain the maps is a commodity but the aggregation and consolidation of the data is valuable and those who have gained control over the data and they are not likely to license it to any competitors for strategic (i.e. political) reasons.

So we have a perverse situation of a very costly, unprofitable asset requiring duplication of maintenance effort by politically motivated actors imprisoned by their own strategic interests.

If so then it fits perfectly with the mobile telecom industry. Like mobile networks, maps are very expensive and worth very little.


  1. The revenues that Navteq was obtaining during the 2008/2009 time frame included that from customers such as Verizon, Garmin, Advertising, Traffic services, Microsoft Windows Live services. For the six months ended on December 31, 2008, Europe accounted for 44% of NAVTEQ’s net sales, North America 43%, Middle East & Africa 8 %, Asia-Pacific 2 %, Latin America 2% and Greater China 1%.

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  • “Maps have become a hygiene factor for a platform. Not having them makes a platform repulsive but having them offers no attraction.”

    Great description of an expected, must-have feature for any product platform.

    • Yacko

      In addition to turn-by-turn, maps are about shopping, reviews and advertising. All big spaces. Maps accurate to within a foot horizontally and within an inch with the change in the level of the land will be a necessary part of driverless cars and commercial vehicles. Many companies will want a robust mapping service at its disposal and few will have them. It may be expensive, but getting into maps early is a good hedge.

      • “shopping, reviews and advertising” can (maybe) make money for Google. They don’t help Apple, as long as Apple wants to be a platform that costs a little more but, in return, is not a wasteland of advertising and commerce.

        I suspect, however, that Horace is a little too gloomy. Yes, the path from Maps to money is not one step but, on the positive side:

        – the costs should fall. As you set up infrastructure and automate, many things become cheaper. For example it’s only a matter of time before the equivalents of Street View are constructed by stitching together location-tagged photos from the web and/or Facebook and/or Photo-stream.

        – like WebKit, control of maps gives you the power to do more. WebKit doesn’t just give you Safari, it also gives you the iTMS. Likewise Maps, in time, will give us Augmented Reality that doesn’t suck, and the ability for apps to put together the sort of mashups that we occasionally see on the web, only using a wider variety of data.

        The current crop of map mashup apps range from “OK” to “kinda horrible” — I’m thinking of things like apps that trawl wikipedia for geo info, and show that on a map so that you can see historical sites around you. Right now the lack of curation, and lack of gradation in these apps (so that I see everything from “Birthplace of Thomas Edison” to “Example of 1950s architecture” as one undifferentiated mess) is problematic, but these are the sorts of problems that time can solve.

        This sort of landmarks app, PLUS FindMy Friends, PLUS the ability to share not just current location but historical location, PLUS the ability to share “points I want to visit”, PLUS photos placed on a map, could for example, make a vacation that much more fun — a group could split in two or three, and each keep tabs on what the other is doing, while also having an idea of where they’ll meet again.

      • Tatil_S

        Find My Friends or restaurant reviews do not require owning mapping data, just the coordinates of one particular object. You can lease the map data from somebody else and just put a little blue or purple dot on it. The cost of the mapping data is equal to how much you have to spend to display the location in which your users are interested on top of that map. Cost is not the same as value, but it should be fairly close in this context.

        Google was not charging for such access, but now it is, so it will be interesting to see if there will be more money and competition in this business.

      • Gary

        Yacko is absolutely correct. Maps, or perhaps better said, a Navigation system, will be one the primary components needed for an mobile operating system in vehicles. While you mention a driverless car, a better way to view them may be as follows:

        driverless car = data collector that travels at 55 to 60 mph (88 to 97 kmh) for X miles per year

        I’m confident that this is how Google views the driverless car market. I also don’t think the fact that Eddy Cue is now on the Ferrari board of directors is just a coincidence. Apple sees the vehicle as a large untapped market that will need to be entered. They need their own maps system because Google could shut them out of the future vehicle market.

    • Yacko

      In addition to turn-by-turn, maps are about shopping, reviews and advertising. All big spaces. Maps accurate to within a foot horizontally and within an inch with the change in the level of the land will be a necessary part of driverless cars and commercial vehicles. Many companies will want a robust mapping service at its disposal and few will have them. It may be expensive, but getting into maps early is a good hedge.

  • eyepaq

    I had a thought on this, that Google needs Android users to be making use of map data to make that map data profitable, but Android users typically don’t have a data plan. It may actually be profitable for Google to foot the bill for mobile map access (similar to what Amazon Kindle does with Kindle books and WhisperSync) to encourage users to start using maps. They need some way to justify their continued over-investment in maps or eventually they’re just not going to be able to continue.

    • >> Android users typically don’t have a data plan

      This is stretching the truth beyond breaking point. I’m one of the first in line to point out the significantly lower usage data on Android for various activities but although a non-trivial fraction of Android devices come without data plans, I expect there are more Android devices with data plans than iOS devices. Also, they’re easily able to fund maps now and usage is only likely to increase from here, so why would they eventually not be able to continue.

      • eyepaq

        Has Google demonstrated that they’re easily able to fund maps (including street view, satellite and all the related costs) from money they’re making from maps? I wasn’t aware of that.

      • They’re not funding maps with money made from maps, but it’s unlikely that they’ll have to spend significantly more running maps nor start making a lot less overall in the near future.

      • jawbroken

        The real question is how correlated are the web usage statistics that we have access to and the maps usage statistics we don’t.

    • Jim

      How do you get that “android users typically don’t have a data plan”?

      • eyepaq

        Sorry, I’m posting from Canada where data plans are often prohibitively expensive. I guess local experience isn’t typical, but here, most of the people I know who have Android devices either have no data plan, or have a minimal data plan that they don’t use, because overage charges are expensive.

      • Android phones as a whole typically aren’t used much like a smart phone. If the market were segmented into Premium and Lesser smart phones the story (ies) would be much different.

      • Jim

        By definition, all android phones are smartphones both “premium and lesser” . Regardless of one’s definition of smartphone, there are 10’s of millions of high end android phone users doing the same activities as iPhone users.

        The install base of Android is so broad that one cannot safelyvmake generalizations like “the typical Android user”

      • Kizedek

        10’s of millions isn’t a lot. There are 10’s of millions new iPhones sold each quarter, to mention iPads and iPod touches.

        So, relatively speaking, as you have illustrated and confirmed, very few Android user have high-end devices that are being used for the same activities as iPhones. Despite the very high marketshare of “Android” compared to iOS. Since such use is therefore relatively low, one might just goe so far as to call such iPhone-like use *atypical* among Android users.

        Now the reason one can quite confidently assert such things about “typical” Android use, is that 1) there is some data from carriers suggesting that they sell very few “high-end” Android phones in relation to the number of iPhones they sell (in fact the iPhone usually outsells the next several most popular individual handsets); and 2) apparently Android is now the default OS that is put on anything and everything by all manner of OEMs building all manner of phones. Horace often speaks of this.

        While it is very attractive to say that any phone on which Android is installed is by definition a “smartphone” (due to the features of the OS and its potential as a smartphone OS), the actual hardware features of the vast majority of Android phones AND the apparent use that their owners make of them (according to studies and surfing and connection data) emphatically say otherwise.

        Yes, you are quite correct to say that the installed base of Android users is so broad that it defies any generalization… However, the one thing that we CAN safely say is that the vast majority are NOT used as smartphones! Precisely *because* it IS so broad! Do you not see how you have proved the exact thing you set out to disprove?

        Trouble is, those who talk up Android have so over-generalized the whole Android install base and platform as one huge homogenous pile of smartness, that one might be inclined to think that iOS was actually “losing” in some way.

      • Actually, you can. While there are 100’s of million of high end Android phones being used like iPhone’s there are 300’s of million Android devices that are not used at all like “smartphones”. There are a huge number of Android phones with 320X240 pixel 2.5″ screens. Many of these phones can’t even play Angry Birds but are counted the same as a Samsung GNII.

        There really is an interesting segregation within Android users as being “typical” and “atypical”. The “typical” Android user does not use their smartphone in the same way as either the “atypical” Android user or “typical” iPhone user uses their device. This is why Google still supports iOS so well. Google still derives the bulk of their mobile based revenue off of Apple devices and not Android devices.

      • capnbob67

        That’s the point. There are not 100’s of millions of high-end Android smartphones being used like iPhones. There are not 100s of millions of high end Androids. Samsung’s entire life of Galaxy products, S/S2/S3/Nexus/Note/Note2 are lucky to have sold 80-100M units since 2010 according to the very sketchy Samsung sales numbers. HTC, Moto, LG, all have trouble moving more than a few million total (5-8M) smartphones in a quarter only a portion of which are OneX, RAZRs or high end Optimus phones. There is no massive sea of high-end Androids and what there are are spread around the world, more or less under Google’s control. It doesn’t compare to the iPhone sales which is predominantly (75%) high-end in every generation and almost all come with expensive data plans and mostly reside in the pockets of users with higher incomes than the local averages or most Android users.

      • But the Droid (original) was high-end as were the Droid 2, Droid X, Droid X2, Droid Razr, LG Optimus, HTC Thunderbolt, HTC OneX, HTC Evo 4G, Insert Robot Name….

        Add all these Android handsets together and you get 100’s of millions out there (though not all high-end at once just as you don’t have 100’s of millions high-end iPhones at one time) but it is a smaller number than the 100’s of million Android feature phones that are used to make calls, text and check FB. Many Android handsets are functionally just feature phones.

        Just like the iPhone was high-end once as were the iPhone 3G, 3GS, 4… There are 100’s of million of these as well. Each platform is huge. Each platform has strong networking effects going on. From a utilization standpoint (the part that really counts), I would guess Apple and Google’s Android split the “real” smartphone market pretty close to 50/50. I think iOS is far better utilized and has a much more vibrant and health 3rd party eco-system.

        Think about it. There have been 450+ million iOS devices sold. That is a plethora of devices and there are many more Android devices out there than iOS devices. For some reason, all these devices are used substantially less than the smaller number of iOS devices. It is a really interesting puzzle and I think it is because iOS is disruptive and Android is simply sustaining.

      • capnbob67

        We agree overall, I just think you are massively overestimating the numbers sold of those “high end” Android phones. All those you mentioned don’t even come close to adding to one generation of the Samsung Galaxy. If a Moto Droid model sold 1M in a quarter it was a public holiday and all high ends might be 2-3M. The model would be replaced and it would sell the same units or less. Only Samsung shifts any major high end numbers and has been cannibalizing the other AndrOEMS. That doesn’t add up to 100s of millions of high end Androids. I’m just suggesting some better precision. It is important to the story. If there are 100s of millions then the story you need to explain the underuse is potentially qualitatively different than if you realize that there aren’t that many high-end data-plan carrying Android phones out there.

        iPhone on the other hand roughly doubles every year and most of those are the latest model. This maintains a predominance of the current and most recent models in the user base. Take off the 100M ipads and we have roughly iPhone sales by generation (mashing up 2G/3G) 20M, 50M, 100M, 140M + this quarter of maybe 40-50M mostly iPhone 5s. The generation numbers don’t double because some share of current sales are for old models (~25%) but still, you can see that the vast majority of the install base is 4S/5 with sizable minority of 4 in there. That is a pretty high-end market with a small minority of 3GS or legacy old models. Much more lucrative than Android.

      • The original Droid was pegged to have opening sales of 250,000 in a week back in 2009. These numbers really are huge and when combined add to 100’s of millions. It is true that Samsung represents the bulk of the high end but they also represent the vast majority of the Android Feature phone line since HTC, Motorola and Sony tend to concentrate on the mid to high-end only and these units, when all combined, equally match Apple’s sales (that are also just huge freaking numbers).

        But I agree the bulk of Android handsets (of 1.3 million/day) are being used as basic feature phones. But even if only 20% are mid to high end phones, that is roughly 8 million/month or 100 million/year.

        These numbers match pretty well with utilization numbers (app revenues and web stats).

      • GuruFlower

        @capnbob67 Please see my reply to Steven Noyes above.

      • GuruFlower

        @Steven Noyes and capnbob67

        I was staggered by what you both wrote regarding Android phones being used primarily as feature phones, but I did some research and found this data on mobile broadband use:

        The data do indeed bear out your comments. If you have any other links to data on this topic, I would appreciate seeing them.

      • Cool link. Lots of good data in there. Most of what i “know” (or don’t) is based off of sites like, Net Market Share and the like. Once you learn the differences (like Stat Counter counts the iPad as a [desktop] and the iPhone/iPod Touch as [mobile] where Net Market Share does not) you can start to see some of these patterns emerge. If you look at Google’s Activation numbers, these do not line up with any utilization numbers (or even Google’s).

        I think there are two really different dynamics happening between Android and iOS.

      • I was speaking of how they are used. Most Android phones are too underpowered to be effective smart phones. And so those owners are the typical case. Android market share is a smoke screen. Only the premium phones generate any significant revenue, and only the premium phones are likely to have a data plan. “Tens of millions” is only a small fraction, and so, as as eyepaq said, Android users typically don’t have a data plan.

    • like most other Google services, the map is there to sell ad services and the map is built by Android users travelling around more than by mapping cars

    • Does the mobile infrastructure allow such segregation of data charging: billing Google for map data only?

      • eyepaq

        Bell Canada, at least, has services that it offers that are excluded from the regular data usage counter. I don’t know if every carrier would be set up to do this.

  • stsk

    Fascinating! In the 80’s I looked at the nascent market for GIS (geographic information systems) and couldn’t for the life of me think of a revenue model that made any sense…

  • Ittiam

    Great post… Google at least has their ad business as an incentive for building great maps, especially since local searches are likely to yield huge revenues on mobile as compared to traditional searches…. For Apple, as you said, its probably kind of necessary evil, a strategic asset… unless one day Apple gets into search by buying Bing 🙂

    • Although there is no data to support this, it’s unlikely that ads offer enough revenues to offset operating expenses for Google maps. Especially after losing most of the iOS user base. I support this claim on the evidence that there are many inter-dependencies to every piece of Google revenue. It’s not easy to attribute a click’s revenue to a particular service. Google operates as a single integrated, blended service.

      • ronin48

        Excellent post as usual. Very interesting.

        It would seem that Apple, or anyone needing maps data, needs to find a way to cut the cost of developing and maintaining the data. Not having maps is not an option so finding better and cheaper ways to license or own them is a must.

        Apple seems to be taking steps toward this by collecting data directly from willing users. I would expect them to expand this effort greatly and in new ways going forward. We might see iTunes store credit given for various tasks that could be offered or assigned (after opt-in) based on one’s GPS coordinates. Images and information could be uploaded to Apple from iPhones and iPads in key areas and could be verified with the GPS data. This could be done at the street level as well as inside businesses offering new ad streams.

      • Ittiam

        Yes… If maps are part of the puzzle, then it cannot be seen in isolation…

      • Walt French

        This is always the risk that a seller takes when using loss-leader pricing…he might get high market share but no way to recover his costs.

        The recent news about Google’s decision to no longer support “EAS” email support on free GMail accounts shows, however, that free pricing need not preclude later price rises, after the competition has been knocked out. Microsoft was already at a disadvantage by coming so late to the mobile OS business, and Google is obviously trying to put up roadblocks to individuals’ purchase of non-Android solutions. (Yes, as soon as it wouldn’t create too much customer uproar, Apple’s Mail app will be restricted, too. “They came for the communists, and I did not complain…”)

        I guess this accounting quirk points to the truth of Google’s business plan: it works once it achieves hegemony over the entire internet, and doesn’t work in the incremental, free-market competitive sense.

      • It’s been said elsewhere, but to say it in different words, it’s not just directly quantifiable revenue (from local advertising) that matters. Quality of search as a whole benefits hugely by the data Google collects from its mapping assets. Quality of recommendations (Google Now for example) benefits by the data Google collects from its location assets. Android itself become a lot more compelling because of superior location/mapping experience. And so on. SO while difficult to put numbers on it, mapping business is far from “worth very little” for Google. It doesn’t necessarily mean it is worth for others, however.

      • There’s also no data to support your $1-2B annual cost estimate. Nokia’s not a low-cost anything and there’s easy disruptions to be made using OSM etc on the cost end.

    • Walt French

      Or perhaps, Google’s ad biz is enough to justify good enough maps for most personal uses, while various pro applications can pay a higher price for even better data.

      Not unlike the old joke about not having to outrun the bear (of unprofitability), just having to outrun the other camper.

  • >> maps are very expensive and worth very little

    I might be picking at word choice (and meaning) but I’d disagree strongly with “worth” very little. Maps as a hygiene factor builds a giant moat around the leading platforms and that has to be worth a lot at keeping them in the game, even if they can’t charge more for the service right now. Apple’s Maps are actually very good compared to almost any other similar service (including buying the paper-based variety) except Google’s & Nokia’s. Google sometimes spends strategically to improve services beyond the reach of startup competitors even when they already lead the market. I understand they did this very deliberately in search.

    Mapping & navigation solutions were some of the highest value smartphone apps anywhere until Google started giving theirs away for free and Nokia followed by providing similar free services to Google’s worldwide on their devices. Before this there was a reasonably large and growing market for standalone SatNav devices which is now in decline. In the early days, of the app store, mapping and navigation apps were some of the highest grossing there too.

    The challenge is Google’s ad-supported business model and how anyone else is supposed to compete with them without copying it and achieving similar scale – they are commoditising and destroying whole industries. It is precisely because Google decided to give maps & navigation away and monetize it with ads that no-one else can monetize those services directly. You have to have a complete smartphone platform within which maps are an integrated component to compete. However you do need maps to compete and if anything that makes them more valuable than they were before (considering the smartphone business is rather large). Apple has a vertically integrated model that is competing very successfully and within that maps is “worth” every cent they are spending on it and more, this is precisely because it is “worth” a lot to end users.

    This is the other key phrase along the same lines I disagree with:

    >> Not having them makes a platform repulsive but having them offers no attraction.

    Nokia’s maps are very attractive, they’re significantly better than Google’s, at least where I live and particularly for navigation purposes. They are not attractive enough to persuade me to use Windows Phone when I can get most of the service on iOS and Android (which have just about adequate equivalents anyway). To say that maps are worth very little because they can’t be monetized in isolation any more seems a little odd for an expert Apple analyst. 🙂 Is iOS worth very little because Apple don’t charge for it? If I ran it on original iPhone hardware now I couldn’t sell the devices for very much at all.

    Nokia made a lot more revenue from their maps than the maps divisions sales suggest by making their otherwise not very competitive devices attractive enough to buy for a couple of years while they tried to switch strategy.

    Although Nokia’s maps licensing revenue has been falling, as one of the only remaining players willing to license their maps without major strings attached I’d expect it to start rising again. Amazon will be paying a decent fee for them going forward and any OEM or operator that wants to try to break free of Android is going to have to license them too.

    Not sure I’ve made my point at all well but I see the smartphone wars as a giant poker game. Google made maps one of the table stakes. Table stakes are worth just as much as the chips that you play with and strategically more, because they keep smaller & more nimble players with bigger risk appetites out of the game.

    • Walt French

      Yes, a bit rambly. But I think “the challenge is Google’s ad-supported business model and how anyone else is supposed to compete with them…” reads well on not just maps, but the entire set of Google’s services.

      While it’s pretty obvious that RIM has a near-impossible challenge of integrating a competitive set of media, services, apps and OS features, Nokia faces no less a challenge in showing US consumers its “full spectrum” of available features. I presume Europe will not be such a cliff, but in Asia (as in the US), they might have to make Samsung-sized ad expenditures to haul their reputation upscale. I just don’t see how that works, either.

      So the last non-crippled competitor standing is Apple, with its $100+ billion warchest, and solid hardware profits.

      Adding 2+2 = as with maps, Apple and Google are the only smart buyers left for a whole host of mobile services companies such as Foursquare (talks rumored), Dropbox (maybe should’ve taken Jobs’s offer, as Apple needs to extend iCloud to be competitive and there are no other likely buyers) and who knows how many others. How many firms will be able to convince either Google or Apple that they are the next YouTube—apparently profitless, but a killer service channel?

  • Walt French

    @Horace Dediu wrote, “Like mobile networks, maps are very expensive and worth very little.”

    Maybe I’m a little dense this morning, but after re-reading the whole article and thinking it over a bit, for me, at least, this observation is fraught with …unrealized potential import.

    I know that time did not start with the iPhone, but it seems like maps were very specialized, limited tools beforehand —provided by the USGS to backpackers, roadmap/atlas companies and the military, and that Apple’s apparently offhand decision to include them pointed out the value of them.

    And Google, in its standard MO, decided to destroy the value of competitors’ collections by giving them away, essentially for free. In the process, they also destroyed the business plans of their data providers, since only Google could afford to buy the raw data (with the Navteq story as the perfect proof).

    So I can understand this in terms of guerrilla business plans, but I really can’t conjure up a comparable example in any industry. Yes, restaurants need an “A” rating from the city health inspectors to stay in business, but it’s not very expensive to follow the somewhat fussy protocols, beyond what the business otherwise requires. Toyota took a huge hit from (apparently, bogus) reports of accelerator control problems, but the operator being able to control the car is 90% of one’s purpose in owning a private vehicle.

    Maybe other commenters have some good comparables to help understand this situation in any other terms than Yet Another Google Guerrilla War.

    • Jim Zellmer

      @Walt French Yes, goog destroyed the value proposition of many competitors. As a developer, we consider the use of Google Maps, but after reading the TOS and understanding their throughput based terms, we moved elsewhere. Interestingly and for many years, they never enforced the terms. Many websites simply ignored the terms and used Google Maps as much as necessary for display, routing and geocoding. That changed a few years ago when Google began somewhat throttling users. It is doing something similar with “Google Apps” – email and online documents. The free version is gone along with ActiveSync support.

      This is familiar territory for those who keep an eye on the tech behemoths. Microsoft was very effective at killing off competitors, or as Peter Hoddie famously put it “knifing the baby”.

      Finally, goog has used their streetview data collection scheme to collect an enormous amount of data, including controversially wifi snooping. Their cars and other data/media/network collection vehicles provide a freedom of movement vis a vis tom-tom and navteq.

      Apple’s interesting opportunity, IMHO, is to feed user generated/contributed information (media, reviews, fixes, fun) back to open street maps (OSM) and begin to make their enormous iOS data pile available to developers.

      A long shot, but a powerful way to change the game yet again.

      I’ve added links to this comment here:

      • Walt French

        Thanks for the mention of Peter Hoddie/Knifing the baby. In looking him up, I ran across an old post from Horace, , that looked at Microsoft’s failure with Zune thru the lens of shifting value stacks.

        It seemed relevant to this discussion, and a fun trip down memory lane in any case.

    • In case you can’t be bothered to read all of my rambling comment below:

      “I see the smartphone wars as a giant poker game. Google made maps one of the table stakes. Table stakes are worth just as much as the chips that you play with and strategically more, because they keep smaller & more nimble players with bigger risk appetites out of the game.”

      It’s not Google Guerrilla War, they’re much more strategic and methodically planned than Guerrilla warfare and they do relatively expensive things which smaller competition can’t afford to replicate rather than low-cost, creative and unconventional things.

      You have a big search advertising business that’s making you billions and you want to defend it.

      Location-based search has the potential to steal lots of your traffic. Mapping is not your core business but you build global maps that are at least good enough and give them away for free. Now you don’t have a mapping war because no-one else can start up as a mapping and location based search specialist – the barrier to entry is too high with no hope of a return until you reach massive scale.

      Mobile internet use has the potential to steal lots of your traffic. You make a mobile OS that’s at least good enough and give it away for free. This might seem like quite a large cost but it’s almost certainly cheaper than doing deals with every vendor of paid mobile OS’s and the OEMs to get Google as the default search and maps options, bearing in mind that Microsoft would likely be bidding against them in each case and in the case of Microsoft’s own OS they could never win that market. Owning the OS also allows them to gather more data. If Google has a business model beyond search advertising it is to collect lots of data and figure out how to monetize it later. If Google had not rapidly responded to iOS where would Microsoft be now?

      Pre-iPhone maps was a very big deal for Nokia, it’s just that they provided the maps for free and tried (not very successfully) to up-sell navigation. Google were aware of this, even if most of the US was not. 😉

      • Walt French

        @Mark Wilcox wrote, “You have a big search advertising business that’s making you billions and you want to defend it.”

        Thanks for your notes. I’ll quibble with the above characterization, however: Google has a big portfolio of users and their personal data that they rent to advertisers and others. As Horace noted elsewhere, they have many channels (a huge number on YouTube alone, heh) and methinks that in indexing the world’s information they’re more focused on their unparalleled user data—that’s how they actually make their money.

        As an op-ed in today’s NYT indicates, Google doesn’t need to defend their 98% share of mobile search; they need to keep selling their data about you to advertisers — and, more worrisomely, to companies doing credit checks, instant pricing and profiling as part of your online experience. Ten years from now, search might well be a small part of Google’s revenues, while their other channels thrive by their ever-widening ability to define you to others.

      • Matthias Urlichs

        Google doesn’t give their maps away for free. Far from it. They allow strictly controlled access to them and in return use your mapping queries for deciding which ads to show you.

        You want a free map, use OSM. Google Maps is a one-way street which people should refuse to contribute to.

  • Warren

    The best way to get past the manual part of mapping is to have the customers do it for you. Google MapMaker and OpenStreet Map know exactly this. After working for 2 years on a project specifically meant to fix Google Maps based on user feedback, no data set is as up to date as the user standing in front of the store telling you that you have it wrong. If anyone wants to compete in this market they are going to need to connect with users. Let me know if you want to learn more…there is plenty out there if you know where to look 🙂

    • At Lumatic, We build a full maps stack/smartphone app on Open Street Maps. That works even better.

    • Greg

      Warren, i would like to learn more.

  • Warren

    The best way to get past the manual part of mapping is to have the customers do it for you. Google MapMaker and OpenStreet Map know exactly this. After working for 2 years on a project specifically meant to fix Google Maps based on user feedback, no data set is as up to date as the user standing in front of the store telling you that you have it wrong. If anyone wants to compete in this market they are going to need to connect with users. Let me know if you want to learn more…there is plenty out there if you know where to look 🙂

  • crustyjusty

    Nokia’s business peaked too soon for them to create value from their maps. The value of maps is emerging, but smartphone market share, in theory, should help them explore different business models that can unlock that value.

    • capnbob67

      Nokia had neither the phones nor the OS to make use of the maps asset, Google destroyed the economics of mapping and the PNDs revenue source died a death as smartphones took over. A perfect storm of value destruction…

      • Tatil_S

        Nokia was also planning to combine a PND with a phone and charging more for the new device, so it is not fair to call that type of bundling value destruction, just because Nokia was not good at it.

  • I can’t understand how Googles actions are not monopolistic? That being said, Siri is the game changer, and the integration of Siri with Maps, when perfected, will make Google search seem like such a 80’s thing to do. Other than a recent “Apple Maps Fail” they have been good to me, and their deal with FourSquare should help. When you have a physical address Apple Maps seems to work great, it is their destination database that is the issue. There also needs to be a way for local business to define their address and other info, like google local (now places), this is a critical element in creating a accurate database. Yes, allowing good consumer feedback is also critical, but what better way to build accurate info then to let the business owner do it for you. They also should do a deal with the yellow page companies, they seem to have a good track of who is where.

    • El Aura

      At least in some of the Apple maps covering German-speaking countries, Apple maps do not find a physical address if you spell the word road or street (the German equivalent naturally) in an abbreviated form. My home address is not found if it is spelled ‘XYZ Rd’. If I spell it ‘XYZ Road’, it is found.

      Seems like a trivial thing to fix but I am still waiting.

      • Abhi Beckert

        They have a lot of trivial things like that to fix. I think you can count on them being fixed eventually. In the mean time you can always use something else.

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  • kiran bhanushali

    Horace how does open street maps play into this keeping disruption theory in mind. They are cheap/free and sort of good enough in lot of places

    • Matthias Urlichs

      They’d be even better if Nokia et al. would realize that, hey, maintaining yet another map dataset makes no sense whatsoever, so let’s import our dataset into openstreetmap (not an easy task but people have done it before) and in the future use OSM as the source database. Instant expense reduction, instant quality improvement.

  • gbonzo

    Unbelievable, you are adding IFRS operating losses on top of the purchase price. You should be adding non-IFRS operating profits/losses since the IFRS figures include writeoffs of the original purchase price, so you end up double counting. If Nokia would have done a quick writeoff of the entire purchase price, your method would show the cost of the acquisition to be twice of what it really is.

    • El Visitador

      Navteq abandoned so much of the automotive market, it is not funny. For two of my cars, Navteq only put out map updates within the first three years, and then never updated.

      The situation got so bad that BMW switched over their entire post-sales map updates to Teleatlas. BMW cars that were nearly 10 years old got map updates from a Teleatlas after having maps from Navteq for a decade!

      Some of us VW users were able to figure out that the BMW-engineered Teleatlas rescue also gave us a new lease on nav life.

      Navteq, meanwhile, sat on the assets without monetizing it.

      • Ofentse Letsholo

        Haaa?! But HERE aka Navteq still gives it’s mapping data to BMW, Mercedes, etc.

  • bp

    Interesting post.

    Nokia’s largest client for maps was to be Nokia itself. The NAVTEQ purchase would have seemed very astute and the numbers would have worked out very well had Nokia maintained its smartphone market share from the time. If Nokia still had more than 50% share of the smartphone market, they would now be selling hundreds of millions of smartphones per year with maps and navigation pre-installed. Given those numbers and the licensing fees for maps, $8.1 billion would have been a fair investment. But of course things didn’t turn out like that.

    The bigger cost to Nokia, however, was the opportunity cost: Nokia saw that its maps complemented the Windows Phone platform very well and would have been superfluous on Android. Nokia may have been a leading vendor of Android-based by devices now had it not been for the fact that the company owned the leading map supplier which competed with Google’s location-based efforts.

  • I have always thought that service like google maps, street view or google books were of strategic importance for google.
    They rely on a database that takes a lot of time to be built from scratch. Little by little pouring resources in the database makes it the biggest and the more accurate.
    In due time only one will be able to really offer a complete and accurate database for each service and the monopoly will start to create value empowering other services.
    A strategic advantage is one that does not generate much value by itself but it is an enabler of other ways of creating value.
    Since google is an integrated service company it is the only company that can increase the database year after year.
    Companies like Nokia or Apple use the asset tactically, as a feature for the hardware business, a pure cost without value. Increasing the database not only with the changes but also with new features like 3d, more street views, public transports and so on imply a great increase of cost without an increase of value for the hardware products.
    Google integrates all the informations, the increase of cost is absorbed by all divisions, the value over time will increase and finally enable profitable services, it’s like making whiskey, passing time increase your value.

    Apple created a great map app, but failed in creating a great database. Now they have to close the gap with google’s database, but google is not standing still but is always increasing the data, to close the gap apple must accelerate.
    Apple must spend more than google to do that, much more, and they not even own the database, they license it, so the money will never come back.
    For the database to be strategic for apple, they must plan some kind of return from it, not from hardware sale, but from database service sales.
    I believe the real reason behind the map affair for apple was the inability to allow developers to insert google maps in their apps. That was a strategic disadvantage for apple that had to be closed.
    With the new apple map, developers are able to full integrate map service in theirs apps, but google last week changed its policy and now developers can integrate also google’s database in their apps, so there is a stall. The only reason to maintain maps for apple is to constrain google from changing its policies again.
    On the other end google is losing potential from not having access to ios users that rely on apple’s app. I believe an agreement will be made and apple will terminate its map experience.

  • I’m sure apple know the real worth of Maps.

  • Something to consider: The value of a digital mapping solution/location search service is a function of how many people are using it.

    This is why for Nokia’s play looks like a sunk cost and for Google it looks like an investment.

    I believe there are solid benefits to Apple as location based searching is far more useful on a mobile device than from a PC. Not only are there a lot of eyeballs on it, but it is being used heavily.

  • D Gupta

    So, is Apple better placed to buy Nokia than Microsoft? If Apple does make an unsolicited bid for the mapping platform, or for all of Nokia, how do you expect Microsoft to react?
    Come to think of it, it may be a win-win for Apple. Either they get the mapping data they want + a way to make and sell cheaper iPhones reliably (Nokia can become the cheaper iphone maker). Or, they force MS into a very expensive purchase via a bidding war.

  • Ethnic Food

    Magnificent post

  • Ivaan

    Hi, I am interested about how Nokia manage their profit by providing free Here maps for Android phone?
    Are there any benefit for them?

    • Presumably the same way Google manage to profit from Google maps: advertising.