Knowing where consumers are has proved to be vital information, not just for those in the location-based services ecosystem, but also for consumers themselves. In the LBS application arena, GPS-enabled navigation is one of the only significant money-makers; consumers pay a premium to know how to get from Point A to Point B. Still, the LBS market is just beginning to take off, and opportunities lie ahead for other location-enabled apps and business models in wireless.

Going mobile has been the logical evolution for navigation. What started with personal navigation devices (PNDs) for consumer and enterprise use quickly migrated to the Web world, epitomized by Google Maps, and then into wireless, where carriers and vendors are now experimenting with how best to monetize such services. Even Garmin is making inroads into the mobile market with its first consumer handset, Nuvifone, set to ship by the end of the year.

According to Dominique Bonte, principal analyst for ABI Research, however, the entire LBS market is still somewhat limited, especially when compared to PNDs. To date, mobile navigation has been held back by a lack of variety in location-enabled handsets, small screens, difficulty with text entry and battery life limitations. He expects the market to grow but not to catch up completely with PNDs — at least not in the foreseeable future.

“LBS are still emerging as a whole,” Bonte said. “Within LBS, navigation is still important, but in absolute figures, it's all very small. Typically people pay about $10 a month for those kinds of services. So about $100 per year with three million customers out there, you can quickly see that is only $300 million. If you compare that to PNDs, a hardware solution, it is an order of magnitude bigger than what you see in handsets.”

With most CDMA handsets already location-enabled and GPS planned as a standard feature in GSM smartphones and feature phones, a lack of location-aware handsets is becoming less of an issue. ABI predicts that more than 550 million GPS-enabled handsets will ship by 2012. Nokia, which currently has 12 handsets with built-in GPS, plans to ship 35 million this year. Rick Witham, head of channels and VC relations for Forum Nokia, said that people are always willing to pay for some level of first tier service. While there is pressure for the pricing of GPS to come down, carriers can offer alternative business models to monthly subscriptions, such as micro-subscriptions and pay-per-use, to appeal to vacationers or lower-frequency users.

“Consumers have gotten very smart quickly about what kind of experiences they want,” Witham said. “[Navigation] is going to shift very quickly as different solutions evolve. It needs to provide the right message in the right context. If we are going to Paris and we haven't booked a hotel room, I'll have an opportunity within Nokia Maps to search the hotels in a particular part of town … and make a reservation through the home PC or by calling and giving my credit card number.”

Witham also pointed to Swifter, a shopping application, as an example of advertising used in the right context and time. Based on the consumer's location, the user can check real-time inventory, pricing and directions.

David Harris, senior director of mobile services for Motorola, illustrated other niche LBS applications, such as linking data about ski slopes and weather conditions to maps. Such services might appeal to a small audience, but it is unlikely any significant group of consumers would be willing to pay for them. This is where advertising and sponsorships become particularly important. Harris said that location should be like electricity: something ubiquitous that consumers can rely on but don't have to think about. As such, things they interact with, such as a phone book on the mobile phone, should be enabled through location.