Nokia’s Mega-Deal To Buy Navteq: Another Content Deal, A Sign Of Megalomania Or A Sure-Fire Services Differentiator?
Now that we’ve digested the news that Nokia are going to buy Navteq, the largest navigation service provider, for a cool $8.1 billion, it’s time to ask the critical “why” questions. Why the full-steam-ahead push into content? Why pay a premium on the share value? Why Navteq? Perhaps most important of all, will it pay off?
Some background to put this into perspective. Nokia has sealed several deals (developments we have recounted on this site) to stockpile content and bring order to its capabilities mix – a strategy that includes mobile advertising, mobile search and – increasingly – mobile content. However, following purchases of music, marketing and social networking specialists, the decision to buy a mapping company needs some explaining.
At first glance it makes business sense. Nokia clearly views mapping, and more importantly location, as integral in the evolution of contextual content. Put another way, Nokia has connected the dots and concluded – quite correctly – that helping users find people and places nearby will be as important for users as will be for those seeking to sell content.
But does this justify the $8 billion price tag? Martin Garner from Ovum argues Nokia didn’t have much of a choice. Nokia paid over the odds for Navteq in order to stave off interest from rivals Google, Microsoft and Yahoo. This is a feasible argument bearing in mind TomTom’s recent purchase of the second largest navigation provider and Nokia partner, TeleAtlas. With Navteq as the only other seriously global provider, Nokia were faced with the potential scenario of having to buy all of its mapping content from competitors. Hardly the basis of a long-term or sustainable business model. Nokia didn’t want to take the risk so they bought Navteq.
Or should we read Nokia’s latest move as a mix of confidence and megalomania. Riding high on the hugely encouraging usage patterns of Nokia N95 users Nokia execs may think the company can own this space. However, I have my doubts that the company’s upbeat mood is based on hard fact. It claims 100 percent of N95 users have used the map application. Sounds promising – but perhaps a bit early to break out the champagne.
But let’s leave the hyperbole that has accompanied this story from the start and look at the bigger picture. I think Nokia have been slightly under-estimated. It has its eye on the prize and fully understands the importance of delivering users contextually-aware content linked to factors such as profile, preferences and location. This approach is more than a competitive differentiator; it ensures that the personal user interface remains just that – personal. Put simply, location delivers context. But don’t just take my word for it. During a recent conference call discussing the deal with anaylsts Anssi Vanjoki, Nokia’s EVP Multimedia, said: “Our vision is that the location information helps build the next base of the bed with context sensitive services.”
Navteq is a pricey acquisition – but a necessary one. Keep in mind location is also the cornerstone of offers coming from the likes of Google, Microsoft, Yahoo and GeoSentric. (that hopes to give them all a run for their money).
Navteq will continue to be the largest navigation service provider in a market that is set to accelerate in the coming year – reporting directly to the Nokia top brass. What this means for Nokia is that they will have at their fingertips the ability to weave mapping, location and context into every one of their service offerings. Their new position at the intersection of content and context is an enviable one indeed.
Peggy adds: We have our eye on GeoSentric and its GyPSii consumer app. Look for an exclusive podcast coming soon.
