The concept of free in the mobile phone market
© Sergey Eshmetov - Fotolia.com
Nokia’s announcement to give away its navigation software and maps for free came as a total surprise to all of us. Just two years ago, Nokia had paid the enormous sum of € 5.7 bn for Navteq and now it’s free? Why would Nokia do that? Pure desperation?
Indeed, many experts see this as the last big move of mobile phone giant Nokia to catch up with its competitors. Rivals such as master of innovation Apple, aggressive telecommunications giant Samsung or Research in Motion whose Blackberries have become the synonyms of business phones have been gaining market share in the last years.
But what is truly remarkable about Nokia is its talent for comebacks. Several times the giant has been labeled “out of the game”. First, when Nokia totally underestimated the strong trend towards flip-phones (all for the benefit of Samsung) and just recently the high acceptance and then consumer desire for touch screen phones such as Apple’s iPhone. Many also argue that Nokia’s OS Symbian cannot keep up with the rest. Every time industry experts pointed to missed chances of the immobile giant, Nokia found a way back to gain market share and increase sales. And every time, Nokia somehow managed to come back. One of their strengths is pure size. Nokia is the world’s largest manufacturer of cell phones. No other company has such a huge variety of phones on sale. What they lacked in innovative technology and design, they always compensated with size.
But what made Nokia so huge is not only quantity. From early on Nokia has been focusing on usability and intuitive usage when they designed their phones. I remember my first 5110 and later the more business-style 6210. Other than the Sagem, Motorola or Siemens, you at once understood how they work. And they were simply solid. Nokia’s OS Symbian even profited from the weaknesses of Windows Mobile. It has always been faster and more stable. Yet what the custom Windows OS could not offer, users found in specials hacks, updates, etc. What started small became an argument to buy such a phone: you could easily mod it!
While Windows tried to fight this, and Nokia was busy improving its Symbian, Apple understood what this trend meant for the business and turned the “issue” into a business model and presented an innovative phone which could be customized with numerous apps. As all the others, Nokia followed. But has been trailing far behind. But this time, Nokia turned the game upside down and instead of responding to industry actions, it made facts.
The tactical move of giving away navigation for free shook the world of the Garmins and Navigons and certinaly iPhone mother company Apple. While the entire industry was still running on Google Maps and expensive navigation software solutions, Nokia has been creating exceptional expertise in the field of navigation. Of the approximate 163 mio gps-equipped smart phones 51% are Nokia. Ovi maps are available for more than 180 countries, auto and pedestrian navigation are offered in 74 countries and in 46 languages. There is 6000 3D building views for more than 200 cities.
As convincing as this offers is to consumers, it is also a disaster for competitors. Within a day Nokia managed to depreciate entire business models. Still trailing with their own app store Ovi, giving away a valuable service such as navigation and the necessary maps for free is quite an argument for consumers. Nokia maps rock: And it opens Nokia the doors to what may become the most valuable information in the mobile phone business: the current whereabouts of each user. And thus the ability to offer products, services and much more always exactly in perfect match to the current location. The nearest pizza restaurant, car rental station, CVS, Radio BestBuy,..
Maybe in the future the concept of free will permeate the mobile phone market. You give away the phones for free knowing that people make heavy use of the applications offered and thus in the end earning more than with the sale of the phone itself. Telephone calls not included yet. The future will be data not minutes. And in order to make the most profit you have to be the one who can provide the most adequate information at the right time. This is what Nokia aims to achieve. And it values this new market at such a high price that it is willing to give away its navigation software plus the excellent map material which in 2008 has been worth more than €5billion. This reminded me of Chris Anderson’s “Free – the future of a radical price.” In his best-selling book, he named numerous companies who chose this dramatic turn and became highly successful. Let’s see if in a 2015 edition, Nokia will serve as a another perfect example of how successful the concept of “free” can be.
Sources:
http://www.heise.de/newsticker/meldung/Nokia-bietet-kostenloses-Kartenmaterial-und-Navi-Dienste-fuers-Handy-909803.html
Handelsblatt
Wirtschaftswoche
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Update on the current market situation, powered by Gartner Research:
Gartner 2010
