Mobile location-based service (LBS) revenues in Europe are being tipped to grow from €205 million in 2010 at a compound annual growth rate (CAGR) of 13.4 percent to reach €435 million in 2016.

According to a new research report by Berg Insight, 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.

In North America, the larger installed base of GPS-enabled handsets and smartphones has enabled higher uptake of LBS. Berg Insight estimates that about one third of mobile subscribers now access LBS on a regular basis. The total North American LBS market is forecasted to grow at a CAGR of 2.3 percent from US$ 620 million in 2010 to reach US$ 710 million in 2016.

The installed base of GPS handsets in Europe has reached 35 percent of total handsets and surpassed 70 percent in North America.

Berg Insight highlighted that 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, added the report.

Travel industry

The underlying trend driving LBS is smartphone adoption. They are quickly becoming users’ primary source for communication, information and entertainment in general but more specifically when they are traveling.

If the travel industry wants to meet consumers where they are, it has to participate and maintain a strong presence in platforms because it’s growing fast.

Location-based applications give marketers a chance to engage with customers or prospects in a whole new way. Using location-based marketing can be both an acquisition and retention/loyalty tool. Perhaps the most promising area is social sharing/ word-of-mouth because users are already sharing their activities via smartphones.

One of the most consistent premises behind location-based marketing is the ability to reach the right person, at the right time, in the right place, with the right message. So, for instance, a hotel may reach business travellers when they are at an airport. Because mobile phones have become integral to the lives of most consumers, it makes sense to leverage opportunities for engagement when users are out in the world. And because travel / tourism is all about exploration and experience, the category has a unique opportunity to use the combination of location, activity, demographic and time targeting to engage.