NB: This is a guest article by Aaron Zwas, director of emerging technologies at Digital Marketing Works.
The War of the Maps (Worlds? Ha!) between Apple and Google is that the struggle is not about immediate revenue, it is about ownership of geo-behavioral data and overall strategic positioning.
As a follow up to its maps service, I predict that Apple will eventually bring to market an “Offers”-like program along the lines of Google’s existing service.
Overall, the future of Apple Maps could tie in offers, iAd, Passbook, and other elements for a comprehensive service that is on par (and in some ways assuredly better than) Google’s current suite of Map/Local/Nav/Offers/Check-in services.
But if Apple and Google are only jockeying for position now, with little discernible revenue to be gained, the longer-term opportunity has to be significant, right?
So, how big of an opportunity are we really looking at? I think I can begin to give some shape to what the answer might be.
First, a few assumptions:
- We should assume a consumer base that has +90% smartphone adoption. It’s only a few years away…
- We should assume steep adoption of maps services in parallel with this smartphone adoption
- We should assume that a geo-aware coupon or “offer” model like Google’s will eventually become a persistent characteristic of the mobile commerce landscape.
- Also assume that it also will grow in parallel with smartphone adoption. (Note: such a service should not be confused with substantially less useful services like Groupon.)
Beginning with these assumptions, I believe that the market opportunity being chased by Google and Apple is a big piece of all local brick-and-mortar B2C business.
I call this The Walk-In Economy, and it includes everything within retail and services, from individually-owned shops to the physical stores for national brands like Best Buy, Home Depot, and Burger King.
Based on data from the US Census Bureau, I estimate the Walk-in Economy to be worth approximately $7 trillion dollars annually in the US alone.
If Apple, Google, and other mobile players are able to use their offers platforms to monetize just 0.5% of this market for themselves, it represents an opportunity worth $35 billion annually, which is approximately equal to Google’s entire annual revenues.
Assuming the eventual ubiquity of the smartphone and its proven ability to change consumer behavior, this is a realistic end game within mobile.
One thing to consider is that a certain amount of this new opportunity will be cannibalizing Google’s traditional AdWords revenue, which is fundamentally at risk as more of us use the web via mobile and bypass the traditional Google.com entirely (because of Maps or Siri, for example).
Nonetheless, I think the playbooks are not merely defensive in this case.
The mid-term and long-term opportunities are simply too enormous to think otherwise, and it’s important to note how smart companies always cannibalize themselves versus risking that competitors will cannibalize them.
With mobile disruption and changing user behavior, this has never been more true.
NB: This is a guest article by Aaron Zwas, director of emerging technologies at Digital Marketing Works.
NB2:Â Maps image via Shutterstock.
Related posts:
About Special Nodes
A quick followup on how to use these thoughts to tactical advantage for hoteliers…
A key takeaway is that the “offer” model is going to pick up a lot of steam in the next few years because it will be pushed by Google and (I predict) Apple.
The need to understand this model will be most immediate for limited service hotels that usually see a big mix of walk-in business. Resorts should focus on how this model can be leveraged for the benefit of their outlets like restaurants and spas.
Savvy hoteliers will begin to experiment now with the new turnkey Google Offers so that that best practices are in place in advance of “offers” going fully mainstream via both Google and its competitors.
Thanks,
-az
Aaron,
Excellent insight. I have referred to your article as an perfect example of not getting caught up in the ever present ROI models, and realize that long term strategies highlighted by you may in the sort term appear counter productive, but in the extension of trends and timelines are the necessary starting points to longer term shifts in market. I think you could have added even more impact buy referring to the already dominate growth of mobile as a conversion platform in hospitality in spite of our relative slow migration to its use as an industry.
All in all well done,
Loren
Thanks for the comment, Loren.
Aaron,
Thanks for clarifying that.
Best,
Sean
Great article Aaron. It’s fascinating to see the impact that the smartphone revolution is having on the hospitality industry, and our privilege to be involved in helping organisations modernise to fully harness the power of it.
As you touched upon in your comment, there is certainly a trend towards capitalising on additional services in hotels. This is innovative and marks a move away from a yield management focus that has been seen for many years beforehand. When this accessible platform of offers is operating in full force, hotels will now able to transform themselves strategically to offer lower base room prices and to promote additional services to adjust their revenue streams.
There is another, large and unstated, assumption in this piece – that a worthwhile number of people leave location services enabled on their phone and do not choose to disable it or adopt a very selective approach to when, where and for what they do so.
There are a number of reasons they may do this – in the interests of privacy; to prevent unwanted consumption of data at roaming rates (granted, not a US issue) and to avoid what may well become a growing annoyance from your phone constantly reacting to location based stimuli (parallel to the annoying SMS marketing message).
Until we have some data on this, it is all speculation!
Loren and Edward-
Thanks for your additional thoughts. Good points that smartphone/mobile will continue to transform consumer behavior, whether hoteliers are getting behind it or not! As in any industry, the winners will see the trends early and position themselves for success.
As Edward suggests, one possible outcome could certainly be a greater focus on ancillary services like golf, spa, restaurants, etc. For too many resorts today, the strategy for hotel restaurants, at least, is to “lose as little money as possible”. Hardly a winning strategy! A simple step that hoteliers can take right now is to focus their social media efforts on checked-in guests. Doing so enables last minute flash sales that require no revenue share, for example. It’s easy to measure the traction of these efforts and to fine tune as needed…
Sceptical-
You raise a good point. My math should have included a line item for people who disable location tracking. With your feedback, I conducted additional research today and found something that we might be able to hang our hat on:
The Pew Research Center released a study last month which suggests that about 25% of mobile users disable geo-tracking (the percentages varied per user group and 25% is about the average).
This metric doesn’t shrink the size of $7 trillion Walk-in Economy, but would diminish the .05% conversion rate I’m working with. Factoring in a “no geo-tracking” rate of 25%, I still see a US $26 billion opportunity on the table.
We also need to consider that Apple, Google, and the rest will do their best to encourage disclosure of geo-data while at the same time attempting to assuage privacy concerns and “relevancy” concerns. Will they be effective in this area? To your point, time will tell.
For me, Google currently shows local offers on my Android phone only when I ask to see them. No pop-ups, etc. It’s a good balance, but everyone’s needs and preferences do vary.
For reference, here’s the study (http://pewinternet.org/Reports/2012/Mobile-Privacy.aspx)
Thanks,
-Aaron Zwas
Thanks for all the insightful comments here. To your last comment, Aaron, it’s noteworthy that in iOS 6, Apple moved Location Services into Privacy settings versus a stand-alone setting. Perhaps they are trying to be sensitive to the inevitable privacy issues and/or making it a bit more difficult to disable location services.
To add content to the discussion of privacy and its impact, we would be fair to include the cultural shift that is and will continue in regards to ‘entitlement’. As the younger generations who have grown up with this level of technology and data overload expand there economic value, their perception of entitlement grows with it. These are the consumers who perceive there ‘surrender’ of privacy to the betterment of there life as a fair trade. They are the one who offer there information to app’s and services so as to say, ‘show me what I want, I have given you the information needed to filter the vast amount of data to better my life’. They too represent a statistical value to the model Aaron has presented.
Loren- Don’t know if you’ve had the opportunity to play with it yet, but Google’s new “Field Trip” app is a perfect example of this. Currently Android-only, but highly useful and configurable. The tradeoff, just like you said, is that the app is only as useful as the data you give it…