European startup Cloudmade, which offers data and tools to developers and OEMs for mapping and navigation applications, isn’t the only company to get hit hard by Google’s new disruptive Navigation product.
But they aren’t reeling out of control either. Cloudmade CEO Juha Christensen sent us an email that he distributed to partners yesterday. It’s clearly an advertisement for Cloudmade (the last paragraph tells new partners how to get in touch). But it is also a blueprint for how companies can carve out a competitive niche from the Navigation product. We’re posting it because it’s a good example of a measured response to a potentially company-killing development.
There are developers, device makers and carriers who strategically don’t want to let Google in, or can’t get the functionality they want from Google’s APIs. That’s where Cloudmade and others can get a foot in the door.
The email is below:
Earlier on this year a smart VC, who multiple times has competed successfully against Google, told me that Google is generally willing to act as an “irrational economic player”. It’s willing to destroy value just so others can’t get at it, even if it means destroying value for itself.
Google just announced that it will offer navigation. Navigation has so far captured 70%+ of the $2 billion mapping market. The bad news for established navigation players like Tele Atlas and Navteq is that this will erode the value of navigation, just like the value of maps have been eroded. The good news for those players is that Google has now tipped its hand and shown that it’s willing to compete against the very ecosystem that it has been nurturing over the past couple of years.
Google’s strategy is to leverage maps, including navigation, to extend its current search franchise into local search. We’ve believed from day one of CloudMade that contextual search, using location data and some knowledge about the user (for example which app he/she is using) creates much more valuable CPM/CPC/CPAs. If you’re an advertiser or a merchant, you will pay more per impression if you know someone is a mountain biker and is near the bicycle mega store you own.
Google betting on one-size-fits all model
Google is betting on building a horizontal, local search franchise. I know that sounds like an oxymoron, but please read on, it gets clearer. Google is building a one-size-fits-all set of services around mapping, and will serve the masses with those. Think about Google Maps, Latitude or Earth. They are horizontal one-size-fits-all web apps with little or no segmentation. Everyone uses the same app.
Meanwhile, in the process of building out end-user applications rather than sticking to being a platform player, Google is causing considerable collateral damage. Its move into the territory normally occupied by mobile operators, OEMs and small, medium and large developers is turning the marketplace against itself. The honeymoon is over and the do-no-evil days have ended. Google has declared any monetizable pocket in tech a target, including the key franchises of Apple, Microsoft, the mobile operators and now also mobile application developers. The problem with Google’s approach is, the value is not in horizontal services, but in leveraging the democratizing effect of the app stores to use the 100,000+ vertical apps as a way to divide the market into tiny segments and let them flourish and gain traction.
CloudMade believes vertical apps will inherently nano-segment the market
Most of the impressions that will hit consumers, and most searches that are contextually and location oriented, will occur through vertical apps. Take the mountain biker example. Where will I be more likely to respond if I want to a) navigate my mountain bike though a new trail and b) click on that ad from the bicycle mega store? A horizontal Google app, or a well crafted, vertical app written by a focused developer who understands my special interests? We believe the latter. We believe the mountain biking savvy, app developing expert who knows the hidden trails in his/her community will be better at providing relevance to local mountain bikers.
As I speak to mobile operators and handset manufacturers about the CloudMade business, it’s clear that most of the players understand the value of their immense reach, and want to pick long-term partners with whom they can build a franchise in local search, local advertising and local geo services.
It’s clear that Google’s latest move has served as a lighting rod for clarity in the value chain. Over the past days I have spoken to people throughout the ecosystem. So far, the uncertainty about what Google was doing has actually caused a lot of mobile operators, handset manufacturers and app developers to take a wait-and-see attitude. Now, with Google showing their hand, and making it clear that it’s willing to compete directly with substantial parts of the eco system to get at the local search market, we’re seeing that the wait-and-see is over. With Google choosing to go it alone rather than cooperate with the ecosystem, the ground rules have been laid down, and the competitive landscape is clear.
So what are we doing at CloudMade?
We’re building out our traction in the vertical mobile application area, signing developers within key categories that we believe will drive massive volume. This is a real micro-segmented approach, aimed at driving traffic to thousands of narrow verticals. We’re already seeing this scale.
Local, relevant ads: We’re jumping the learning curve on Location Based Advertising and Sponsored POIs. We’ll shortly be offering developers, mobile operators and handset manufacturers a revenue share on Sponsored POIs and ads that they include in their apps. This is big news to developers, who so far have had to depend on the modest revenues from selling apps at $0.99, $1.99 etc.
Data Marketplace: We’re building a massive marketplace for geo data. In fact, in a few weeks we have our “opening day” at the CloudMade Data Marketplace, the Turkish Bazar from which developers can choose a variety of content that they can mash into their maps. This will result in more app diversity, deeper functionality and even completely new types of vertical apps.
Offering for operators and handset manufacturers: CloudMade has created a super interesting set of propositions for mobile operators and handset manufacturers. We’re doing rev share deals with them where we work side-by-side to build franchises in the local geo spatial arena. We offer them onboard maps (built into their devices) and offboard maps (loaded from our servers), we offer them navigation jointly with our navigation partners and we offer up relationships with our many vertical app developers. For Tier 1, 2 and 3 operators and handset manufacturers this is turning out to be very compelling. The big differentiator is that the operators get to decide what the services look like, they get to brand them and they get to make money from them. That is as opposed to the alternative, which is to take someone else’s services, accept that they are all branded by someone else, who also pockets the ad revenues from them.
We’re focusing on making maps look the way the merchants and developers want them to look. Through CloudMade’s Style Editor anyone, even non-technical people, can produce advanced, custom maps that reflect the brand and identity of their company or their customers company. We’ve found that many, especially those with no yellow in their corporate identity, prefer this to a one-size-fits-all yellow map.
Navigation: We’re continuing to ramp up our work with key players in the turn-by-turn navigation field to increase the scope for navigation solutions. We are building assets to help drive the verticalization of the field, so we see custom navigation for different verticals. Again, CloudMade doesn’t believe in one-size-fits-all. We think different types of navigation will require different types of apps. For example, if I’m hiking in the mountains I don’t care about roads. I want to navigate hiking trails, be directed to places where I can fill my water bottle, and I want to know where the vista points are.
Last, but not least, the most important component of CloudMade’ approach.
Tools, tools, tools: CloudMade is focusing a lot of effort on the tools side. We believe that the best way we can serve the community of mappers and developers is to put all the control in their hands. We’ve demonstrated this through our efforts already, for example with our iPhone libraries. We’re similarly putting the control of Location Based Ads and Sponsored POIs into the hands of developers. Put yourself in the shoes of the vertical app developer. You know better than anyone else how your constituents want to be advertised to, what ads they want (and don’t want) to see and how to place those apps in your app.
Similarly, we’re readying a suite of tools that makes mapping easier, faster and more powerful. CloudMade’s web based Mapzen tool (http://bit.ly/1MRz8U), and Mapzen POI Collector for iPhone will be available shortly. This suite of tools enables us to further serve the 180,000 person large OpenStreetMap community that is building the most detailed, finely textured and accurate map of the world. The community was founded by the founders of CloudMade, and most members of the CloudMade team are active members of the OpenStreetMap community. The map we’re building in the community is stunning in it’s detail. It’s essentially the Wikipedia of maps. After all, who knows better how to map a community than people who live in the community. Just look at this Stanford example: http://bit.ly/3HJiRh vs. http://bit.ly/1i2N8m.
The Mapzen suite enables us to bridge the needs of app developers, who serve as a proxy for consumers in a given vertical segment, and the mappers, who are members of local communities or specialists in a certain type of mapping (e.g. mountain biking trails). Bridging the consumers needs for maps and the mappers’ desire to create maps that truly reflect their local community will result in mobile and web applications that both feature better maps and be more attractive to users.
So what’s the bottom line?
Over the next twelve months, we will see hundreds of thousands of vertical apps use maps and location services to better serve consumers with data about where they are, where they are going, how they get there and what is surrounding them at their location. We will see mappers collect map data that is highly relevant to local, narrow communities. We will see owners of diverse datasets make their data available though the Data Marketplace. In turn, we will see app developers jump on the opportunity and leverage the map data and Data Marketplace datasets into highly targeted, compelling and enchanting apps. Many will choose to monetize the apps through a combination of app store revenues as well as carefully selected Location Based Advertising and Sponsored POIs.
If you are a developer that has yet to use our platform, get started here: http://bit.ly/Vjdcp (or if you’re an iPhone developer, go here: http://bit.ly/2IRZA3).” If you are with a larger company with a need for a mapping provider that does not compete with you email me at juha@cloudmade.com.
I really like the idea of using sponsored POIs to monetize map impressions. We are looking forward to trying it out on UMapper.com.
I like your site and your idea. Good job
I agree, we are about to see an explosion of use in geo location and mapping technology and smaller verticle niches. It is going to be an interesting year ahead!
Good article. Good letter from Cloudbase.
Google is Evil. (but really good at search, dammit they got me) I wish Cloudbase the best of luck. They will need it.
There is no need for luck, they may have the same audience, but totally different in clients !
“The honeymoon is over and the do-no-evil days have ended. ”
I’m not sure what is evil about competing in a competitive market? Google is once again providing a free service to its users in return for advertising dollars. I would say giving a service to users for free, that used to cost money is not evil. It’s good. It may be bad for the companies that charged users for these services, but oh well. That’s business as usual.
This is not necessarily true. The cost of collecting, maintaining and processing the underlying data is near constant. As we all know the costs need to be recovered, so my bet is that G’s offering is only going to reshape the market, and perhaps quite unexpectedly for an average consumer. Yes, personal navigation may get substantially cheaper or free. But let’s imagine for a second that they drive Navteq, TeleAtlas et al completely out of consumer navigation market. How much more would they charge you as a business for that same data? And then, what would you do to recover these costs? Exactly – charge your consumers.
This is exactly what business is, if Google dosen’t drive these inefficient producers out of the market, then someone else will, and if not now then definitely later. The cost of this data is now cheap and a company like Navteq no longer needs to exist.
I agree. It just means that GPS vendors will have to move faster & be creative.
At least for now, Google Maps Navigation only works in the U.S. and I doubt if it works offline (i.e. in places where their is no wireless service). That leaves the rest of the world AND areas lacking wireless coverage. Still a sizable market, I would say.
I hardly see the evil in this. There have been two trends already set for years:
Trend A: The price of online map services is free. Set long before Google Maps by first movers like MapQuest, et al. So, precondition one, is that there have been free, robust, driving direction apps in the cloud for over a decade, however, you couldn’t use them from your car.
Trend B: GPS capability massively shrunk down and commoditized. There was a time when you needed a big box to house a GPS, now reasonably accurate GPS is provided by GPS in phones, aGPS, and Skyhook.
Trend C: 3G. Mobile connectivity got way better and now it is feasible move around with constant wireless availability of reasonable bandwidth at reasonable cost.
Trend D: More powerful mobile devices. The CPU and graphics capability of mobile phones has gone way way up.
Now, if we combine these 4 trends: Free cloud map services, cheap, miniature GPS devices, always-available wireless, and powerful application platforms on mobile phones, then we see that the days of the niche GPS device are numbered.
The fact that Google wired up all 4 of these trends isn’t evil, it’s inevitable. The moment phones got powerful CPU, fast 3G networking, they can connect to already existing online cloud based free driving directions.
The market forces here are no different than those that put horse-and-buggys out of business. The trends were aligned to kill single-function GPS devices eventually.
+1
I just checked out their map and I think their get directions is useless. I cannot specify from and to address which is ridiculous. either it is not available or hidden somewhere. But how the hell I am supposed to know the coordinates of the destination address … for that matter even the start address.
You can right click on the map to set the start and end points of the route.
google is the new microsoft
Then Facebook is the new Google?
Now tell me who is the new Facebook, user.
twitter
this dude has it backwards – google is not “destroying value” they are INCREASing value and destroying price
I do not see that large business in vertical maps as the author does. For most people a generic maps app/service satisfies their mapping needs. So pleasing vertical map apps developers with tools is not a goal on which I would focus on.
LBS advertising and sponsored POIs on the other hand is a great idea. I am interested in the specifics of the revenue sharing and the business model behind it as we would consider using them in our iPhone maps application OpenMaps: http://j.mp/OpenMaps
Many of us may initially agree that driving the price of a product to zero is good for the end consumer. No, it is not. What if PCs were offered for 49.99$ a piece, but were advertisement sponsored? Yes, a vast majority of homeowners, small and some medium businesses may switch. However, Intel would have to charge the rest of us very (and I mean VERY) high premium. And by “the rest of us”, I don’t mean gamers. I mean businesses and other organizations, large and small, where ad-sponsored model does not work: universities, medical research, your nearest pizza joint, etc.
Just imagine potatoes in your nearest Costco/Tesco/Billa/Auchan are suddenly free forever (no asterisks attached) simply because your favorite restaurant now has to purchase those potatoes for a 20x price. YOU’d end up paying anyways. No free cheese…
I suspect a lot of mobile operators will want to have Google Maps Navigation, on their smartphones. It will serve to entice people who might not otherwise get a smartphone to get one, resulting in a significant increase in data contracts for the operators.
It says OSM is “most detailed, finely textured and accurate map of the world”. It’s not more accurate. Most of the country is just TIGER data. The routing is pretty bad. And Google is adding detail fast. It’s funny that he uses Stanford as an example. Google added details on campuses in their last revision. Stanford on Google is now better that OSM. Check it out on his own link!
Maybe you haven’t looked at OSM in some other places, like Germany or Belarus? For a long time Google had only 3 (THREE) roads for the whole country of Belarus.
Maybe it’s time to add your area to OSM and stop saying google’s cooler?
I kind of doubt how operators will benefit from that. They get $10-$20 per month for navigation subscription and that will be reduced to 0. Verizon has 3M users with NIM navigation – that’s some 10M (rest goes to NIM) per month. Not a number easily recovered.
Regarding Google, I wonder if there is not going to be an intervention by the regulator. In reality, they are dumping prices (I.e. to zero) in navigation market using revenues made in another market. That is not exactly legal.
That’s how the BellSouth baby Bells were born. So if Google is divided, let’s see how each part becomes profitable.
trust me google map is profitable along.
Anyone who didn’t see this coming deserves to fail
Neverthless, I personally switched from Google’s APIs to CloudMade’s (for the Hollywood Walk of Fame on http://hwof.com ) for many reasons: a) the API was better, b) the cartography can be customised, c) if I find an error in the data I can fix it, d) etc etc
For those who complain that someone new has entered your space: just figure out to do a better job. (I think CM’s vertical strategy is smart)
You can’t expect to win a war by being the only one fighting it.
I agree.
Google is forcing companies to, excuse the expression, “shit or get off the pot”. Google does not have a monopoly on innovation so I think other companies, in the spaces that Google is or becomes active, are likely to come up with some equally great & innovative responses.
Google & Apple have really invigorated the high tech industry. Get ready for the fun ride!
I this (fake) Steve Jobs is commenting as well http://www.fake...-validates.html
I think the Google defenders are missing the point. Everyone operates in an ecosystem. Even Google. Google has just given the birdie to wireless operators, mapping companies and phone/device manufacturers. They’ve left the platform story and are now just another guy pushing their apps in the app store. Companies thy us their bruising monoply in one key market to subsidize an destroy other markets are well known. Soon nobody will play with them because they will do anything to feed the growth beast. Google just crossed a line you can’t go back on and will be treated like the new MSFT.
Oh and wonderfully articulate article/email worth sharing per TechCrunch
Its a true concern that Google is acting this way. Imagine someday Google giving milk from their farms free for Ads and all those farmers might be out of business. User gets stuff for free but indirectly they are paying for Ads. The more the companies advertise, the more the consumers pay.
This is not same as Cars making horses obsolete.
“Meanwhile, in the process of building out end-user applications rather than sticking to being a platform player, Google is causing considerable collateral damage.”
this sentence tells me one thing – this guy might be putting on a brave face, but he is shitting bricks at the momemt
There are so many business plans out there that G can trash, if they choose to focus their energies on new markets/opportunities.
IBM allowed Microsoft’s OS and applications like office to run on their PCs. Did MS disrupt the PC ecosystem by developing applications that compete with thos of IBM? There is room for both horizontal and vertical navigation fields. I do not see why cloudmade shoud be so displeased with google’s free application. We have vertical search engines, size-one-fits-all types all running in the same ecosystem and I do not see why he is complaining about the same thing happening in the navigation and Geo-mapping field. Consumers are the winners. Google is not evil.
innovation is painful for somebody, by definition.