Nokia has announced a “strategc review” of its mapping business and plans to sell HERE just eight years after buying it for £5bn
“Location-based services are one of the cornerstones of Nokia’s Internet services strategy and this acquisition is another step toward Nokia becoming a leading player in this space.”
That was the bold message from then Nokia CEO Olli-Pekka Kallasvuo just eight years ago, after the Finnish giant splashed out a whopping £5 billion on the world’s largest mapping data provider Navteq.
At the time, Nokia had the world at its proverbial feet. It was the biggest and most recognised handset manufacturer on the planet, owning nearly half the global market and boasting sales close to 440 million. The inclusion of maps on its emerging Ovi platform was meant to further cement its position of leadership and spearhead its ambitions to become the world’s biggest player in the navigation space. However, It failed.
Eight years on, Nokia is now a shadow of its former self. Having already divested its failing hardware business to Microsoft last year, the company has now confirmed HERE (formerly Ovi Maps, 2007-2011, Nokia Maps, 2011-2012) is also set to go as it looks to fund its merger with French networks firm Alcatel Lucent in an £11 billion deal.
From a user perspective, the numbers make for pretty grim reading when compared to its competitors and show a lack of mass market adoption.
Figures from research firm Comscore show it had just 202,000 unique users in the UK during February (excluding Windows devices), with 88 per cent using mobile (the rest were made up of desktop views). Nokia insists it recorded two million users over all devices (including Windows) for that same period.
This compares with Google Maps, the market leader, with 26 million unique visitors during the same month, and almost half of those (49 per cent) were on mobile.
Bing Maps (which uses HERE) had 1.6 million visitors, although Apple was second most popular on mobile with 6.2 million.
Analysts blame its poor adoption on a number of strategic decisions made by Nokia, dating back to 2007 right through to the present.
These include, initially charging customers for a Nokia Maps Navigation licence, £6.99 per month or £54.99 a year, whilst comparable offering from the likes of Google Maps available on Android, BlackBerry and iOS were free.
“While it was tied up with Nokia phones, it had a really strong offering,” said CCS Insight analyst Martin Garner, “but with Nokia smartphones losing such a massive share, the maps offering fell away on the consumer side.”
Another criticism surrounds the firm’s decision to initially restrict the service to just Nokia handsets (a decision in 2007 which initially seemed a sensible one given its dominance) has also backfired – limiting its visibility to the mass market. Windows Phone has a market share of around 7.8 per cent according to the latest figures from Kantar, giving it an estimated six million handsets in the UK.
HERE was originally launched on iOS in 2012, but pulled a year later due to issues with iOS 7. It was re-added in February, having been made available on Android in December last year.
Following the launch of its Android app, there has been more than four million downloads across the world, according to Nokia, although it declined to disclose exact numbers for the UK.
“The UK market is quite Apple heavy and HERE has only just became available on that platform. Android is the dominant platform and it has not historically had that platform either,” Comscore regional marketing insights director Ben Martin explained.
“It takes time to grow share and when you already have established, integrated services such as Google Maps and Apple Maps then it would take any challenger time to break through that dominance. It is a very congested market.”
Radio Free Mobile’s Richard Windsor was quoted in 2007 (then at Nomura Securities), labelling Nokia’s business model in navigation as “already broken”.
Eight years on his concerns appear to have been proved correct.
“There are only two really good quality mapping services out there in the world: Google Maps and HERE,” said Windsor.
“Ovi was much more than just maps – it was Nokia’s plans to cement its relationship with the customer at the expense of the network operator. It didn’t really work. It is a good product for the consumer but the point of interest is not as strong as its rivals. But selling it wouldn’t do them any harm, except that if they sell it now, they will sell it cheap.
“There was a big strategic reason to buy NAVTEQ and Nokia was in a much stronger position with a lot more cash. That made it easier for NAVTEQ to negotiate hard, plus they were listed equity so Nokia had to pay the market price.”
Financially, HERE still makes money. Revenues in 2014 for HERE stood at €969 million, up six per cent year on year, and accounted for around 10 per cent of Nokia’s entire business.
However, the value of the business has fallen significantly, with reported sales numbers ranging from between one and two billion – suggesting Suri, who spent 10 years with Nokia’s network business (accounting for 90 per cent of total revenues) is prepared to take a significant hit on any sale.
Reports speculate that HERE could be sold for as little as £1-2 billion, significantly less than the £5.5 billion Nokia paid for NAVTEQ in October 2007. In October last year, Nokia’s board announced a write down of the HERE assets to €2.1 billion.
“The reason it is written down is quite frankly Nokia has lost so much market share and goodwill,” said Windsor. “It failed the goodwill test and that led to it falling in value.”
Despite lacking appeal from a consumer perspective, HERE remains a successful business in the automotive industry.
HERE has agreements in place with a number of top car manufacturers including the likes of BMW, Toyota, and Mercedes. In total, 13 million cars were shipped in 2014 installed with HERE maps and Nokia said that its technology was on four out of five new cars shipped with factory built navigation in the US and UK last year.
HERE director of consumer experience Patrick Weissert, who declined to discuss any potential sale or the “strategic review”, explained: “Automotive is a very big segment for us and we work with almost every big brand in that sector. It is very significant for us, and they seem keen for us to continue our push into the consumer market because it gives us an insight into what consumers want, which is information they can use.
“There are features that we have innovated on Windows Phone and across our consumer offerings that we can then integrate into our enterprise offering, and we can integrate these more quickly.”
It is this aspect of the business that could be most enticing to any potential buyers, according to CCS analyst Garner, who said HERE had positioned itself as the “anti-Google” by not tying into a larger infrastructure.
“Nokia’s ambitions for HERE as a consumer brand did not go according to plan, as Nokia’s market share in smartphones slipped,” he explained.
“However, HERE has built up other aspects of its business and its strength in automotive is likely to be one interesting factor in determining who is interested in buying it and for how much.
“HERE has built a good position in the web world as the anti-Google of maps, being an independent and non-competitive resource for other players such as Microsoft, Yahoo, Amazon and Yandex (Russia). There is a clear position for an independent horizontal mapping player.”
Several possible bidders
So with that in mind, who will buy it? Reports have suggested that Nokia has been shopping HERE around to several possible bidders, including taxi app company Uber and several capital investment firms.
“There will be people queueing up to buy it,” commented Windsor. “I’d expect Microsoft to top the list. Amazon, Alibaba, Tensent, any number of people who would arguably benefit from buying HERE. If it became a paid service in the process of selling it, then it would be determined by people’s tolerance for advertising on the service.”
Ovum’s Dharia agreed that a lot of buyers from different industries will probably take a look at the HERE proposition but said she did not expect Uber to be one of them, instead pointing to the likes of Facebook, Microsoft and Apple.
“Facebook and Microsoft would logically be interested. Microsoft has strong connections with Nokia but didn’t purchase it when they bought the handset business.
“They currently take data from HERE through licensing, but if they wanted to grow revenues through advertising or data, buying HERE would make sense.”
For the full coverage, see Mobile News issue 587