Navigation iPhone Apps Make Dollars and Sense

The business of navigation apps

The App Store's new category, Top Grossing Apps, highlights an iPhone trend: navigation apps bring home the bacon.

Among the top 10 highest grossing apps, seven are games, one is for shoppers and three are navigation apps. TomTom U.S.; Canada ($US69.99) is the highest-ranked navigation app, taking the number two spot. MobileNavigator North America ($69.99) holds the number five slot, followed by Magellan RoadMate 2010 North America ($79.99) at number 10.

Of course, this doesn't mean navigation apps are all the rage. These apps are some of the most expensive apps in the App Store, while most gaming apps cost only a few dollars. It doesn't take many sales of a $70 navigation app for the software to break the top 10 grossing apps.

RedLaser ($1.99), on the other hand, is the cheapest selling app in the top 10 grossing apps list at number nine. The app scans product barcodes and searches for lower online and local prices. Given RedLaser's low price and high gross, it's safe to assume that it's one of the most popular apps.

Market researcher Gartner recently predicted that location-based services will be the second most important consumer mobile application for 2012, behind money transfer. Gartner says location-based services' user base will grow from 96 million this year to more than 526 million in 2012.

The trend is spurred by location-based services' "perceived high user value and its influence on user loyalty," the Gartner report states. "Its high user value is the result of its ability to meet a range of needs, ranging from productivity and goal fulfillment to social networking and entertainment."

Granted, navigation apps are only a slice of the location-based services pie, but they're a significant one. Only a few years ago, standalone navigation devices hit the market to great fanfare. The devices from the likes of TomTom and Magellan were pricey. By coming out with an iPhone app at half the price or less, these vendors face some cannibalization of the standalone market. (TomTom came out with its iPhone app, dashboard mount and adapter kit earlier this year.)

Forrester analyst Charles Golvin predicts smartphone-based navigation will dominate the market by 2013. "All of these GPS-enabled mobile phones are potentially degrading [TomTom's] market," Golvin told me a couple of months ago. "It's a smart play on their part. Their core abilities are more based in software than hardware, so it makes sense to leverage that skill on other platforms."

This doesn't mean navigation iPhone apps don't have their faults. Imagine relying on one of the iPhone apps while in the car when you receive a phone call. "If you get a phone call, then your navigation is going to stop," Golvin says. "Standalone devices won't do that."

Tom Kaneshige is a senior writer for CIO.com in Silicon Valley. Send him an email at tkaneshige@cio.com. Or follow him on Twitter @kaneshige. Follow everything from CIO.com on Twitter @CIOonline.

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