Google’s New Mobile App Cuts Garmin, TomTom at the Knees

Google (GOOG) released a new mobile navigation app Wednesday and GPS navigation companies such as Garmin (GRMN) and TomTom saw their shares take a plunge. The announcement shaved $1.2 billion off of Garmin’s market cap alone. Its shares are down more than 16 percent so far Wednesday to $31.60. TomTom’s shares are down 21 percent to $8.11.

And this is just for an Android app. But Google could very well make it available to other phones as well, and that is what has investors worried. GPS navigation apps are among the most expensive, and most lucrative, of all mobile apps. TomTom sells its iPhone apps for $50 to $100, with a different app per country.

Google just cut the traditional GPS navigation companies at the knees by releasing what may be a far superior product for free. It is not a standalone navigation app. Rather it taps into a lot of the resources Google makes available on the Web, including Google Maps, Streetview, voice recognition, and sophisticated search. You can use voice search just as you would look for something on Google’s search engine. “Where is the Pizza Hut in downtown Palo Alto”? If Google’s search engine can find it, then so can Google’s navigation app. Garmin and TomTom can’t compete with that kind of Web-scale computing power.

And Google is happy to give its navigation app away for free because it leverages many existing technologies it has already built for the Web, and it encourages more people to use Web-capable phones and do local searches on them. Its strategy is to give the software away for free, and make money on the search ads.

Original post

Comments

[banifa:]

This is going to be even more interesting in the next quarters. Underlying data from Navteq (Nokia owned) and Tele Atlas (Tom Tom owned) are critical. Google cannnot possibly play this game if it does not own its data. As it cannot rely solely on users's generated content, it would be interesting to see its content play.

Oct 28 09:35 PM

[Roger Knights:]

"Google is happy to give its navigation app away for free because it leverages many existing technologies it has already built for the Web ..."

Google has been playing Go, positioning itself to make a pounce.

Persons who followed tech rumor boards closely probably got a heads-up on this pounce a few weeks ago. I hope a few of them were canny enough to take advantage of it by shorting the current incumbants.

Oct 29 01:44 AM

[Stone Fox C...:]

Don't get why people pay that much for navigation. Was in Miami a few weeks back and I used a free app on my Iphone to easily find a few destinations. It didn't provide turn by turn directions, but it provided the location on a map and all any person with a sense of directions needed to find. Why would anybody basically pay for a map?

Oct 29 12:13 PM

[BioGuy:]

Google has not used Navteq since last year, and no longer uses Tele Atlas in the USA.
apb.directionsmag.com/...

I'm no geo expert, but it seems Google has some options as far as trusted/updated map data.
blogs.weogeo.com/pbiss.../

The Tele Atlas data was not that good anyway.........

On Oct 28 09:35 PM banifa wrote:

> This is going to be even more interesting in the next quarters. Underlying
> data from Navteq (Nokia owned) and Tele Atlas (Tom Tom owned) are
> critical. Google cannnot possibly play this game if it does not own
> its data. As it cannot rely solely on users's generated content,
> it would be interesting to see its content play.

Oct 29 01:51 PM

[css1971:]

So... what happens if you're out of reception?

No 3G connection and Google Maps... doesn't work? The time you're most likely to need (middle of nowhere) it, it won't work?

Oct 29 03:19 PM

[Canadian Re...:]

I could never quite understand the need of GPS navigation gadget. I travelled a lot around the world, USA & Canada. All I needed was a good map of the city I visited. Some of them, I got free from the local tourism booths; some of them I bought at bookstore for around $10. They lasted me long long time.

As for looking for places to eat and for entertainment, usually I got them through local tourism board free of charge or at hotels.

Oct 30 03:13 PM