August Report 8/31/2007

Purpose: A market research report discussing location based services in the US

market.

Table of Contents:

I. Market overview
II. Competition
III. Potential Opportunity

I. Market Overview :
Location based services have been growing aggressively over the last few years. The
market is primarily divided into navigation (consumer and business), consumer services,
and advertising – marketing services. Over time, it can be expected that these areas will
converge.

Telephia reports that LBS services account for 51% of mobile application revenue.
Surprisingly, it isn't social networking and it isn't text message ads. According to the
latest information from Telephia, location based services (LBS) are the leader for revenue
from downloadable mobile applications. LBS services accounted for 51% of the $118
million mobile ad dollars during Q2 2007. Sprint Family Locator and Verizon
Chaperone are both new and interesting applications, but of the $200 million that will be
spent by consumers on mobile LBS services this year, 87 percent will be for navigation.
Networks In Motion (NIM)—an LBS navigation publisher for products including Verizon
Wireless' VZ Navigator—secured a 27 percent share of carrier revenue from mobile
applications and leads all mobile application publishers. Telenav Mobile followed with a
15 percent share of carrier revenue and is another LBS navigation publisher.

Kristina Knight from Biz Report cites that, “Location based services help users find
information, friends and business locations and can include community areas and
personal organizational tools.

“There are hurdles that LBS publishers face, most notably the relatively low incidence of
application downloads when compared to other mobile data activity. Many consumers
may not realize the utility of a navigation application on their mobile phone until they use
it," said David Gill, Director of Mobile Media, Telephia.

According to Telephia 13 million mobile users downloaded a mobile application to their

phone during Q2. The report also found that there is still room to grow in the LBS
department. According to the report LBS services have only penetrated about 5% of the
market whereas games, ringtones and SMS have penetrated about 13% of the market.
LBS is more expensive than other mobile applications. On average, LBS applications
cost about $9.23 per month for a mobile users but pictures, sports information and
weather applications cost only about $5.41 per user.
August Report 8/31/2007

Social consumer services are probably the most exciting emerging area for location-based
services. Companies that have the ability to create a community or own the end users
location has tremendous leverage to deliver targeted ads and other services to the end
user. This feature not only solves the question, “Where are you” but also gives us a good
idea of the answer for the next logical question, “What are you doing?” Having the ability
to answer these questions allows one to segway to a very interesting business model for
location, the convergence of targeted ads and location.

The last exciting area in location based services is the convergence of location and
marketing. David Gill reports from FierceMobile:

The market for mobile location-based Services is clearly on an upswing. U.S.

carrier spending on GPS/LBS marketing campaigns topped $30 million in the first
half of the year and surely will increase during the holiday season. Much of that
marketing spend is directed toward the traditional services such as fleet and
workforce management, but favorable carrier deck placement for LBS
applications and the bundling of navigation services with data packages have
driven downloads to record highs. According to Telephia, over the last nine
months, revenue from the mobile LBS applications market has tripled and there
are no signs of it slowing anytime soon.
August Report 8/31/2007

Market research firm The Kelsey Group forecasts U.S. mobile search advertising
revenues to grow from $33.2 million in 2007 to $1.4 billion in 2012, representing a
compound annual growth rate (CAGR) of 112 percent, the firm said Monday.

The growth of location-based services are in part driving that growth. "Advertisers in the
U.S. are the most aggressive in terms of messaging to potential U.S. consumers," said
Matt Booth, senior vice president and program director, Interactive Local Media, The
Kelsey Group. "Given the relatively high spend levels, we believe advertisers will
continue to look into innovative solutions, including mobile, that demonstrate a clear
return on investment (ROI).

The Kelsey Group's mobile search advertising forecast comprises three distinct revenue
and usage segments:
* Ad-Sponsored Directory Assistance (Free DA) — consumers dial a phone for free
directory assistance and other local information (examples: 1-800-GOOG411, Jingle
Networks).
* Mobile Internet Ads — consumers use SMS, WAP, etc., to search or browse the Internet
for information (examples: Google Maps, Apple iPhone).
* Multi-Modal Applications — carriers and/or consumers opt to put voice-in and data-out
products directly on the mobile device
(examples: Tellme, V-Enable).

II. Competition

Company LBS Focus Traction VC

Pointr Location Platform Pre-Launch

Wherify Network LBS IPO ASE

Loc-aid LBS service and platform South America Intersouth
ulocate LBS Platform Boost, AOL Venrock,
Grandbanks,
Kodiak
Skyhook Wi-Fi tracking Bain, RRE, INtel
Geocity Community, NAvigation UK
Telenav Navigation 15% market ; Menlo, Lehman
>10M Revs
NIM Navigation 2M paid subs
Churchill 3D Space to face Google behind??
Navigation
Elloqor Platform Provider Canadian Carriers
Jumptap - Search + LBS Strong Growth General Catalyst
Autodesk
Medio Search + LBS Strong Growth Medio Systems
Knowledgewhere Games and SNS BDC Capital
80108 Directory + LBS Gabriel
Sprint- Family Location Sprint
August Report 8/31/2007

III. Potential Areas for Growth

Aside from the aforementioned areas of growth of navigation, social location services,
and location based marketing, I foresee the best potential growth areas as: 1) Still a
market for mobile couponing and location based advertising but the players are evolving
quickly 2) Location based directory assistance 3) Location based marketing video ads