AutoNavi turns to futuristic technology to steal an edge over peers in Chinese e-commerce market

Digital mapping and navigation services company AutoNavi Holdings Ltd is looking to its new Internet location-portal service to give it an edge in the burgeoning Chinese e-commerce market, even as it pushes ahead with its existing map services.

Crucial to the success of the new portal is cloud computing, as it would be the one cloud (or common technology) that would link personal computers, smartphones, automotive navigation systems and smart TVs, collectively referred to as the four screens.

According to company officials, cloud computing will enable users to store their data and software on a remote server for easy anytime/anywhere access, subject to the availability of a network.

The information stored would be synchronized with the cloud server regularly and also made easily accessible for registered users along with other services, such as discount information or reviews of nearby eateries, from the four devices.

"Mobile Internet is the core of the 'Four Screens - One Cloud' strategy. We believe it is the future for map data providers and crucial to our long-term growth plans," says Qie Jianjun, vice-president of AutoNavi.

Set up in 2002, the company currently has more than 2,500 employees on its rolls. AutoNavi posted a 48 percent growth in annual revenue last year to $126.9 million, while net profit rose nearly 90 percent to $38.3 million.

According to data provided by Analysys International, a Beijing-based consulting firm, AutoNavi is currently the leader in smartphone map and navigation in China with a 45 percent market share as of March. NavInfo, a company that specializes in map data services was ranked second with a 43.2 percent market share.

AutoNavi is also the largest provider of digital map data for in-dash navigation systems in China, with a 58.1 percent market share based on the revenue from digital map data sold in 2011.

Earlier this month the company was selected by US technology giant Apple Inc as its mapping data supplier in China. The move follows the US company's plan to have its own map applications in the iOS6 operating system instead of Google Maps.

Though AutoNavi officials refused to comment on the development, Yang Yongqi, the executive vice-president of the company, admitted on his micro blog that the Chinese company has teamed up with Apple.

The Apple deal will boost AutoNavi's prospects in the location-based service (LBS) market, global investment firm Goldman Sachs said in a recent report.

Rather than bask in the Apple glory, the company is looking to the future with the LBS, Qie says.

"Most of the mobile Internet apps, especially those like Weixin from Tencent, Sina Weibo, and other SNS (social networking service) products, require LBS support."

Currently, the company's revenue mostly comes from three major segments: automotive navigation, mobile/Internet location-based solutions, and public sector and enterprise applications.

Revenue from the navigation services comes mostly from digital map data services for in-dash navigation systems installed by many automobile manufacturers, including Audi, BMW and General Motors. This segment was also the largest money-spinner for the company and accounted for more than $86 million, or 60 percent, of the overall revenue.

Though the company foresees a bright future for its navigational services, it has realized that revenue from license fees may no longer be good enough, as most of the services in the mobile Internet era are free, says Zhang Qin, CFO of the company.

"Nowadays, location and map services are essential in daily life. There are also a growing number of companies providing free services and apps. We are concerned whether the existing revenue model will last for long," Zhang says.

She says that in the future, the company will gradually shift its revenue focus from automotive navigation to the mobile/Internet location-based solutions, which accounted for 21.6 percent of their revenue last year.

The company has already made a head start by teaming up with leading telecom carriers such as China Mobile Ltd and China Telecom Corp Ltd for map data and solutions. "We will feel more comfortable if 50 percent of the revenue comes from this sector," Zhang says.

Besides, the company has also gone in for more user-generated content, such as real-time traffic updates or reviews of nearby merchants, to support its operations. Yang says that the company has employed a team of 100 to process the UGC data and constantly update them onto the server.

Qie says that currently the first priority is to expand consumer base and retain them.

More than 62 million users in China now use the company's free mobile map application, and Qie expects the number to reach 100 million by the end of this year.

"If you have a user base of more than 100 million users, then the business model will no longer be an issue."

Qie says this is because the major revenue model will be the reverse-charging model, which means companies will provide free apps and then charge merchants or users later.

"Mapping services are a natural platform for location-based advertisements. AutoNavi will provide free downloads and installations of maps on users' devices, and then charge users if they want additional features, such as different voices to report the real-time traffic conditions."

For merchants, there are two major revenue models involving advertising and commission fees, Qie says.

The company plans to charge offline merchants for displaying the information of their shops on the map, or get commission fees from online to offline e-commerce, which also allows users to book and place orders using its apps.

Typically, users can review the product list of a neighboring store from AutoNavi, and then finish the selection and payment process on their mobile devices, and get the product delivered to their home.

Qie says AutoNavi will not only be a navigation tool, but also a portal for people's daily life, just like Sohu and Sina.

"We will cooperate with more third-party service providers, such as Ctrip.com, and offer our customers and business partners a broad range of location-based solutions serving various aspects of consumer needs, from air tickets, hotel bookings to eatery coupons," Qie says.

"It is a portal based on LBS. No matter where they are, users can perform searches on the map and meet their daily demands from nearby merchants."

Yin Xinglong, an analyst with Analysys International, says that the "Four Screens - One Cloud" infrastructure will provide better user experience once it is officially launched.

"But the project needs a large amount of investment and requires a better balance between investment, returns and company operations."

linjingcd@chinadaily.com.cn

(China Daily 06/29/2012 page17)