Mapping a Wireless Trend

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Verizon Wireless said data revenue rose 70% in the second quarter from a year earlier, contributing some $1.8 billion to its total of $10.8 billion in wireless revenues. A Verizon spokesperson said the company doesn't break out revenue by product, but characterized sales of the VZ Navigator service as "healthy." AT&T said in July its wireless data sales grew by nearly 67%, while Sprint said its data business grew 40% in its most recent quarter. Neither AT&T nor T-Mobile has attributed the growth to navigation, but Telephia's Gill says the popularity of navigation services has shown a sudden growth spurt in the last two to three quarters.

Navigating More Services

Expect to see more wireless navigation services in the coming months, analysts say. "They've found it's a sticky application," says TeleNav's Jin. "Everyone can understand the product because navigation is such a basic need. Once they try it, they're willing to pay for it."

Still, getting users to try phone-based navigation isn't a given. Networks In Motion's Antone says some carriers find that only 30% of their user base is aware they can download applications to their phone. "What we need is to make the app a little easier to discover," Antone says. "And I think you'll see that happening in the next few months." To prime the pump, carriers will offer more free trials, Antone adds. When carriers offer customers a free trial of navigation services, more than 30% keep the service and pay for it, double what's normally seen for other applications. "They're used to seeing conversion rates in low teens, [so] that made them very happy," he says.

Sticking with the Original

Where does that leave Garmin? A spokesperson for Garmin, based in Olanthe, Kan., says the company offers its own cellular navigation service, but adds that most consumers would rather stick to the larger screen sizes found on a PND or a dedicated device that tends to remain in the car. Indeed, Garmin, TomTom of the Netherlands, and peers such as Magellan Navigation will generate $6.7 billion in sales this year, up from $2.7 billion in 2005. Gains like that have led investors to propel Garmin's shares to $106.77 on Sept. 13, from a split-adjusted $8.84 five years ago. TomTom shares have surged to €52.25 on Sept. 13, from €19 in May, 2005. (Magellan, based in Santa Clara, Calif., is closely held.)

Still, prices on PNDs are coming down, and Morgan Stanley (MS) analyst Aaron Husock in a Sept. 5 research note said he sees a "potential risk" to Garmin's third-quarter unit sales. The Morgan Stanley note doesn't outline cell-phone-based navigation services as a threat.

That could change in coming months if folks like Hughes keep opting to read maps on their phones instead of PNDs and dashboard devices.

Check out the slide show for a roundup of cell phones that offer navigation services.

Hesseldahl is a reporter for BusinessWeek.com.