This is my uninformed prediction, but it would be a bold move, backed by the National Research Council since 1980. It is the kind of game changing move that would help solidify their position as the number one search engine for localized business advertising.

A Halloween Treat - Gazing into Google's Future

I alluded to this possibility the other day when I looked at the possible importance of Google Map’s new parcel data layer and suggested that some mapping content that is currently very valuable will be given away for free in order to support a larger location-based advertising market. The release of their free navigation application for Android 2.0 seems to back these thoughts and suggests that mapping is just a means to an (advertising) end for Google. I believe the mapping community should get ready for more game changing moves.

Forbes also made the “free navigation” connection. It seemed pretty consistent with their overall strategy of building on their strengths to leverage into the localized search and advertising market. This local advertising market could be worth $40 B in new revenues to the industry. Since Google has ~70% of the current search related advertising market, a back-of-the-envelope estimate would make it worth ~$28 billion in new revenues, doubling their current revenues. Google has some room to make investments to secure this local search business that others cannot make, and they seem willing to push their advantage without regard to previous players.

The Forbes article specifically mentions a price per device for turn-by-turn navigation data of $5 – 10 per device. Worldwide mobile phone sales are on order of 300 M units, so if Google wanted to “own” the localized search and navigation space, it was going to cost them billions for the navigation data. So it appears they made a classic build vs. buy decision and came down on the side of build. We can argue about whether Google will be a “trusted” data source for navigation. However, the very fact that three very prominent “geonerds” in our industry are fixing Google’s maps for free suggests that there may be some value to the crowdsourcing of mapping data (see also – Open Street Maps).

The key to building a successful localized search and advertising service is the accurate navigation and business listings (and here as well). This requires highly accurate and timely cadastral data. For Google to be dominant in this space and double their revenues they have to solve the problem of accurate parcel data on a national scale.

The desire for a national cadastral map dates back to 1980 with the release of the National Research Council report, “Need for a Multipurpose Cadastre”. There are lots of issues as to why 30 years later we still do not have a national parcel map; and I believe some of these include the “ownership” and licensing of the localized parcel vectors as a revenue source for municipalities.

If Google really wants to create a national parcel map for navigation and business listing purposes, they will need to go through municipalities. They could obviously buy the data from Pitney Bowes or 1^st American. These companies have built relationships with these municipalities over the years to provide high-quality cadastral data at the local level, which these companies then aggregate to provide a national-level geo-coding product.  However, it does not appear that Google has bought their current parcel data from them; and considering that Google is leaving the existing navigation data providers NAVTEQ and TeleAtlas, it would seem that Google plan may be to go directly after the parcel data without the middle man.

So how do they get the parcel data directly from the municipalities without worrying about individual licensing with the 10,000s of local, county, and state governments? One approach is to commit to creating a national cadastre map, and then open source the project by giving yearly updates to the USGS National Map. What municipal GIS professional is going to argue against opening up their data to their users through an open source cadastre project that is backed by the NRC, federal government, and Google?

Google would still run the use and updating of “Google’s” parcel data via its APIs. They would still have the easiest and most recently updated service to drive their navigation and business listing services. They could sell “geo-services” directly to local and federal agencies based on their cadastral maps, which would save government agencies millions a year in maintaining cadastre data in databases that have little interoperability, i.e. a new business line for Google Maps Enterprise. It would also bolster their “Do No Evil” marketing, and perhaps keep the regulators off their backs (re: Microsoft in the 1990’s).

And oh-by-the-way it would speed their creation of a better turn-by-turn routing system and business listing service that would help them dominant a new $40 billion dollar localized advertising market. They could spend $1B on creating a self-perpetuating National Parcel Map, and still generate an enormous ROI on the expense.

The geo-world was a-twitter last week with the fact that Google had dropped TeleAtlas as their map supplier in the US (here too), and that they have included parcel-level data and geo-coding in their API release. The big question is, “Why?”. Is Google moving into the enterprise mapping business?

Word is Google Maps did >$100M in enterprise sales last year (I got this from multiple sources). A significant revenue number in the mapping industry. Yet, while this is certainly a big number, it represents a drop in the bucket compared to their $20B per year advertising business. Heck, they made more than $100M in the 2Q:2009 just from foreign currency exchange risk management efforts.

Why bother with such a small geo-related business, when to move the revenue needle they need to look at >$1B businesses? Maybe from Google’s perspective’s it is easier/cheaper to build a $1B business from a $100M business, than to have to buy a $1B+ businesses to generate earnings growth. However, here is what I believe. I have seen estimates from Microsoft and others that suggests the hyperlocal advertising business is worth $25 to $60 billion (e.g. this report on directional advertising at $41B). Getting the navigation right helps build the traffic to this advertising business. Parcel level geo-coding helps make sure the addresses are correct for navigation. A green-field $40B directional/hyperlocal advertising business is right in Google’s primary area of focus. Everything else (i.e. other geo revenues) may just be gravy.

Google is building geo-related services, and selling them at much lower costs than traditional service providers, because of the synergistic revenue generation from the advertising business. If I am right, they will probably be taking a similar direction in the mobile market, including support of their Android OS. This is also very logical and consistent with their advertising model as good geo-location for hand-held devices combined with hyperlocal and augmented reality applications will drive future advertising revenue opportunities.

What does this mean for traditional mapping data vendors such as TeleAtlas and NAVTEQ (as well as parcel data providers)? Probably not much in the very near term as the directional/hyperlocal advertising markets are mostly untapped by these traditional vendors. In addition, the quality of the data for advertising-relevant navigation probably doesn’t need to be as sound as for insurance, e911, legal, etc., type businesses. It is also unclear if the licensing and the most up-to-date data from municipalities are properly addressed in the new Google APIs.  But if the price point is right and service is “good-enough”, these services could encroach on the more traditional markets of traditional commercial data vendors.

What does that mean for the rest of the geo-market participants, including software, collaboration, game-playing, and other crowd-sourcing groups hoping to build geo-related revenues. It means GOOG = BORG. They have a mission: “to organize the world’s information and make it universally accessible and useful,” as well as to build revenues from advertising. The phrase, “Assimilate or Die” in the mapping space is not evil, it is just economic Darwinism. Google is chasing a big market, and they are going to leverage their heft and dominance in the advertising space by building better services in the mapping space. They will create and give-away or under-sell geo-related products, which represent large amounts of revenue in geo-related industries, for no other reason than to dominant the directional advertising market.

If you don’t believe me, just look at the impact of Microsoft and Google on the wide-area imaging market.