The battle for location hasn't even started yet

Location-based services were predicted to be 2010's Twitter,  let's have a look at the landscape.

Foursquare is the new Twitter - It took Twitter 2 years to reach 1 million users, 4Square did it in 14 months. Foursquare started averaging over 1 million check-ins per day within 15 months of launching, it took Twitter double the time to average over a million tweets/day. They pioneered the check-in gaming model and now they've added a lucrative incentive-based check-in scheme, expect this to get hot in Q4 as retailers fight for the coveted free-spending early adopters.

Yelp, I need somebody - Yelp began by adding location features to bolster the integrity of their reviews, but they've recently begun copying the Foursquare gaming model with suspiciously similar badges. Yelp has more brand recognition but they lack the cachet of Foursquare's userbase. I'd wager that they'll see another takeover offer before the year is out (Yahoo?).

Gowalla and it's garden - they're beyond hopeless. Gowalla has followed the flawed social networking model of closing off the platform to outside developers. Have a glance at their API Agreement, is there anything that developers can actually achieve with their platform? Apparently not, judging by the underwhelming response from the developer community. Gowalla has become a minority platform and they're going to struggle to claw back market share from Foursquare.

Whose Town? MyTown - I've never heard of MyTown but apparently they're quite popular (to be fair, I hadn't heard of Justin Bieber either). I have no idea where their audience comes from but they seem to lack the hype of every other location service - that alone could kill them.

Loopt, BrightKite, Rummble, Whrrl - All interesting services but at this stage they seem to be also-rans.

Facebook looms - Facebook has a location service, it's all coded and ready to go but it's sitting in storage. They want to wait for the current privacy kerfuffle to calm down before launching their check-in service. They already have the ingredients for a dominant platform - a mammoth audience and strong retail partners. Expect huge numbers when this launches as retailers look to lure Facebookers into their struggling stores.

The battle for location hasn't even started yet.

The real battle will take place on Black Friday (the post-thanksgiving retail riot). Retailers traditionally buy ad space in newspapers touting their discounts, 2010 will be the year they go digital. I expect a mixture of partnerships with the above services and proprietary apps from retailers in the run-up to November 26th. Whoever wins this battle will win the war.

China and India are ready to roll

For every car sold in Europe & the Americas this year, 2 will be sold in China & India. China alone will buy more than 14 million vehicles this year - many of those sales will be to first time car buyers. In comparison, the US sold a little over 10 million vehicles and that figure has been declining since 1999. So while Toyota & Ford pump billions into hybrid technology, are they missing the big picture?

The BRICs (Brasil, Russia, India & China) are hungry for automobiles and price is the key to sales. So while Toyota are adding expensive technologies to squeeze every last ounce of energy out of your fuel tank, Tata are parring down their cars to the bare necessities. In India, Toyota's cheapest model costs $12,500 while the Tata Nano sells for just $2,500. Toyota and other western automakers are missing out on a whole new customer base.

But could the Tata Nano conquer the United States? In short, no. Tata plans to ship the Nano across the pond within the next 2 years but the American Nano will be a very different beast. For starters it will cost at least $6,000 and will have to undergo major changes to meet EPA & DMV requirements. But pricing aside, I don't foresee the Nano being a hit with US consumers; the American road network is simply not built for a 33 horsepower compact car.

Europe may be a better place for the Nano. Europeans have fallen out of love with the car - it's now merely a tool to get from A to B, hopefully as cheaply and stylishly as possible. The Nano could garner some attention with it's quirky looks and low cost of ownership. Tata expects to begin selling the Nano across Europe in 2011 and company representatives stressed that Europe is a key market for future growth.

BRIC automakers have also been buying up automotive brands - Tata owns the Land Rover & Jaguar brands and China's Geely Automotive recently purchased Volvo from Ford. This is vital for their expansion; Western car buyers are skeptical of new manufacturers and acquiring trusted brand names is far cheaper than slowly building their own brand identities. Of course, as the recent Toyota accelerator fiasco illustrates, they must live up to the reputation. Volvo has a rich history of building safe, reliable vehicles so Geely must carefully choose which vehicles receive the Volvo badge.

But trade tariffs could quickly halt the globalisation of auto manufacturers. In September 2009, the US imposed a 35% import tax on Chinese tyres to 'protect American industry' - China quickly filed a complaint with the WTO. But this is just the beginning, developing nations will struggle to gain a foothold in the US market during the Obama administration - the UAW union has too much influence. Therefore Europe will be the first test for BRIC automakers.

To summise, 2010 will be a lean year for all automakers, expect GM & Chrysler to continue struggling, perhaps even a bankruptcy for GM's European Vauxhall division, unless it receives significant EU aid. Ford & Toyota will struggle to sell their costly fuel efficient vehicles as oil remains low. Geely and Tata will focus on integrating their acquisitions for an expansion into Europe during 2011.

Auto Industry at a crossroads

I've been planning to blog about the auto industry for some time now but I wanted to do a fairly broad analysis of the industry as a whole rather than individual company forecasts. The big auto shows have given us a decent idea of where each manufacturer is heading so let's go on a roadtrip across the global auto industry (keep an eye out for obvious puns and crude transportation metaphors).

There are 2 fundamental paths - electric cars or manufacturing for the emerging markets in Brazil, Russia, India & China.

Electric vehicles are a hot topic; everyone is talking about Tesla's Roadster or the latest concept car from Ford. But the near term outlook is not so bright. Electric cars are a small niche market and will remain so for at least the next 5 years. Simply put - they are not cost effective yet. I'm sure we've all heard statements like 'it costs only 1 cent per mile' but that's some rather fuzzy math. It does not take into account maintenance costs which are considerably higher than traditional combustion-powered vehicles.

In a normal car, the energy is stored in a fuel tank - nothing can go wrong with that. How many times have you had to change your fuel tank?

In an electric car, the energy is stored in batteries. Batteries have a lifespan of 5-7 years. Gradually the battery loses storage capacity until it can't be charged anymore and you have to replace it. That's fine for your cell phone but what about a car? Replacement batteries for the Tesla Roadster cost $36,000 USD - that's 33% of the original cost of the car. So when you factor in $6000 per year to your operating costs, your electric car doesn't seem such a bargain.

So in fact electric vehicles are not cheap to operate - they're prohibitively expensive and they won't be catching on with the middle class anytime soon.

Hybrids offer a reasonable solution - the efficiency of an electric motor with the simplicity of a fuel tank. But therein lies the problem, why would you have an electric motor and an internal combustion engine? There's no possible way of making hybrid car production cheaper than plain old oil burning vehicles. Hybrids are simply not economically viable yet, the initial purchase price difference means that they'll remain a niche vehicle unless they continue to receive Government subsidies.

Ford & Toyota have hitched their wagons to the electric vehicle concept and it looks like they're heading in the wrong direction.

North American & European car sales are declining while the BRIC nations are booming. Chinese auto sales grow 45% each year and this year they finally overtook the American market. I'll be delving deeper into the effects of this shift in part 2 on Monday.