Nokia Scores a Hit with Yandex

Mapping Deal Will Help Bid to Broaden the Reach of Nokia’s Location-Based Services

Nokia announced at the end of January that it had struck a licensing deal with Russian search giant, Yandex, to power the Yandex Maps service and location apps with Nokia’s Navteq mapping data.

Yandex is to Russia and some of its neighbours what Google is to North America and Western Europe. It has over 60 percent of the search market in those countries, and is the fifth largest search engine worldwide. Like Google, Yandex also runs a number of search-related location-based services, such as Yandex Maps and phone applications. It also runs a traffic monitoring service for Russia.

Since the separation of Nokia’s service business during 2011 into the Location and Commerce Division, the company has been actively pursuing a strategy of widening the reach of its services, especially location-based ones. It hopes to have them power the major Web properties of the world (except perhaps Google). In practice Navteq was following this kind of strategy long before it was acquired by Nokia, although Nokia has notched up some notable successes, putting Navteq data behind the location services of Microsoft and Yahoo.

For Yandex the deal makes sense, given the very large costs associated with mapping the world in detail. Nokia is a leading player in mapping; it’s also not a competitor to Yandex, unlike Google, and it’s in a stronger financial position than TomTom, which owns Tele Atlas, the third major mapping player.

The deal with Yandex is a big step forward for Nokia. As we understand it, it’s a data deal, meaning that the service will be branded Yandex, powered by Nokia (Navteq) data. It will not be a Nokia-branded service. The deal will bring Nokia high credibility with other potential licensees, including large Asian players such as Baidu, Renren and Tencent as well as other Western players such as Groupon and Amazon.

As a separate initiative, we expect to see Nokia-branded location services like Maps and Drive appear as HTML5 applications in various software stores, including Apple’s App Store and Android Market, over the coming 12 months. At the moment, these services are confined to Nokia devices running Windows Phone 7, Symbian and Series 40.

The organisational separation within Nokia marked a cultural shift in which the role of services changed from being mainly there to support device sales to being significant revenue generators in their own right. This is entirely sensible, given that the main way to compete in a market characterised by high economies of scale is to try to out-invest other players and have your solution adopted as widely as possible.

Nokia is now better placed than both Google and TomTom to achieve that position.