While app mania continues unabated in the automotive sector, business models remain murky. TU’s Susan Kuchinskas examines the current thinking on automotive apps and content – and the perplexing search for business models.
Despite some initial hesitation, almost every carmaker today offers an array of apps – either embedded in the head unit or accessed via the driver’s smartphone. Still, three primary questions remain:
How many apps?
Will the number of automotive apps come anywhere near matching the proliferation of apps in smartphone marketplaces? Or will the automotive space be content with a carefully curated, but much more limited list of apps?
Where should apps reside?
Will head unit-embedded apps prevail or will smartphone apps carry the day? Or will drivers end up mixing the two?
Paid or free?
Free is an easy sell, but will drivers eventually open their wallets?
I. How many apps?
There are a couple of issues that seem to argue for limiting the number of apps to be available in the car.
Driver distraction is the most serious and contentious. If using an in-car app is distracting, then having access to more must be more so.
Robert Gee, product line manager, telematics and connected systems, Continental Automotive, says the vehicle should restrict consumers' choice when it comes to apps, adding that, in the United States, most vehicles have only one occupant: the driver.
Therefore, apps chosen for the car should primarily support the driver’s primary task, which is driving, and be designed not to distract. This may also mean limiting features and functionality while the car is in motion.
Andrew Hart, head of advanced research division at SBD, says there's a second consideration, one that app developers and carmakers seem eager to ignore: research shows that consumers don't necessarily want more apps.
Last year, SBD conducted a couple of usability and customer satisfaction studies on connected car systems in Europe, the United States and China, and it found awareness of connected services among owners of cars with telematics sorely lacking.
For example, 41% of Hyundai owners in the United States never used Blue Link, more than a third of GM owners never touched their connected vehicle services, and around 25% of Ford drivers never launched SYNC. "We are spending billions to develop features and functions that aren't being used," Hart says.
As a result, creating more apps may not be the answer, he says. According to Hart, 28 % of comments in SBD’s usability and customer satisfaction testing related to there being too many features or them being too complex. No one complained there were not enough features, he says.
According to Hart, the first thing on the agenda at OEM app design meetings should be: "What can we remove?” “The future isn't in providing more content,” he says. “It's in changing the way we deliver it. This is the killer app."
II. Where should apps reside?
Despite some obvious advantages to embedding apps in the head unit – these advantages include driver safety and branding control – the smartphone remains central to many OEM strategies because it's difficult to come up with embedded solutions that meet consumer demands for choice, personalization and portability of apps and services.
Honda has, for example, brought the smartphone approach to HondaLink Next Generation, the latest iteration of its connected car services, which provides access to third-party apps via HondaLink App Launcher.
These apps are downloaded from smartphone app stores onto the driver’s mobile phone, but they are presented via Honda’s Display Audio in-dash touchscreen.
"We want to bring content into the car in a much more live way," says Charles Koch, manager new business development, American Honda. The solution "answers one of the questions from consumers we hear all the time: Why can't I get the content from my phone into the head unit? This is taking a step in that direction."
In addition to OEM solutions, a number of service providers are vying for drivers’ attention. In addition to the likes of QNX and the Car Connectivity Consortium (MirrorLink), there is, for example, Abalta Technologies with its app-delivery solution called WEBLINK.
With WEBLINK, the driver's smartphone remains the primary computing device. The advantage of this setup is that the in-vehicle infotainment system doesn’t become outdated, not does it need to be updated as all updates take place on the smartphone.
South Korea’s Obigo is another company promising a better connected experience through apps running on the smartphone. Obigo's App Connector interfaces with the automotive head unit via USB, Wi-Fi or Bluetooth. But rather than merely mirroring the smartphone's display and controls on the head unit, "all the data in the smartphone can play in the head unit,” says Obigo CEO David Hwang. “That means the automaker has full control of the HMI."
Finally, both Apple and Google recently weighed in with smartphone integration solutions that leverage apps residing on the smartphone.
There's another reason for bringing apps in via the smartphone, says Andy Gryc, former automotive product marketing manager for QNX and current co-founder at CX3 Marketing, a marketing consultancy. According to him, embedded software – and hardware, for that matter – can only go so far. "Rapidly iterating technologies will be best served by the device brought into the car," he says.
On the other hand, there are two strong arguments for embedded, OEM-installed apps.
First, they're presumably safer because carmakers put them through the same meticulous testing as every other in-car system. Second, they afford carmakers control of the user interface, which reinforces the automotive brand.
However, this doesn't necessarily mean that the answer is either smartphone or embedded. There is, if fact, much room for a hybrid approach.
"Things will naturally categorize themselves into rapidly innovating technologies naturally served through bringing a mobile into the car,” Gryc says, adding that MirrorLink might be one way to integrate the phone experience. “Another subset will directly interface into the car via HTML5. There will be a split. You can't just make the problem go away."
According to Christopher Ruff, president and CEO at UIEvolution, carmakers essentially need to look at the connected car in two different ways: as “a unique connected product and just another device."
Apps that are central to the automotive experience, such as navigation and customer relationship management software, should be installed in the head unit, he says, while lifestyle apps should be tied to the phone.
Egil Juliussen, director & principal analyst, automotive infotainment & ADAS, IHS, also believes there will be a hybrid approach with some apps created and embedded by OEMs and many more provided by independent mobile developers.
But even when apps and content come from third-party providers and run on paired smartphones, they will, more often than not, be integrated behind the scenes and deliver their functionality into what will appear to the driver as a seamless user experience.
III. Paid or free?
Juliussen sees four basic models for financing apps in the car: the driver pays, the driver trades access to content and apps for driving and personal data, a third party pays, for example, by serving ads, or the freemium model, which offers a free version with a paid upgrade to more content or services.
However, if the smartphone continues as an integral part of the infotainment experience, the app business model for the connected car will likely remain in doubt, Ruff says. "It can't be free on the phone and paid in the car," he says. "Free on one is free on all."
The idea of somehow profiting from the data generated by drivers and driving remains intriguing, and usage-based insurance (UBI) is one use case.
Konstantin Zervas, director of business development at Ericsson, sees automotive and driving data becoming part of a marketplace of cross-industry solutions.
Ericsson provides Cloud services not only for automakers, such as Volvo, but for other industries as well, including healthcare, transportation and insurance. In Ericsson's vision, developers will be able to access data from an array of industries in order to create new solutions.
For example, if someone purchases an airline ticket through a travel app, a mobile operator can offer the traveler a choice of roaming data plans for the trip.
As complicated as this sounds right now, it may, ultimately, be the easiest way for carmakers to provide automotive content and apps free of charge.
What’s more, they are starting to realize that their customers may not settle for anything less.
When asked about how they expect customers to pay for connected car services, almost 43% of respondents to a live audience poll at last year’s Content & Apps for Automotive USA, a Telematics Update conference, said that customers won’t pay while another 28% said the services will be included in the price of the vehicle.
That left only about 30% of respondents believing that customers will pay, either as part of their data subscription, or on a monthly, yearly or pay-as you-go basis.
You do the math.
Susan Kuchinskas is a regular contributor to Telematics Update.
For all the latest telematics trends, check out Advanced Automotive Safety USA 2014 on July 8-9 in Novi, Michigan, Insurance Telematics USA 2014 on Sept. 3-4 in Chicago, Telematics Japan 2014 in October in Tokyo, Telematics Munich 2014 on Nov. 10-11 in Munich, Germany, and The Open Mobile Summit on Nov. 10-11 in San Francisco.
For exclusive telematics business analysis and insight, check out TU’s reports: Insurance Telematics Report 2014, Connected Fleet Report 2014, The Automotive HMI Report 2013 and Telematics Connectivity Strategies Report 2013.
October 2014, Hilton San Diego, CA
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