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TomTom's Google Moment

by Roger Lanctot | 10月 17, 2018

The automotive navigation industry had another Google moment, Tuesday, as TomTom faced the investor community for its third quarter earnings call. As is often the case with TomTom, the company’s senior executives were forced to confront unpleasant truths about the state of built-in navigation in cars and the implications for TomTom’s long-term prospects.

Generally speaking the quarterly results were modestly positive, as they often have been for TomTom, which has eliminated its debt and can boast of $179M of cash on hand. The company was able to tout a navigation win at PSA and a traffic win at BMW – likely representing bad news for rival INRIX. As in quarters past, TomTom was able to report incremental gains in the automotive and telematics businesses juxtaposed with incremental declines in its consumer business.

These results were not enough to displace investor concerns regarding business lost at both Volvo and Renault to industry arch-rival Google. Long the bugaboo of TomTom and its duopoly competitor HERE, Alphabet has managed to convince Volvo and Renault to adopt most of Google’s location-related platform assets including Googlemaps, Google Voice and Google Places along with the Android operating system.

The Volvo loss was a shortening of an existing contract and the Renault “loss” was actually a failure to win a particular deal, which TomTom described as impacting only a select few vehicles. But the broader implications of the twin developments was clear and acknowledged by TomTom management as a “user experience” failure.

Such sparkling self-awareness was a refreshing moment of Dutch candor and one that was only partially appreciated by the financial analysts on the earnings call. The analysts repeatedly hammered TomTom CEO Harold Goddijn on the question of “Why Google?” emphasizing business model issues and cost.

Goddijn declined to address the question of cost and side-stepped the issue of business model, while noting that TomTom’s own focus has always been safety, privacy and its own, more straightforward business model. Given Google’s ulterior motives and ability to monetize customer and vehicle data, it is wise to avoid the question of cost as the core consideration. TomTom is not able to compete on cost since it lacks an alternate means of monetization.

So the question comes down to user experience. The financial analysts on the call had great difficulty appreciating the reality confronting TomTom and its legion of competitors throughout the industry on a daily basis: automotive in-vehicle infotainment systems stink! Harold Goddijn knows it and asserted repeatedly that the company is redoubling its efforts to fix it – but there is no question this is true.

Alphabet’s recruitment of Volvo and Renault to the Google platform is a powerful statement that car makers have their work cut out if they want to continue to “own” their in-vehicle platforms. The evidence has been reflected in J.D. Power customer satisfaction reports for at least a decade.

The harder car companies try to deliver clever infotainment systems in their cars, the more frustrated consumers become with obtuse user interfaces, under-powered or redundant app systems and outdated navigation maps. What’s amazing is not that TomTom lost ground to Google but that TomTom, and chief rival HERE and the dozens of competing infotainment hardware and software suppliers, have held on so long.

Automotive engineers and senior managers have been confronting their failures on an annual basis even as they sink more and more millions of dollars into infotainment systems that fail to pass muster with consumers. While Goddijn is correct to admit the shortcomings of current in vehicle systems from every car maker on the planet – not a single one is doing particularly well – he is wrong to question the efficacy of what he describes as the “mobile phone paradigm” for the car.

It is clear that consumers are looking for a familiar user interface – tuned to the automotive environment – but even more important, that they want up-to-date maps, traffic information, weather, parking and POIs. Anything less than accurate and up-to-date information is counter-intuitive and disappointing.

This creates a high bar for car companies and their suppliers and definitely requires an off-board connection for over-the-air updates and hybrid functionality. Too many car companies have failed to provide for these elements.

Of course, the threat of Alphabet’s entry into the dashboard isn’t just about the user experience, which means the threat is even worse than it appears. The combination of growing industry adoption of the Android operating system and the beginning of the acceptance of the entire Google platform proposition is built upon considerations of cost, convenience, familiarity and performance. 

The business model proposition inherent in Google’s conversion of privacy to a commodity remains something of a battleground for regulators and both a value proposition and headache for consumers. For car makers, the privacy violation is heretical, but it is a measure of the industry’s desperation to get the in-vehicle experience right that some are willing to make this sacrifice of what used to be an industry catechism: the customer owns the data.

The woeful state of automotive infotainment systems is difficult to overstate and it remains a key Achilles heel for car makers across the globe. Like a back door security vulnerability, the failure of automakers to refine their IVI systems has put a welcome matt out for Alphabet.

To its credit TomTom asserts it is hard at work addressing this challenge. And TomTom is not alone as companies ranging from NNG and Telenav to Continental, Bosch, Harman, Panasonic, Visteon, Alpine, Pioneer and many more are all committed to delivering clever infotainment systems that safely deliver enhanced location information systems to drivers without violating privacy.

What was perhaps most interesting about the nearly hour-long TomTom earnings call was that the analyst obsession with Google obscured the arrival in the automotive industry of Mapbox, which is already working with NNG, Telenav, Bosch and others to bring cloud-based navigation to dashboards. When the single Mapbox question was asked on the call, it was more or less ignored.

Of even greater concern is TomTom’s failure to deliver a map suitable to enable basic levels of automated driving. While TomTom executives recognize the need to create an automated platform for map updating and to improve accuracy – the existing camera-based approach continues to fall short.

TomTom’s Google moment was a wake up call for the entire industry. For TomTom, it may mean selling off its telematics division – but the bigger unanswered question remains: “What’s next?” How can TomTom reinvest and reposition for a market that Goddijn himself described as “turbulent.”

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