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Doubters fret at Nokia Navteq deal

But the logic is unassailable

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This week, Nokia even added the ability to offer video from CNN, IBN, Jamba, Sony Pictures and others through its Nokia Video Centre, to go with YouTube and Reuters deals already announced, delivered to its N95 devices – again without reference to the video strategies of cellular operators and initially pushed only in the Asia Pacific region.

Someone is going to combine handset location with highly localised advertising, and now Nokia is in pole position to be the first to get there, before Google and Microsoft – both hell bent on dominating mobile advertising – have made their first steps. If we added localised search to the equation we would have a complete strategy.

It was essential that Nokia at least tried to stave off the combination of Google Maps and advertising on a handset, and in order to be successful it needed to buy the mapping company that had the biggest global reach in terms of maps and population covered by those maps, which in Navteq's case is some 69 countries, so it had to win Navteq, hence the high price.

How many more companies of this type has Nokia got to buy we might ask? Nokia understands that there is only one internet, and that where a service ties up both mobility and the internet, then these are the only new games in town.

The only other issue is whether it needs to buy or partner on a search engine which has to add the mapping data to the search and raise search advertising revenues from vendors that are physically near the mobile search user. It can either compete with Google and MSN and Yahoo! on this, or partner one of the weaker ones to help support it against Google, or do its own thing.

What Nokia now has to do is smooth over ruffled feathers and convince existing clients that it will not undermine their services, and that they should stay with Navteq. In that way it will make some rival device makers, as well as Google and Yahoo reliant on it and begin to change its relationship with these constituencies from rival to customer.

Failure do to that successfully would mean the great bulk of that $8.1bn would be wasted. But given just how much work goes into the Navteq mapping process, employing as it does 3,000 people, we can’t imagine any customers dropping its maps for an inferior service just to remove dependence on Nokia.

"Location based services are one of the cornerstones of Nokia's Internet services strategy. The acquisition of Navteq is another step toward Nokia becoming a leading player in this space," Nokia president and CEO Olli-Pekka Kallasvuo said.

"By joining forces with Navteq, we will be able to bring context and geographical information to a number of our internet services with accelerated time to market. We also look forward to maintaining and enhancing the services and support provided to Navteq’s existing and future customers".

Copyright © 2007, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

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