Google and Audi’s new connected cars are really just about selling you apps

December 31, 2013
December 31, 2013

Expect a lot of hype this coming year about the “connected car.” At the Consumer Electronics Show, the industry’s main event, which starts on Jan. 7 in Las Vegas, the big car firms are all due to show off how their cars are taking advantage of internet access, and Google and Audi will announce that they’re working together on an in-car entertainment and information system based on Google’s Android operating system.

Connected cars have been in the works for a long time: Apple is already working with several other car-makers, and an early leader in on-board operating systems is QNX, now owned by BlackBerry. The change is that software firms and car makers now want to show off their developments to the public.

But while a lot of stories will focus around which cars have the coolest features or on the battle for dominance between Android and Apple’s iOS, don’t let those distract you: The real money at stake isn’t in operating systems or hardware, but in the services piled on top of them. GSM Association (GSMA), a trade body of mobile operators, breaks it down.

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Download apps direct to your car

Services are and will remain more valuable than the other three categories put together. Promoters of connected cars see a world where you can download apps directly to your car, rather than via a phone or tablet.

Services already on the anvil include things like music streaming, offered by everyone from Spotify and Pandora to lesser-known companies like Slacker, Deezer and TuneIn, all of which have already signed partnerships with one or another auto manufacturer. Another is mapping, which includes not only navigation but also finding restaurants or tourist spots, reading reviews, and checking traffic. Seen in this light, Google’s acquisition earlier this year of Israeli mapping start-up Waze now makes a lot more sense. There’s more: Telematics, which is a catch-all term for sensors in a car that can help with diagnostics, will plug into your onboard computer to offer preventative maintenance and can also be used to give insurers a better idea of how you drive in exchange for lower rates.

That services will make up the lion’s share of the connected-car market is unsurprising when you consider this chart showing how many connected cars are likely to be sold:

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All said and done, GSMA expects just under 20 million connected cars to be shipped in 2014. By contrast 250 million smartphones were shipped in the third quarter of 2013 alone. Compared with mobile devices, connected cars are not a volume business.

This is hardly surprising either: cars typically last longer than phones, take longer to design and build, and have to meet much more stringent safety standards. The same car will probably have to support software updates for several years. Compared with smartphones and smart watches, therefore, connected cars are likely to be a lot less sexy than the software that gets put into them.

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