BUSINESS MODEL FOR EMERGING REAL-TIME
LOCATION-BASED SERVICES
A Technical Perspective
Farag Sallabi, George Ditsa, Ezedin Barka and Hazem El-Khatib
College of Information Technology, United Arab Emirates University, Al Ain, U.A.E.
Keywords: Location based Service, Mobile Phone, Business Model, Mobile Computing, Value Proposition, Web
Services.
Abstract: Recently, new and sophisticated mobile commerce applications, especially location-based services
applications, have been emerging very fast, which demands a closer attention to their use, technology and
business models. As a result, new business models designed specifically for the mobile arena have started to
emerge. Moreover, mobile commerce is generating considerable interest and has led to the design and
development of new mobile web-based services. However these services lack a suitable business model.
Brokerage firms have already setup novel and profitable business models for wired web-based services.
Converting these wired web-based services into mobile services introduces new challenges. In this paper, we
present a business model for dynamic location-based services. We find it very useful to introduce this novel
approach to define a business model for such an application. Our focus is on the value proposition for each
stakeholder involved in the application. We highlight the technical perspective and analyze the different
technologies used in this application.
1 INTRODUCTION
Mobile cellular is considered as the most rapidly
adopted technology in history (ICT, 2009). It is the
most popular and widespread personal technology
with an estimated 4.6 billion subscriptions globally
by the end of 2009. Mobile phones along with other
wireless handheld computing devices such as
personal digital assistants (PDAs) and pocket PCs
provide considerable opportunities for ubiquitous
computing growth. Ubiquitous computing is an
emerging paradigm of personal computing,
characterized by the shift from dedicated computing
machinery to pervasive computing capabilities
embedded in our everyday environments. A
Location-based Service (LBS) is an example of
ubiquitous computing. LBS take the user’s location
into account in order to deliver a service. It employs
accurate, real-time positioning to connect users to
nearby points of interest, advise them of current
conditions such as traffic and weather, or provide
routing and tracking information all via wireless
devices. A key motivation behind LBS is to enable
access to services regardless of the location of either
the mobile user or the service provider. LBS offer
safety, convenience and productivity to consumers
and businesses (Turban, King, Lee and Viehland,
2008). Tsalgatidou, Veijalainen, Markkula,
Katasonov and Hadiefthymiades (2003) classified
the location-based services requirements to six
categories: user requirements, usability
requirements, reliability requirements, privacy
requirements, location infrastructure requirements,
and service interoperability requirements.
Current LBS systems present the Point of
Interests (POIs) to mobile users as static icons
displayed on a location map. However, in this case,
the mobile users can not differentiate between
open/active and closed/inactive service points. Also,
the size of the transferred file is too large as it
includes the location map, which is usually
represented in a picture format. In a previous work,
we proposed a Dynamic Location Based Service
system (DLBS) that eliminates these two problems
by providing real-time data of selected POIs
(Sallabi, Ditsa, El-Khatib and Al Kobaisi, 2010).
New and sophisticated mobile commerce
applications, especially location-based applications,
are emerging very fast, which demands closer
183
Sallabi F., Ditsa G., Barka E. and El-Khatib H. (2010).
BUSINESS MODEL FOR EMERGING REAL-TIME LOCATION-BASED SERVICES - A Technical Perspective.
In Proceedings of the International Conference on Wireless Information Networks and Systems, pages 183-188
DOI: 10.5220/0002980601830188
Copyright
c
 SciTePress

attention to their use, technology and business
models. Looney, Jessup and Valacich (2004) stated
that “Business models designed specifically for the
mobile arena are reshaping the industry. But each
model has unique advantages and disadvantages—
potential adopters should take care in choosing
among them.” In the other hand, Varshney (2008)
mentioned that “Mobile commerce is generating
considerable interest and has led to the design and
development of new services, but it lacks a suitable
business model.” Brokerage firms have already setup
novel and profitable business models for wired web-
based services. However, converting current web-
based services to mobile services introduce a new
wave of innovations. Brokerage firms are utilizing
mobile services to differentiate themselves from
others in terms of customer attraction and retention.
While developing our DLBS, we realized the need to
define a novel business model that suits this
application. In this study, we opt to identify and
address the technical issues relevant to this model,
and continue to proof and enhance the business
model by conducting some usability and adoptability
studies.
The remainder of the paper is organized as
follows. The overall architecture of the DLBS
system is mentioned in section 2. Section 3 presents
some review about business models essentials and
requirements. The new real-time location-based
services business model is explained in section 4.
Finally, section 5 concludes the paper and discusses
future work.
2 DYNAMIC LOCATION-BASED
SYSTEM OVERVIEW
In a previous work (Sallabi et al., 2010), we
presented a two-phase framework for developing
and testing the acceptance of a dynamic location-
based service (DLBS) prototype in the United Arab
Emirates (UAE). The first phase, the development of
a fully functional DLBS prototype, was successfully
completed and was presented. The developed
application provides users with the capability of
locating nearby Point-of-Interests (POIs) such as
businesses, hotels, restaurants, and others. Also, the
system provides an end-to-end pervasive solution to
the LBS use case. The system covers client to
business (C2B) and business to business (B2B)
programming model. In C2B, clients communicate
with the back-end server, which might be hosted by
a third party server to receive the POIs information
that spans a specified distance. The B2B solution
allows the POIs service providers to upload and
maintain their assets/services required by end users.
Figure 1 below depicts the DLBS overall system
architecture. The architecture shows mainly three
applications; Mobile Device Application, Gateway-
Service Application and Portal Application.
Figure 1: Dynamic LBS overall system architecture.
3 BUSINESS MODELS
ESSENTIALS AND
REQUIREMENTS
Traditional business models can be defined as
methods of doing business by which a company can
generate revenue to sustain itself (Turban et al.,
2008). While m-commerce business model, refers to
services, technologies, core expertise, strategies,
revenue generation, and sharing of multiple players
(Varshney, 2008). The major revenue models for m-
commerce may include direct sales, transaction fees,
service subscription fees, advertising fees, affiliate
fees, and some other revenue sources. Traditional
business models often incorporate the following
essentials (Turban et al., 2008):
 Customers to be served and the company’s
relationships with these customers;
 All products and services that a business will
offer;
 The business process required to make and
deliver products and services;
 The resources required and the identification of
which ones are available, which will be
developed in house, and which will need to be
acquired;
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 The organization’s supply chain, including
suppliers and other business partners;
 The revenues expected, anticipated costs, sources
of financing, and estimated profitability.
With the emergence of m-commerce applications
and the rise of new market players, Varshney (2008)
suggests some amendments to m-commerce business
models requirements that can be summarized as
follows:
 M-commerce business models must consider
service-revenue generation and sharing.
 Certain requirements must be supported in
designing business models that affect the design
and development of m-commerce content and
services.
 Wireless channels must be managed to maximize
bandwidth and usability and create overall value
for customers in terms of instant access,
emergency use, enhanced anytime access to new
services, and increased productivity.
 Wireless carriers’ lack of experience in
developing service content combined with the
cost of building m-commerce infrastructure will
require collaboration among multiple players,
each using its own financial, technical, and
developmental capabilities.
 With the diversity of m-commerce services, a
suitable revenue model is a major requirement,
with service price based on flat rate, connection
time, traffic, group, transaction, or some
combination.
 M-commerce services can span multiple wireless
carriers with diverse access protocols and
performance.
 In addition to the above listed requirements, we
believe that privacy and security play significant
roles in the success of the emerging m-commerce
applications, and thus should be added to the list
of m-commerce business models requirements,
and be addressed accordingly.
Current m-commerce business models fit into two
categories as seen by Wireless Service Providers
(WSP); WSP-centric or WSP-managed (Varshney,
2008). In WSP-centric, WSPs control both network
access and content. While in WSP-managed, WSPs
control access but not content. An example of WSP-
centric is Japan’s DoCoMo (DOCOMO, 2010),
which uses a business model that dominates the
entire supply chain by creating and enforcing an
exclusive set of service providers. Vodafone uses
WSP-managed model. Unlike DoCoMo, Vodafone
doesn’t control an exclusive set of third-party
providers that its wireless customers can access.
Rather, content and news services are included in
Vodafone’s subscription charge, and the company
charges news-type services as Short Message Service
(SMS).
Location-based service is one of the appealing
applications in Mobile Commerce (m-commerce)
services. Enterprises use m-commerce mainly for
location-based and tracking services, such as mobile
financial services, shopping and advertisements and
some other services like mobile games, payment
systems, entertainment, etc. The business model for
the DLBS we developed in this study involves three
main stakeholders; WSP, content provider and
service consumer. The DLBS business model may
use WSP-centric or WSP-managed. In case of WSP-
centric, WSP controls and approves content
providers, and is obliged to provide location
management, real-time delivery, service quality,
transactions support, security, and wireless network
reliability to content providers to sustain consumer
retention. In case of WSP-managed, WSP collects
and manages information from content providers
and make them available to consumers with the
same quality as in WSP-centric. WSP generate
revenue from using their wireless network and they
can use any payment scheme for consumers. For
example, they can enforce monthly subscription
fees, charge by packets or charge per transaction.
There is no direct revenue for content providers,
they only get revenue when consumer select and buy
their product or service.
4 REAL-TIME
LOCATION-BASED SERVICE
BUSINESS MODEL
In this section, we describe our real-time location-
based service (RTLBS) business model, shown in
figure 2. Our focus in this paper will be on the value
proposition, which refers to the value stakeholders
get from the business. The main value proposition
on which the whole system was built is the provision
of real-time (dynamic) information to mobile phone
users. This has the ripple effect of value proposition
to all stakeholders in our business model. Our
proposed RTLBS business model involves the
interactions between different stakeholders to
perform an end-to-end transaction. Application
developers and handset vendors are involved in the
initial setup process and any subsequent application
updates, while other parts are involved in every user
initiated transaction.
BUSINESS MODEL FOR EMERGING REAL-TIME LOCATION-BASED SERVICES - A Technical Perspective
185

Figure 2: Real-time location based business model.
The end-to-end connection from the mobile phone
user to the broker involves two types of connections;
wireless and wired. Mobile phone users are
connected to the system through the wireless link
provided by the wireless service provider (WSP).
Brokers are usually connected to the wired Internet
part of the system and receive requests from mobile
users through WSP. Therefore, WSP relays all
requests from mobile phone users to brokers. Figure
3, depicts, with numbers, the flow of messages time
sequence diagram for the end-to-end connection,
which proceeds as following:
• Before the user sends any POI request to the
broker, he/she needs to connect to GPS receiver
and WSP. The connection to the GPS usually
doesn’t take too much time if the user is in line-
of-sight with the GPS receiver and exists in a
clear outdoor environment (no high rise
buildings and undergrounds). Mobile phone
interaction with the GPS is indicated with flat
lines 1 and 2, which means time is not
significant.

•
The second step in the connection setup is to
connect to the WSP and get an IP connection.
This type of connection is different from user to
user (depends on the requested Internet service)
and it is different for different WSPs, depending
on the wireless network infrastructure. Some
WSPs provide always-on connections in which
users get an IP connection as long as they are
connected to the wireless network, other WSPs
provide IP connections on demand, which means
users get IP connections when they want to
connect to the Internet. This situation is most
likely to change in the near future by introducing
all IP wireless networks. Connections to WSP
are indicated by messages 3 and 4 in the
diagram. There is usually some delay incurred by
this connection. In general, connections to
wireless networks incur more than 50 ms
depending on the situation of the wireless
network, but it takes less than 50 ms for wired
networks.

•
Once the initial setup is finished and the user is
connected to both the GPS receiver and the
WSP, he/she starts to send the POI request to the
broker. Usually, the first POI request is to inquire
about locations and addresses of certain
businesses (hotels, gas stations, hospitals, car
parks, etc.) This request goes to WSP through
wireless link then is relayed to the broker
through wired link. The broker analyzes the
mobile user request and sends back the result on
the reverse link. There are two options at this
step; either to send plain text to users or
incorporate the POI points into a map retrieved
from the Map Provider. In the former case, the
amount of information sent back to user is
minimal and will not cost the user too much
money. In the latter case, the map will add extra
overhead to the message and increase
considerably the amount of traffic sent to user.
These steps are reflected in the diagram by
messages 5, 6, 7, 8, 9 and 10.

• After the user gets the POIs, with or without
map, from the broker, he/she may proceed or just
use the received information. If the user decides
to proceed with one of the POIs in the list, he/she
will send another request to the broker to finish
the transaction. This process may involve several
message exchanges with the broker. This step is
reflected in the diagram by messages 11, 12, 13
and 14.
• Finally, the user should confirm the transaction
with the broker that commits the transaction with
the business and update the database.
Figure 3: Real-time location based business model time
sequence.

Application
Developers
Content Providers
Broker(s)
Wireless Service Provider(s)
Mobile Phone Users
Map
Provider
GIS
Provider
Handset Vendors
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The more dominant and widely accepted technology
for conveying the messages end-to-end back and
forth is web service. The mobile device acts as a
Web Service (WS) requestor. The WS client at the
mobile device consumes the WS provided by the
web service provider. The web service client
interacts with the web service provider using web
service protocols over a wireless network (e.g.,
WLAN, WiMax, UMTS, GSM/GPRS). Web
services incorporate additional overhead as
compared to traditional web interaction. This
overhead increases the load on Internet servers.
Tian, Voigt, Naumowicz, Ritter and Schiller (2003)
conducted some experiments, which showed that the
imposed overhead of web services is non-negligible
during server overload. The response time for web
services is more than 30% higher, and the server
throughput is more than 25% lower compared to
traditional web interaction using dynamically
created HTML pages. In another paper, Tian et al.
(2004) evaluated web service performance of
handheld resource-constrained clients using different
wireless technologies. They stated that due to the
usage of XML, message sizes in web services are
larger than that in traditional web technologies. They
have recommended the compression of web service
messages to make them more attractive for mobile
clients with poor connectivity and high
communication costs.
The following sub-sections describe the main
components of our proposed business model.
4.1 Content Provider
Content providers, sometimes referred to as service
providers, are the companies who provide the
ultimate service to service consumers. Content
providers get their value proposition through the
direct sales of their products and services. They
provide the information related to their products to
the broker(s) that advertise for their product. The
content providers also benefit from the better and
more reliable quality of service provided through
real-time availability of information in DLBS.
Below is a list of some businesses that might benefit
from DLBS (Elliott and Phillops, 2004):
 Travel (e.g., booking online);
 Ticketing and billing;
 Banking (e.g., checking statements online and
transferring money between accounts);
 News and sport bulletins (e.g., paying a premium
rate to receive tailored news bulletins);
 Health (e.g., check lab results);
 Purchasing goods and services (e.g., e-vending
machines, online auctions and indirect online
buying and selling);
 Business services (e.g., checking stocks);
 Education (e.g., announcements, attendance, etc.)
4.2 Brokers
Brokerage companies have already started
incorporating mobile e-commerce services to their
existing conventional web-based services. They
utilize this new service to compete with themselves
to attract customers and retain them. The value
proposition for brokers is complex; it involves
sharing revenue with advertisers, content providers
and wireless service providers. They can generate
their revenue from content providers by advertising
for their products and services, and make the
products and services available in real-time to
consumers. They can charge content providers for
every transaction completed by the user or they can
charge a fixed monthly amount. They can also share
the costs with the WSP. From mobile location-based
point of view, we can categorize the services
provided by brokers according to the following
(Elliott et al., 2004):
 Location-based product retailing.
 Location-based services information.
 Location-based maps.
 Location-based purchasing.
 Location-based access.
In fact, the main motivation to the broker in the
DLBS business model comes from the higher
volume of mobile phone users as a result of the
currency (up-to-date) and reliability of information
provided. The up-to-date and reliable information
provided also gives the broker a competitive
advantage over other brokers using static LBS that
currently do not provide up-to-date information.
4.3 Wireless Service Provider
Most wireless operators today operate as brokers,
which bypass the role of independent brokers. This
is because most of the LBS services offered today
are network-based, and network and terminal-based
location determination, which means generation of
the users’ location is mostly controlled by the
mobile operators. In addition, operators would like
to increase revenue by providing such service, which
increase the air-time connection from users. But this
situation is likely to change in the near future.
Operators alone will not be able to create an
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187

attractive LBS offering. Meanwhile, due to the
sensitivity of the user location information, and the
lack of relevant legislation, operators prefer to keep
this information within their control, leaving less
room for other players such as brokers. But due to
the rapid development of mobile commerce and LBS
applications, operators will lack the expertise and
resources to manage such dynamic area. Eventually,
they will be forced to outsource these solutions.
Again, the higher volume of mobile phone users as a
result of currency (up-to-date) and reliability of
information provided will encourage WSP to
support such service.
4.4 Application Developers
Our business model includes mobile commerce and
LBS applications developers as part of the whole
process. Common models used by application
developers, for example, include a combination of
one time set-up fees, revenue sharing and monthly
payments for additional services such as technical
support and upgrades, customer care, etc. The main
value proposition to the application developer in the
DLBS business model also comes from the higher
volume of mobile phone users as a result of the
initial sharing of revenue that will be accruing from
the volume users of the system they develop.
4.5 Mobile Phone User
The value proposition for mobile user is to save time
and money while searching nearby points of interest.
The main value propositions of the mobile phone
user are the reliable, up-to-date information and
value-for-money. The mobile phone user also has
the advantage of responding to emergency situations
in a timely function, since information provided is
current. For example, if the mobile phone user is
looking for a hotel or a gas station in an emergency
situation, the system displays the hotel or gas
station, where facilities are available. In other words
there is better match to mobile user’s needs, better
quality and more reliable service in the RTLBS
business model.
5 CONCLUSIONS
This paper described a unique business model for a
dynamic (real-time) location-based services
application. It presented the model and highlighted
the technical perspective of the model. This business
model aimed mainly at presenting the value
proposition for each stakeholder involved in the
application. The work presented in this paper was a
continuation of an ongoing project on dynamic
location-based applications, which the authors
believe will be the type of applications dominating
the wireless world. This paper also explained how
web services model may affect the value proposition
of the application, but web services are inevitable
because of their widely use and connivance for web-
based applications. After the successful development
of DLBS, and the proof of the usefulness of the
business model, the next phase of this project is to
conduct usability and adoptability testing of the
DLBS by different stakeholders. This involves the
development and administering of a questionnaire in
a controlled environment to test the acceptance of
the DLBS by potential users. As another direction of
our future work, we intend to develop a security
framework to support the DLBS business model.
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