Facebook and Nokia – Value in patience.

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Facebook deal underlines that it is too early to sell Here.

• It looks very likely that Facebook has already or is about to sign up to use Here as the source of location data for its services.
• Here is a global mapping company owned by Nokia that is one of only two high quality maps that are available on the open market.
• The other is Google and to date, Facebook has used a combination of Google or Apple maps for its location data.
• RFM research has found that Here’s map is just as good as Google’s but where it is less good is on points of interest and searching for places.
• However, Here’s great redeeming feature is its neutrality.
• Since the sale of Devices and Services to Microsoft, Nokia has no skin in the digital ecosystem making it far more attractive as a supplier of mission critical data.
• In many ways both Google and Apple are competitors of Facebook and clearly it feels uncomfortable relying on a competitor for such important data.
• All of the old concerns of being suddenly switched off or treated unfairly will be at the forefront of Facebook’s mind.
• Consequently, as long as the mapping data is of good enough quality (which it is), Here is the best option for Facebook as it knows that it will be treated fairly and that Nokia has no incentive to suddenly terminate its contract.
• I think that this is a classic example of the opportunity that still lies ahead of Here.
• When many of the contracts were struck with Google, its ecosystem ambitions were much less defined and consequently it was not seen as a threat by its customers.
• A lot has changed in a few years and just as Google is losing the default search provider position with Firefox, and probably now Safari, the same is happening in maps.
• Consequently, I think that Here is in pole position to gain a meaningful amount of market share over the next year or two as Google Maps contracts come up for renewal.
• This is why it is much too early to sell Here.
• If Here can meaningfully increase its market share before it comes to a sale, it will be able to command a much higher valuation.
• The market chatter is looking for a price tag of around €2bn but I think that if Nokia is patient and grows market share, it could get €4bn or more.
• This combined with a strategic sale of the patent portfolio at some point could allow investors to realise significantly more value than they do today.