AutoNavi cuts its major revenue source to expand market share

China's top online navigation provider AutoNavi Holdings Ltd said on Thursday its major mobile navigation application will be free to download.

The move is AutoNavi's latest attempt to expand its market share in the mobile Internet sector, where the user population is hitting 465 million.

"Although we are not yet certain of the profit model, it is clear that free navigation services will be the next big market trend," said Cheng Congwu, CEO of the Beijing-based company.

The company's navigation app has 70 million users in China.

AutoNavi's move came a day after Internet search giant Baidu Inc said its navigation app will be free to download. Baidu is one of AutoNavi's biggest competitors.

Cheng said the two events are not related.

"Making the navigation app free to use will help AutoNavi and its partners get a better position in mobile Internet, and that's why we are doing it," Cheng said.

E-commerce company Alibaba Group Holding Ltd is a major shareholder of AutoNavi. Earlier this year, Alibaba bought a 28 percent stake in the company for $294 million.

Qiu Changheng, vice-president of Alibaba's wireless unit, said the Hangzhou-based company will provide cloud computing and data resources to AutoNavi.

Cheng said the move is likely to cut the company's income in the coming quarters, but expanding market share is a more urgent issue for AutoNavi.

AutoNavi's second quarter net revenue was $38.2 million, down from $40.2 million in the second quarter of last year, the company said on Wednesday.

Its biggest profit generator is mapping services for corporate and government use.