GigaOM

WiFi location startup Skyhook Wireless, which has the marketing-friendly browser plug-in Loki, has been making some pretty good progress since we last spoke to them in June. The Boston-based startup, which has raised $8.5 million from Bain Capital Ventures and Intel Capital among others, says it is powering a location-based plug-in for AOL Instant Messenger users that will go live by the end of the year.

Skyhook Wireless CEO Ted Morgan says AIM users will be able to download the plug-in on the AOL site, find their buddies on a map, and receive alerts when their buddies are nearby. The company will also likely launch another plug-in for an IM provider before the end of the year as well, says Morgan. AOL had announced an OpenAIM initiative earlier this year, and had also expanded the OpenAIM to web applications.

A few weeks ago Skyhook also quietly launched an upgrade to its Loki plug-in, which includes local advertising that can show users local businesses. We downloaded the new plug-in on our neglected PC (there is still no Mac version) and checked out some of the location-tailored Google ads. Morgan says there has been impressive click-through on these, though that can only be data from the thousands of users that have already downloaded the plug-in. The upgrade also includes the ability to send an SMS to a friend to notify them of your location.

For now, much of Skyhook and Loki’s business is based on the laptop and PC market — Loki is for IE and Mozilla, and the WiFi access points that provide location data are mainly being connected via laptops. But mobile devices could be its next major market. Morgan says the company has signed up a “big component company” that will use Skyhook’s WiFi location data technology in dual WiFi/cellular phones. The idea is that cell phones with GPS aren’t so accurate in downtown areas (like we’ve pointed out) so Skyhook can cheaply and easily locate the phone when GPS is hindered.