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Summary:

Nearly two years ago, I outlined five reasons Apple’s iPhone will change the wireless business, the foremost being increased web usage on mobile phones. I should have added another item to that list: catalysing location-based services and applications that use geolocation data to enhance their functionality. […]

Nearly two years ago, I outlined five reasons Apple’s iPhone will change the wireless business, the foremost being increased web usage on mobile phones. I should have added another item to that list: catalysing location-based services and applications that use geolocation data to enhance their functionality. One company that’s benefiting from this trend is Boston-based Skyhook Wireless. The 6-year-old company got a big boost when Apple decided to include its core technology in the iPhone platform.

In early days, Skyhook was more like FON, but since then it has changed its focus and developed a technology that uses Wi-Fi, GPS and cell towers to collect location data, which it in turn resells to everyone from mobile phone makers to tiny startups that develop mobile apps. With Apple having shown the way, suddenly everyone is showing a renewed interest in location-based services, said Ted Morgan, Skyhook founder and CEO.

pub“Thanks to the popularity of iPhone, we are seeing more and more apps using geo-data,” Morgan pointed out. For instance, game developers are using geolocation data to build location-based leader boards. “The iPhone has unleashed location-based creativity,” he said. Last year, I pointed out that “in order for LBS to be on mobile phones, we need applications, which is where I believe the iPhone plays a vital role. Its large screen and built-in GPS (and now its 3G speeds) enable and encourage truly interesting LBS applications.”

  • Last year, there were only a few dozen apps that incorporated location-based data. This year that number has grown to 2,000 apps. Next year there will be five times as many apps that utilize location-based data.
  • There are nearly 200 million geolocation queries on Skyhook’s system. In comparison, Google is searched more than a billion times a day.

pub-1Those numbers should be enough for LBS skeptics to take a fresh look at location-based services. ABI Research predicts that location-based services will be a $13 billion business by 2013 vs. $515 million in 2008. Morgan says that the next big location push is going to come from the netbooks and adds, “Most laptop and netbook makers are building location-functionality into their devices.” Next up — non-computing devices such as WiFi-enabled cameras.

This opportunity hasn’t gone unnoticed, attracting more attention and competition to Skyhook. And there is no one bigger than Google.

Once Skyhook was designed into the iPhone, Google folks took notice of Skyhook and started to develop their own competitive offering, which is being offered for free, while Skyhook charges for its offering. Morgan admits that the company has lost a couple of deals because of free offerings. For instance, the X2 edition of Sony Xperia phone (Windows Mobile-based) uses geolocation data from Google.

pub-2Morgan is confident that his company has a better offering. For instance, the Skyhook team travelled 2 million miles around the world to build a Wi-Fi access point database. Morgan claims that Skyhook covers nearly 70 percent of Europe and the U.S. along with major Asian cities. In comparison, Google has plotted half-a-dozen cities in the U.S. thus far. By offering Latitude, Google hopes to overcome some of those shortcomings. Nokia, Useful Networks and uLocate are some of the other companies competing with Skyhook.

There are a couple of reasons why Skyhook continues to gain market traction. First, it offers a simpler pricing scheme than, say, cell phone companies, which charge on a per-lookup basis. It also benefits from the fact that it’s a neutral provider, making it more attractive as a partner for chip makers such as Broadcom and software companies such as browser-maker Opera. And, of course, Apple.

With millions of iPhones likely to be sold in months to come, Skyhook is all set to be off-the-hook.

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  1. I say it’s inevitable for this technology to become a “standard” in many different types of apps, and hardware. As more people start to discover the benefits of geolocation, companies will adapt their products to provide the best and most useful functions. I look forward to seeing where all this will go in the coming year.

    1. US Patent No. 2,525,425, entitled “system and method for defining an event based on relationship between an object location and a user-defined zone” recently issued with broad claims covering location cased application where users are allowed access to each other location information relative to user defined zones, see claims 1 and 27 of the patent. It seems to cover Google Latitude.

  2. Krishna Baidya Monday, April 27, 2009

    though privacy may be of concern for some individuals, there is immense benefit for users to embrace LBS. i was simply amazed with the possibilities and a lot of applications when i got my iphone. and i would vouch it has delivered very well till date.

    OM : would you comment on different monetizing models in LBS?

    1. I think that question will become moot in a few years. I think it will be core functionality — in other words apps will use Location beacon just like they use the network connection. The monetization will be at the infrastructure provider — which explains why Nokia, Google, Qualcomm and everyone else wants to get a piece of the action here.

  3. I dont know how Morgan can be so confident of Skyhook’s current lead. Take the case of its current Wi-Fi lead. All Google has to do is add functionality of data layers to its mobile app like there is in the desktop version. Open this up and allow importing of the thousands of KML files users have created for Google Maps and this will cause a significant erosion to Skyhook’s numbers.

    However, fast wireless data access is not yet as mass-market as mobile carriers would have us believe. Which is why Google is biding its time.

    ~ Asfaq

    1. Ashfaq

      I don’t see why not? Google can do a lot, but can it. It is defocused in comparison to Skyhook whose primary task is to build this location database. I wouldn’t discount their lead. Google has been talking about it for nearly a year and they have five cities to show for it. I am sure they can buy their way into the market but even that doesn’t quite work.

      Nokia, in fact is a more formidable challenger for Skyhook, if it can get its act together.

      1. i still argue that the accuracy (or lack of) prevents it and will always prevent it from giving the consumer and the business actionable data.

      2. Except in the case of street data, traditionally, Google has always relied on UGC to fill their databases. Google Business listings have always allowed users to plot the location of their address on a map. They just need to open this up.

        The LBS space in India is starting to become hot. Tata Indicom, a CDMA telecom provider recently released its maps application. Its competitor in this space, Reliance Telecom is said to formally launch BigMaps.com very soon.

        Other smaller players like Yulop.com offer niche city-based, community-driven LBS services which rely on cell triangulation and bypass the GPS route altogether.

        These are indeed interesting times and personally, I believe those with the richest data in this space will win. My money is still on Google..

  4. not accurate enough. you still cant audit location so that it becomes meaningful from a business model point of view. How can this service know that i went in to a restaurant as opposed to standing outside it?

  5. every other phone has gps/agps these days…and gps phone has now become commodity item with new phones …….take for example …nokia maps complete turn by turn navigation with atms /restaurants / landmarks/downloadble multimedia travel guides, …iphone with google maps pails way in comparison …gps already have accuracy of .so please stop worshiping apple !!

    1. gp… i don’t see the point of your comment? apple is helping making the gps apps popular which in turn popularizing them on other platforms. apple has caused a lot of behavior and business model changes in the mobile world. of course you can ignore that, but i don’t. i would say to you … stop hating apple.

      1. Point is simple
        1)iPhone is significant minority (US smartphone segment) and losing share http://news.cnet.com/8301-13579_3-9957776-37.html and insignificant minority worldwide
        2) and LBS / GPS apps and mobiles are now commodity not only in smart phone but also entry level phones and low end smart phones with proper turn by turn navigation , guides etc rather iphone google maps hack …so this is general trend

      2. sorry please delete my multiple posts above …my mistake and slow inter connection

  6. Is there any statistics available for the success of these apps?

  7. The success of location based services will be muted until distribution access is widespread. By distribution, I mean app distribution. While the iPhone has seen tremendous success with its AppStore, apparently the other players have not enjoyed the success.

    So, for now, independent developers are essentially left with the iPhone (or old style distribution through traditional walled gardens). The problem is that the iPhone enjoys very limited market share (approx 2.5% in US?). Its hard to build a business on that, unless you are doing something like Skyhook.

    1. Ryan

      The next big move in this market — net books and other connected devices. Imagine Kindle with location functionality. :-)

      1. Om, per your comment, it would be cool if e-books could contain location information coded in … for example, you are reading Ulysses in Dublic or a James Elroy book in LA or the White Castle in Istanbul … or conversely, books are proposed to you based on where you are … something along the lines of those city-specific sections you find in every Barnes & Noble in the city you are visiting… but this one could have references that go beyond the plainly tourist in nature…

  8. Hi Om,

    I haven’t the foggiest about who wins the locative data game (GPS+cell tower+Wi-Fi hotspot) but I do have a pretty well formed vision on the compelling use cases around same, which I would basically frame as “Status meets Location with Context.”

    Here is a post that I wrote that burrows deeper into the topic:

    “Right Here Now” services: weaving a real-time web around status
    (http://bit.ly/i40h)

    If interested, check it out.

    Regards,

    Mark

  9. Great article -thanks, but we have developed a LBM that rus on ALL mobile phones in the world and it is also preb. for iPhone, Android and more…. http://bit.ly/IJhFg & http://bit.ly/BKQq2

  10. Mohit Agrawal Monday, April 27, 2009

    It is true that iPhone and Android are driving LBS and other application sales but still there are many structural issues in the mobile ecosystem that present significant challenges to a developer. The application development can only sustain if the impediments to its growth are removed. Ihave discussed some of the challenges faced by the mobile applications developer community and the potential solutions for the same in my post on http://www.telecomcircle.com/2009/04/mobile-application-development/

    Request you all to give your comments on the post

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