iPhone is Boosting Demand For Location-Based Services

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 (s NOK), 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.