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iPhone is Boosting Demand For Location-Based Services

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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.

67 Responses to “iPhone is Boosting Demand For Location-Based Services”

  1. Location based services are a very powerful tool. For me, I just needed a simple application to help me with reminders.

    I had been searching for an iPhone application for location based reminders that works without using GPS (which dramatically reduces battery life). I ended up developing my own application to do just this. LocationMinder on the iTunes App Store allows you to set simple location based reminders. The location can be set by searching for a business, by address, or manually on a map. This reminder is then delivered the next time you are near that area. The advantage is that it uses a new technology only in the iPhone 4 that continuously monitors your location without the high power of GPS. The application also does not need to be running to receive the reminder. I would love some feedback on the application. You can find it here at this link-

  2. Skyhook has done a great job of building its WiFi map and fostering a dev community around it (see June 1st, MobileMonday event in Palo Alto). Ultimately, location-lookups have to be abstracted enough to hide the details of WiFi, Cell-ID, A-GPS, GPS fixes. Skyhook’s advantage in WiFi based positioning info can be complementary to offerings from Ulocate, WaveMarket, Useful Networks (who are typically aggregating operator control plane/user plane assisted look-ups). Untapping this potential of LBS apps on feature phones is the real opportunity.

    Regarding pricing, this has to be really streamlined (currently WiFi lookups can be ‘nearly’ free while Operator based lookups are $0.05 to $0.01 depending on precision & volume etc.). No consumer app is going to survive having to pay that kind of transaction fees.

    Could Location aggregation be headed the way of Messaging aggregation business (consolidations c2006)?

  3. Two data points we’ve seen that show why Apple has an interesting edge in bringing the growth of LBS applications:

    1) In our last survey of smart phone users, the % of users that were “able and willing to download an app” with the iPhone was 82%. Next up was Blackberry with a whopping 6%. It’s the power of iTunes – downloading an app is as easy as downloading a song. It doesn’t matter what the install base is for Blackberry if users don’t know how to download apps, aren’t allowed by their corporate overlords, or just don’t care to. But the iPhone (and iTouch!) is a completely different case.

    2) We have been watching the engagement levels closely for iPhone and mobile apps we have developed, such as the Lucky Magazine iPhone application that allows users to shop hundreds of products and either buy online or find at a nearby store. When users are given a choice of “buy online” or “find nearby”, they choose “find nearby” 17x more often. That’s 17x, not 1.7x. There is a huge opportunity here to drive in-store business.

    NearbyNow has a number of retailers and brands now paying for each lead driven into their stores, with much of the excitement for this model being driven by the iPhone. The ROI of these leads still hovers around 1100%, so there is plenty of upside. Perhaps in-store leads are the LBS equivalent of Google clicks. No matter how you spell it, there is plenty of room for new business models. Plus a chance for the brick and mortar gang to fight back on this technology wave.

  4. charlie

    Om, no offense, you blew the initial forecast and you’re blowing it now. Skyhook is a dead man walking.

    The money isn’t LB service, it is location based seach. I use google maps 25 times a day to find local restaurants and other numbers — need a trader joe number — easier to do a location based search on google maps rather than going to the trader joes page. Once you figure out how to monetize that with ads, the game is up.

    Nokia must feel really stupid blowing $9 billion on Navtec, and have google steal all their thunder. What a bunch of finnish idiots. Go back to making tyres.

    • Charlie

      You assume that Google is the only player in this market. Funny how they couldn’t get their own Android app developers to use Google’s limited Location-information. I mean, sure Google is getting going but don’t dismiss a company that is actually doing well, is designed into most GPS chips and is being designed into different apps. I think that is why they have a leg-up on others.

      On Nokia, well… who knows what they are doing. I know they do their thinking ahead of everyone else ;-)

  5. 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

    Request you all to give your comments on the post

  6. 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

    Request you all to give your comments on the post

  7. 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

    If interested, check it out.



  8. 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.

      • 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…

  9. 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 !!

    • 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.

  10. 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?

  11. 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

    • 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.

      • 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 very soon.

        Other smaller players like 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..

  12. Krishna Baidya

    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?

    • 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.

  13. 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.

    • Roberto

      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.