Mobile Location Is Charting a Quick Path to Growth

[qi:gigaom_icon_geolocation] Location is a core element in mobile applications and smartphones. We take our mobile devices with us everywhere we go. Their location, and the context in which we use them, changes constantly. In the next two years, location will become central to user experience and performance on hundreds of millions of handsets and applications.

We most commonly think of location within traditional mobile applications. Navigation apps were the first to use it. Local search results and social-networking apps are more relevant when mapped to a person’s current location. But location can do more than simply drive people to places where they can shop, eat or meet friends. Soon, all mobile applications will need to be tied to location if they want to stay relevant.

Applications that we currently do not think of as location-relevant, such as books, sports, reference, music and cooking all become more interesting when a user’s location is taken into account. Home cooks will be able to check out the most popular recipes in their neighborhoods. Music lovers will see where others are listening to their favorite artists around the country. Sports fans will be able to interact with other spectators in the same stadium, and book enthusiasts will be able to search for books written about their neighborhood, or find nearby book clubs to join.

Some apps are already beginning to experiment with location in unusual ways. Sportacular, a top iPhone sports app, allows users to vote for which team they predict will win an upcoming game. The votes are tallied and categorized by region and state. Three days before a recent Red Sox v. Angels baseball game, we saw that every state in the country thought the Red Sox would win except for the Angels’ home state of California. In the end, the Angels dominated, but the voting process encouraged debate and banter among users, fostering a deeper sense of community.

TuneWiki takes over a mobile device’s music player and offers a more compelling user experience by displaying song lyrics and adding community features. The app also ties in location with TuneWiki music maps, which displays the songs that are currently playing around a user’s current location. The community feature lets people see what songs are popular in their area for the current hour, day, week, month or year.

Over 3 billion mobile applications like Sportacular and TuneWiki will be downloaded in 2009. This market will explode to 7 billion applications in 2013 alone, The Yankee Group projects. These apps will make already-powerful mobile devices more functional, social and customizable to a person’s interests and style. Neither Sportacular nor TuneWiki need location. But serving up music and sports content within the context of location makes the information more relevant, engaging, and socially connected.

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Data represents location apps from the iPhone App Store, Android Market, Ovi Store, Palm App Catalog, and BlackBerry App World.

The developers of these applications are driving the mobile marketplace. Some are generating millions of dollars in revenue, and are becoming hot acquisition targets. Amazon acquired Lexcycle’s Stanza, an iPhone eBook reader, in April 2009, and SnapTell, a location-based image recognition and shopping application in June. Also in April, IAC purchased Urbanspoon, a location-based restaurant search app. In July, Blackboard, an educational software provider, purchased TerriblyClever, developers of the location-based MobileEdu applications for college campuses, for $4 million. The location-based TomTom iPhone navigation app generated $4.8 million in the third quarter, Distmo estimates, while the location-aware I Am T Pain app from Smule is projected to generate $3 million alone in 2009.

The applications generating real revenue and that have been targeted for acquisition are not simple, gimmicky apps. They are highly functional and take full advantage of device capability, like location, accelerometers and graphics. Millions of dollars in revenue and high-profile acquisitions are classic early signs of a lucrative tech investment sector. As these trends continue, the size of the mobile application market will continue to accelerate.

Massive growth in these types of rich and context-relevant mobile applications will change the way consumers purchase and interact with mobile devices. Ultimately, the growth of mobile apps will help drive the device market. And while apps get even cooler over the next five years, mobile devices and data will get more accessible. Handset prices will fall, and hot devices like the iPhone, Palm Pre and netbooks will capture even more consumer attention. 3G networks will get more powerful; the demand for mobile data and connectivity will increase; and operator subscription fees will get more affordable worldwide.

We’re seeing a shift in the market away from feature phones (voice and SMS-only) to smartphones. An estimated 63 million mobile phone users upgraded to smartphones from feature phones in 2008, from approximately 15 million upgrades in 2005. We will see massive growth of the market over the next four years with 503 million smartphones projected to ship in 2013, RBC Capital Markets projects. The netbook market will also expand — 50 million netbooks will ship in 2012 alone, Gartner projects. Consumer demand for location-aware applications will help drive the distribution boom of these devices.

Developers of today’s most lucrative applications are applying location to their apps in compelling, new ways, and there’s every reason to expect this trend to continue — and to open up new revenue models in the future.

Kate Imbach is the head of marketing at Skyhook Wireless and co-founder and organizer at Mobile Monday Americas. You can follow her on Twitter @Kate8.

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