Analyst Report: The Enormous Promise of Location


One of the hottest segments in mobile, location is a key component not just in navigation apps but also social offerings such as Foursquare, Google Buzz and even Twitter. The nascent space still has plenty of wrinkles to iron out, of course, including thorny privacy concerns and the technical shortcomings of GPS and other positioning technologies. But even though some business models have yet to emerge, there’s plenty of opportunity in mobile location. And there will be for quite some time.

“You Can Get Traction”

That’s one of the takeaways from our GigaOM Bunker Series event yesterday (watch the video here) that looked at some of the challenges and possibilities in mobile location. Unlike some other white-hot segments in high tech, location is a wide-open field with relatively few legitimate players, GeoDelic’s Rahul Sonnad said during one panel.

“There’s only a handful of quality location companies out there,” Sonnad said during a panel discussion on location business models. “This market is in a hyper expansive universe-type mode. I think even for newer people coming in, you’re going to get this massive new market and, if you have something that works properly, you can get traction.”

The App Revolution

That kind of opportunity is new to mobile, where carriers typically dictated which apps made were available to consumers – and how much they cost. But the rise of the app store changed that, enabling developers to easily submit their offerings and bring them to market. And the vast proliferation of GPS in mobile phones provides a massive addressable base of handsets that can deliver data regarding not just location but also the speed and direction the phone is moving.

And as hot as location is now, it is positioned to explode in the near-term as new applications come to market and as more users become willing to share their whereabouts via the handset. Foursquare, for instance, remains a forum for early adopters to advertise where they’re eating or what their favorite nightclubs are – which is a pretty slim value proposition for most of us. But as mobile social networks gain popularity, they enable users to instantly form communities based on location.

“Foursquare is really just the first step in associating yourself with a place,” Skyhook’s Ted Morgan explained during the panel. As more consumers use Foursquare, the value of the offering increases, “and now you’ve got critical mass. That’s when you start to see amazing things. I’m no longer checking in now but I’m building a relationship with these people because we’re doing the same thing.”

Augmented Reality

Opportunities will increase, too, as location spreads beyond today’s offerings into a wide variety of apps and platforms. Augmented reality (AR) is currently a novelty but holds enormous promise as a way for users to access information about their surroundings with applications that use location information to deliver web-based content to end users. AR glasses are already available, and it’s easy to imagine a day when we begin our day by donning glasses or contact lenses that overlay Internet-based information on our everyday world.

The emergence of AR will usher in a host of new applications and services, from local search offerings (which are already coming to market) to mobile games and other forms of entertainment. Augmented reality isn’t likely to gain mainstream traction for at least a year or two due to technical limitations, but developers who can leverage AR to create apps that are as much fun as they are easy to use will thrive in the long-term.

Vertical Markets

Some vertical markets are fertile territory for location-based applications. Developers hoping to leverage location should consider building health and fitness apps that could combine location information with vital statistics, enabling users to track how their bodies respond to workout routines.

Athletic events and other happenings provide an opportunity for sports leagues and other businesses to team with established social networks to execute event-specific trivia contests and other promotional campaigns. Retailers, too, can leverage location not just to woo potential customers nearby but also to deliver sales information and other content to boost revenues and create customer stickiness. A department store, for instance, could send a come-on to a regular customer who happens to be in the neighborhood and has opted in to receive such pitches, then (once the technology is in place) could send more detailed information about products or sales depending on which part of the store the user is in. And a user in the market for a new car could request information about certain makes and models, then receive product information from auto retailers whenever he’s within a mile or two from the store.

Improving Accuracy & Specificity

Of course, entrepreneurs looking to tap the space face a variety of potential pitfalls.  Michael Liebhold of the Institute for the Future bemoaned the inability of GPS to pinpoint location close than 10-20 meters or to locate users indoors. That lack of precision can be partially mitigated by leveraging the positioning of other technologies (including cell networks and Wi-Fi), but more accurate positioning could open the door for a host of more targeted offerings. While GPS can be ineffective indoors, Best Buy or another big-box retailer could offer Wi-Fi to support location-based applications. Retailers have traditionally been loathe to boost connectivity for customers already in the store, lest they lose sales to customers who use their phones to find better deals nearby. But as location moves into the mainstream, retailers could actually embrace it as a differentiator — a PR-friendly way to help customers help themselves with a kind of high-tech personal shopper.

Several participants spoke of a lack of the kind of geodata that could be used both to identify specific places (such as GigaOM’s offices, which are on the fourth floor of the building) and to provide location-based histories (such as every important event that occurred at a specific address). While GPS can help determine how far above the ground a user is, it can’t correlate vertical location with a building’s blueprints, as Morgan noted. A massive library of geodata data could cross-reference a user’s location, delivering content based not just on coordinates but also on the user’s surroundings. Which would allow corporations to offer up marketing info to customers in the lobby, for instance, or grocery stores to deliver recipes based on the current specials. Cities, meanwhile, could use location-based histories to create a walking tour of historic areas or to tell drivers which intersections are the busiest during rush hours.

Beyond Hole Filling

SimpleGeo’s Matt Galligan urged entrepreneurs to develop compelling, innovative offerings and urged not to build their startups on “hole-filling” offerings that are at risk of being overtaken by established players in similar segments. Businesses built on Facebook or Twitter add-ons (like URL shorteners) can be co-opted and crushed by the behemoths that serve as their underpinnings. So only truly innovative players with compelling applications that can’t easily be reproduced will thrive.

Other hurdles will surely emerge as location moves further into the mainstream and becomes a component of a wide variety of apps and services. But if 2010 is truly the year of location, as Om predicts, it will only provide a taste of what we’ll see in the coming years. And that means plenty of opportunity for developers and everyone else looking to tap the booming segment.

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