Location-based firms see mobile profit, user worries

Location-based services have proved lucrative but cause some consumer jitters

The location-based mobile services industry is already lucrative but has to do a better job easing consumers' fears about invasion of privacy, some executives said on Wednesday at the GPS-Wireless conference.

"The technology business [and] the advertising business has done a terrible job ... of saying, 'How do the consumers feel about this?'" said Duncan McCall, co-founder and CEO of PlaceIQ, which converts location information into intelligence about specific areas.

Sharing location information today is viewed with suspicion just as sharing credit-card numbers on the Web was 15 years ago, and it will evolve as well, McCall said.

However, the industry's conduct plays a role too, said Bryan Trussel, co-founder and CEO of Glympse, which offers a service for sharing your location to specific people for a limited time.

"It's not just about consumer education, it's also about people being responsible on the other end of it," Trussel said. While carriers typically are, some app developers have taken risks with users' data, he said.

Recent scandals have not helped the cause, panelists said, probably referring to disclosures about Carrier IQ's phone software and about mobile apps accessing iPhone address books. Lack of transparency has caused problems, said Joel Grossman, chief operating officer of Location Labs. Such problems have worked against a positive trend, he said. "Users, I think, are starting to trust more and more the carriers to protect their private data," Grossman said.

Location Labs sells a service that notifies parents where their children are. The company has focused on being highly transparent, with regular reminders about what information it uses, and keeps that service limited to the users on a subscriber's own family plan. "Transparency and control are how you get by the creepiness factor," Grossman said.

The conference, which continues through Thursday in Burlingame, California, finds a well established industry playing in a new world of mobile applications.

The LBS (location-based services) industry that grew up around navigation and other applications of GPS (Global Positioning System) is now integral to the mobile revolution and is powering popular services and valuable advertising, representatives of software and services companies said on two panel discussions. Technologies that once were intended primarily for consumers finding out or disclosing where they were have become the foundations of applications built on top of those capabilities, they said.

For example, startup FourSquare built its all-mobile application around consumers' ability to "check in" to their current applications, but found last year that consuming location and other information was becoming the bigger part of its business, according to Holger Luedorf, vice president and head of business development. All the data that the app collects can help consumers follow their friends' recommendations and find out what's popular nearby, and businesses have tapped into Foursquare for locally targeted advertising, Luedorf said.

Likewise, online discount service Groupon is now working with Nokia to layer the locations of businesses with Groupon deals on top of the maps on Nokia's phones. That service is coming later this year, said Andreas Lieber, director of mobile partnerships at Groupon.

Advertising may make up an even bigger part of location-based revenue in the future. Judging from the value that location information adds to advertising, it's not hard to see why. LBS helps advertisers reach nearby consumers and then follow their response to an ad all the way to their front door, some panelists said.

Surveys by Google have found that 95 percent of consumers use their phones to make local decisions such as where to eat, and 90 percent of those users took action within 24 hours on the basis of those searches, said Jay Akkad, product manager for mobile local ads at Google.

LBS advertising platform provider xAd provides an API (application programming interface) to mobile app developers that lets them build geographically targeted advertising into their software, according to Ted Babitz, director of business development at xAd. The closer a consumer gets to a purchase, the more the app developer (and xAd) collect. For example, if a consumer performs a search for hotels on a mobile app, a nearby hotel can place a well-marked sponsored search result at the top of the list. If a user clicks through to that entry and calls the hotel's phone number, and then books a room, the hotel may pay up to $50 for the referral, Babitz said.

Likewise, location services provider Telenav can detect when a mobile user sees an ad and then walks through the doors of the advertiser's business. For the proven effectiveness of that ad, the advertiser will pay three to five times the rate they would pay for a standard mobile banner ad or sponsored listing, said Sal Dhanani, co-founder and vice president of products.

"That predictability and that transparency all the way through he door is that makes that ad really valuable," Dhanani said.

Telenav, like other LBS companies, also makes money by charging for services, such as an enhanced in-car navigation service for US$4.99 per month and one that lets enterprises track their employees. But Dhanani expects the industry to make even more of its revenue from advertising in the next few years, reaching as much as 70 percent. McCall, of PlaceIQ, disagreed.

"That's still going to be a big market, but the LBS market ... is just going to be so much bigger because it's going to be inherent into so many other things," McCall said.

Stephen Lawson covers mobile, storage and networking technologies for The IDG News Service. Follow Stephen on Twitter at @sdlawsonmedia. Stephen's e-mail address is stephen_lawson@idg.com

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