Location was the Next Big Thing for a decade or more in the mobile industry. It was the cellular operators’ most unique asset; something that—at some undefined yet nearby point in the future—they would begin to monetise with great success. Of course that point never came and location was demoted from service to feature, and then from feature to function.

The problem was that operators almost always envisaged location as a service in its own right—something that subscribers would pay for; either on a per fix or subscription basis. Charging per location fix proved both cumbersome and complicated, while subscription models required that the customer commit to regular payments for something they had no idea how much they’d use. This is a problem not unique to location—it is common across all value added services.

To be fair to the mobile operators, location rarely, if ever, crowned their to-do list. And against the backdrop of (necessary) carrier preoccupations in other areas of their business, location found an alternative route to market. Like so much else in the recent history of the mobile industry, it was the handset, platform and OTT players that worked out how to harness information on the whereabouts of mobile users and create services that were appealing for them.

This has owed much to the increasingly widespread inclusion of GPS chipsets in smartphone devices, which have allowed service developers to circumnavigate the network in deriving a network fix. Today, location is one of the most frequently adopted APIs for smartphone apps.

A year ago, mobile security firm Lookout announced a research programme that it called the App Genome Project. The project was designed to assess the security risks posed by different smartphone apps, and this was partly achieved by gauging which APIs different applications required access to. By February of this year Lookout had mapped more than half a million free applications from the Apple App Store and the Android Market. More than a third of free apps on iOS (34 per cent) access location information, with the number slightly lower for Android, at 28 per cent.

GPS is not the only means by which location fixes on smartphones are retrieved, and both Apple and Google are building and maintaining positioning databases, founded on the location of cell towers and wifi nodes, as well as GPS, which threaten to cut mobile operators out of the location play.

Skyhook’s recent experiences illustrate the extent to which location information is being treated as a competitive necessity by OTT service providers

US firm Skyhook was one of the first players to begin compiling such a database, which is based predominantly on the position of wifi nodes. And the firm’s recent experiences illustrate the extent to which location information is being treated as a competitive necessity by OTT service providers. Until spring 2010, Skyhook was a provider of location information to Apple but the iPhone vendor decided that, from version 3.2 of its iOS onwards, it would be using its own location database, compiled in a similar fashion.

“Databases are definitely seen as more of a competitive advantage now,” says Skyhook’s director of marketing, Ronda Billings. “It adds credibility to the fact that location is hot when people like [Apple and Google] see its importance. Of course we’d like to see [Apple’s] data coming into our own database rather than theirs but it is what it is, and we’re still on their older devices.”

Skyhook is also suing Google over an aborted deal that would have seen Skyhook technology used on Motorola Android handsets, instead of the Google location feed. The firm alleges that Google made Motorola an offer it couldn’t refuse, leading to a volte-face from the handset vendor and a scuppered deal for Skyhook. Still, the firm can bypass Google through the SDK that it makes available to Android developers, who are able to integrate Skyhook’s solution into their apps.

Such intense competition among the different players building location databases that don’t require a feed from the mobile network raises the question of whether or not that network is even necessary for location any more. Billings, as you’d expect, suggests not: ‘The carriers have missed the boat on location and we were ahead of the curve. They may not have seen it as quite as important as it has become. Who would have thought, two years ago, that an idea like Foursquare would be as popular as it is now?”

But not everyone is so ready to write the mobile operators off. Simon Buckingham, CEO of content aggregator Mobile Streams, the Applitalism application store and Zoombak, a US tracking service provider, says the operators may be down, but they’re not out.

“The operators realise that with mobile search they gave the game away,” he says. “By letting Google run the search portal, they lose traffic to external sites and they lost the ability to control where the customer eyeball went. I think they’ve learned that lesson and my experience has been that they’ve realised that location is their greatest asset. I agree that the operators may have lost the first round, but the fight isn’t over yet.”

Buckingham argues, and he’s not alone, that one of the operators’ advantages is that solutions based on databases of cell towers and wifi nodes are simply technologically inferior to the level of information operators have at their disposal. His experience with Zoombak over the last five years, he says, is that “the only way to deliver the promise of highly accurate location is with network buy-in.” The radio environment is dynamic and therefore unreliable, he says.

Jamie Moss, a senior analyst at Informa Telecoms & Media, agrees. “The big problem with using wifi is that net addresses change and routers get turned on and off. It’s really not a particularly efficient way of locating people—and there are coverage issues as well, because it’s reliant on wifi signals which don’t have great propagation characteristics. Plus they create a lot of cross channel interference between each other in the first place, so wifi location has never been that efficient.”

Given the dependence of non-network location databases on the positions of cell towers, Moss says carriers could scramble or reallocate cell site IDs, impeding the performance of these databases, if they wished. That said, he points out that they would risk a serious backlash in doing so.

Skyhook’s Billings says that the firm’s solution can deliver accuracy of ten to twenty metres, which she argues is more than enough for mobile applications. The operators, of course, think differently. Tim Sefton is director of new business development for O2UK, which is one mobile operator that has been making recent inroads into the location space.

“Apple and Google are creating a proposition where the customers have to flag their whereabouts by switching on an app. So they’re not actually creating a real-time, continuous understanding of the other customers, they’re just pinpointing them at whatever time of day they switch on GPS. Whereas operators have the capability to know where the customers are at any point in the day.”

Perhaps the greatest benefit that operators have in the near term is the fact that they can locate everyone on their network, and not just the smartphone users with GPS chips in their pockets

Nonetheless, Sefton’s latest location play, a loyalty scheme called Priority Moments, uses a GPS-enabled application for owners of high end smartphones, and he concedes that different solutions suit different use cases. Perhaps the greatest benefit that operators have in the near term is the fact that they can locate everyone on their network, and not just the smartphone users with GPS chips in their pockets.

Placecast is a Silicon Valley startup that believes the key to location is scale. CEO Alistair Goodman says that the firm moved on from a strategy that relied on a GPS-enabled smartphone app after realising that, using the network, services could be delivered to everyone. The firm uses what it calls Geo Fences, designated polygons created from groups of cells within the network, to deliver geographically targeted marketing.

The firm has created these programmes for consumer brands in its native US but has decided that there is greater reward to be had through providing the solution to mobile operators, the emerging media divisions of which can then sell marketing opportunities to clients themselves. So far it has announced deals with O2UK and AT&T in the US and Goodman says that it will go public with more partners later in the year.

In the Placecast model, when the (opted in) consumer crosses the boundary of one of these fences, they receive an SMS or MMS message. Stressing the benefits of scale, Goodman says that more than 90 per cent of text messages received in the UK and US are opened and read within three minutes or less. “When you’re a brand trying to break through the clutter and the noise, this is a terrific way of doing it,” he says.”

And there is a degree of consensus that, if there is one area in which mobile operators are going to be able to make headway as location services evolve, it is marketing and advertising. For Simon Buckingham, operators should not be thinking about location per se, but about the targeting that location can enable.

“The more targeting you can do, the more money you can make,” he says. “For every targeting parameter that you add, you have a 10x multiple on CPM. If you have no targeting you’re talking about pennies per thousand. If you add location to the mix you start talking about $15 – 20 CPMs, that’s what I’m seeing with my advertisers.”

He continues: “Operators are going to make money by slicing and dicing the audience, building engagement and knowledge warehousing. And the single biggest value enhancer on mobile is location. It can take you from zero to hero in the advertising world.”

But not everyone agrees. KF Lai is the CEO of mobile advertising network Buzz City, based in Singapore. He suggests that mobile advertisers can be grouped into two sets; the national or regional brands, and the local, small businesses. The larger brands are likely to launch products across their markets and will only be concerned that users are in a particular country or city, he says. Location information could be more usefully exploited by the smaller, local businesses but the problem is that they will probably have very little money to spend on it.

In any case, he says, mobile advertising plays ought not to be based on spontaneous user behaviour. “I always thought that, with location, the industry got it wrong, because we always saw it in terms of serendipity. But the potential of location is around where the customer lives or works. Advertisers with offers relevant to that will succeed. My opinion is that they don’t need to know where you are, they just need to know where you’re going to be.”

Placecast CEO Alistair Goodman argues to the contrary. The movement of subscribers around the network offers huge opportunities for brands looking to reach new and existing customers, he says. With the PlaceCast solution operators’ media clients can be given an interface to their location marketing platform that allows them to dynamically update their geofences and the offers associated with them, based on information they can see about the movement of subscribers around their geographies.

So if a coffee shop chain sees that more of the subscribers who have signed up to alerts are in a particular area, it can adjust its promotion in real time to try and take advantage. If it’s a warm day in one part of a national market and not in another, that same coffee shop can change the special offer where it’s warm to a cold drink instead of a hot one. “It’s about being able to really understand all of what’s going to make that message to the user relevant based on place, time and preference,” Goodman says.

The future could involve greater sophistication in terms of the preferences users are able to set. They might only want food offers during weekday lunch hours, or fashion offers in the evenings and on weekends

‘Preference’ is a key word, here. In all of the old blue-sky location presentations that saw users being hit with special offers from every shop and restaurant they passed, one obvious question arose: At what point do these messages become a nuisance?

Obviously users have to opt into these services; unsolicited messages, no matter how valuable the carrier or brand might believe them to be, are little more than spam. And while O2’s Tim Sefton is part of the chorus voicing disapproval for any approach other than up front and opt in, the firm seems to be stretching definitions somewhat, as he explains in reference to the PlaceCast-based advertising service O2 offers.

“For customers who are upgrading or taking new contracts, we’re starting to opt them in automatically. As they go through the process there are points at which they can opt back out and on all the [advertising] messages that we send out, users are given a very simple means of stopping those messages being sent to them.”

The future could involve greater sophistication in terms of the preferences users are able to set. They might only want food offers during weekday lunch hours, or fashion offers in the evenings and on weekends. Alistair Goodman says that the numbers of messages that users are receiving is on the increase in Placecast’s UK and US deployments. In the UK, which has been running longer, early tracking showed consumers were receiving two to three messages a week. While he doesn’t want to share the numbers, he says they are moving up in response to users’ requests for more interaction.

Ultimately, he says, we will reach the point where different brands and providers will be able to bid for the ability to provide services to the end users, based on a pre-established set of thresholds, in real time. This remains a long way off he says, but such practices are now emerging in the online environment. In mobile, location will be the key vector, he says.

This belief, that location remains a key operator asset, clearly hasn’t faded. The difference is that operators are now beginning to focus on the kind of content and services they can offer to differentiate themselves in a world where positioning information is well on the way to becoming ubiquitous.