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Location-based service business could hit $10 billion by 2016, report says

June 10, 2011 | 12:21 pm

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Location-based services could become a $10-billion-per-year business by 2016, despite recent concerns over privacy and what companies do with location data once they've gotten it, according to a new research firm report.

"The recent kerfuffle over Apple iPhone tracking and other privacy concerns will barely be a speed bump in the evolution of location-based services (LBS) because there is simply too much money at stake," said the research firm Strategy Analytics in their new study called "The $10 Billion Rule: Location, Location, Location."

"Consumers are increasingly demanding services such as search, maps or navigation, for which location information is either fundamental to or provides greater context, utility and therefore appeal," the firm said. "For advertisers, location data provides opportunities for ad targeting and optimization."

In Strategy Analytics estimations, location-based search advertising could account for "just over 50%" of the predicted range of $10 billion in 2016.

Location providers will have to become more transparent with users about how location data is captured, managed and stored, but that won't stop the growth of location-based services for mobile phone and tablet users, the firm said.

"For advertisers, location data provides opportunities for targeting and optimizing ads," said Nitesh Patel, a senior analyst at the company. "Strategy Analytics sees strong evidence of consumer demand for LBS in line with rising smartphone and data plan penetration."

An example Patel noted -- Google recently disclosed that 40% of all Google Map use takes place on mobile phones.

And it will likely be Google and Microsoft, the current leaders in Web search, that end up dominating the market for advertising associated with location-based services, despite challenges from smaller players such as AT&T's Yellow Pages, Telmap, TeleNav and Aloqa, the firm said.

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-- Nathan Olivarez-Giles

Twitter.com/nateog

Photo: Google Maps on an Apple iPhone. Credit: Juan Pablo Gonzalez via Flickr

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