Forget the World Wide Web on your cell phone. The key to the always-on, everywhere wireless Internet comes down to three things: location, location, location.
One of the most interesting moments I've had as a venture capitalist took place this past spring, when I visited the offices of Vindigo, on Manhattan's West Side. Seated in the company's conference room, I stared at an image of New York City rendered on a laptop. It was unlike anything I'd seen before. The company's 32-year-old CEO, Jason Devitt, who'd started Vindigo barely a year earlier, explained that I was looking at a map of what New Yorkers like to do and, more interesting, where they like to do it.
Most maps of Manhattan show a straightforward grid of streets. On this one, coagulating splotches of red portrayed an additional network. The speckles were densest along vertical axes, where one would expect the avenues to be. They thinned out in perpendicular strands, following what would normally be the side streets. It reminded me of an epidemiological study tracking the spread of a disease, except that Devitt's image was showing the hot zones of cool in the city. The clustering of dots around any given point corresponded to the location of restaurants or bars in the Vindigo database that people had inquired about. The thicker the clump, the more interest people had shown in that particular place.
Devitt's company isn't in business to map the hot zones of cool. Vindigo's mission is to provide to PDA users a comprehensive listing of restaurants, bars, movies, and stores. When I first tried the service, in April 2000, it had about 10,000 users and offered listings only for New York; today, there are nearly 600,000 in 20 US cities. The map is a sales tool, a way for Devitt and his staff to show potential advertisers where Vindigo users tend to cluster. The data aggregation is invisible to anyone checking listings. Vindigo logs all searches and sends a record of them back to the central server each time users synchronize their PDAs with their PCs - which happens often enough, since they have to be online anyway for Vindigo to refresh itself with the most up-to-date information.
Vindigo suggests a rich location-based future: a time when portable devices, wirelessly linked to the Internet, will be cheap and ubiquitous, offering new forms of media, communication, and commerce. The attraction is that these devices will know exactly where you are, since they'll be connected to a wireless data network providing real-time telemetry in the form of x-y coordinates corresponding to longitude and latitude. And that presents all sorts of commercial opportunities. For example, while you're checking movie times, an ad pops onscreen for a pizzeria around the corner from the theater. That ad doubles as a coupon, redeemable with a swipe of the barcode at the checkout counter. The map of Manhattan then gains another dimension - speckles of different-colored dots correlate to money spent, as the system tracks coupons that have been cashed in. Knowing where people are going and why becomes valuable because there's money to be made from this information.
For some location services, the future is already here. In Manhattan, there are taxis equipped with rooftop ads that change from block to block. As a cab passes a store, a promotion for that retailer pops up on the screen.
Just as Internet protocols became the glue that bound multiple technologies - the PC, telecom networks, and local-area networks - into a sum greater than its parts, location information will produce a similar result with wireless. It promises to take disparate technologies - the mobile phone, handheld computing, and wireless access to networks - and fuse them into a new and compelling medium.
So far, wireless services have been a huge disappointment, failing (inevitably) to live up to the hype that heralded their arrival. It turns out that having the Web in your pocket is not all that useful. The Internet-on-your-cell phone ends up being a slow and clumsy imitation of what we have on our desktops - with one key advantage: It's available anywhere. The concept of mcommerce - reduced to the opportunity to buy a book from Amazon after torturous keypad pecking - is hardly worth the neologism.
But that's before you add location-based services to the equation. Do that and the result is not a thin version of something we can do better elsewhere, but an entirely new application - a complementary technology that transforms wireless devices from second-class Web browsers to first-class windows on a dimension thus far neglected online: position.
The ability to pinpoint location will likely generate the sort of demand for wireless services we haven't yet seen, providing many with an "aha" moment for mobile commerce and media. It could happen the first time your wireless phone gives you directions to where you want to go, simply and successfully. Or it could occur one quiet afternoon, when your phone alerts you that a friend is nearby, allowing you to rendezvous spontaneously for coffee.
Analysts project that by the end of the decade, every mobile phone sold - some 915 million units worldwide - will be equipped with a form of location technology. This represents an enormous business opportunity, akin to the advent of the Internet on the desktop. Yet few of the Net's rules apply in this sector; many, in fact, are turned upside down. Figuring out which services to offer, building the technology to make them possible, and discovering the business models to make them profitable are essential steps if the wireless industry is to recoup its substantial investment in upgraded networks. (In Europe alone, carriers spent more than $90 billion acquiring new spectrum for advanced wireless data services.)
The drive for revenue has spawned an ecosystem of companies competing for a stake in location-based technologies. At the infrastructure level, established players like Ericsson and Nokia are upgrading their tech to make customers' wireless networks location-savvy. On the handset side, Qualcomm is aggressively pushing to bring forms of GPS - the satellite-based location network - onto mobile telephone chipsets. Software outfits are battling to take the raw data and convert it into standard x-y coordinates that businesses can then use to power their services. Meanwhile, there are the companies trying to create services that will be popular with wireless customers.
But unlike the Internet circa 1994, which beckoned as a wide-open playing field, mobile media converges into one set of clients: wireless carriers. In Europe and the US, the carriers are taking their time to make key decisions about which systems to deploy. They own and operate the mobile networks, they're responsible for the bulk of the capital expenditures required to enable mobile media, and they're wary of racing ahead - the revenue models are far from proven. With cash reserves dwindling and the overall sector in a steep downturn, few aspiring location-based companies have the runway to handle delays.
What keeps them interested is the irresistible math. In Europe, SMS - the wireless standard for sending short text messages from phone to phone - has proved hugely popular. In June alone, 20 billion SMS messages were sent worldwide. "The average revenue per message for carriers was 8 cents," calculates J. F. Sullivan, VP of marketing and business development for the Silicon Valley-based startup AirFlash, which provides location-based software to carriers. "That's $1.6 billion in one month." While most of that money goes to the carriers, Sullivan is betting that AirFlash can grab a percentage of the revenue for those that involve location-based services, and that this will translate into hefty profits.
The message to Sullivan is clear: Forget the virtual, embrace the physical. In other words - location, location, location.
Europe and Asia have long been ahead of the US in deploying wireless services. It's no surprise, then, that the action in location technologies is overseas. In Japan, where the wireless Internet has been enviably successful (see "Pocket Monster," Wired 9.09, page 126), location services were introduced in 1999. Japanese wireless companies have been leaping ahead of one another with every upgrade. Two years ago, NTT's DoCoMo subsidiary launched DoCo-Navi, a trial giving Japanese real-time maps and directions on PDAs, similar to the guidance systems found in automobiles. Japan Telecom's J-Phone then released a personal-navigation service on its cell phones that now generates between 500,000 and 800,000 daily mapping requests from its users. In April, KDDI introduced a pocket-sized panic button made by Secom that has sold more than 25,000 units. A person in distress presses the button on the gadget, and within minutes a security team is dispatched to help. In all these cases, the network detects where these devices are, as opposed to the device knowing where it is and telling the network. Now DoCoMo, Japan Telecom, and KDDI are poised to unveil a new generation of handsets embedded with a Qualcomm chipset that provides even greater accuracy - to within about 150 feet in urban areas.
In Europe, carriers are still using a relatively primitive cell-based detection system - the network knows that you're within range of a specific cellular node and, in turn, that the node is positioned on a certain street corner or hilltop. Depending on the size of the cell, accuracy varies from about 320 feet in cities to 5,000 feet or more in rural areas. Initially, that data was used for predictable products - a version of the Yellow Pages that can find the nearest gas station or bank, and fleet management systems for taxi services - but now, carriers like Sweden's Telia are adding new products whose sole purpose is entertainment.
Take BotFighters, a real-world mock combat game that's a variant on paintball - but in this case you use your cell phone to locate and "kill" opponents. Created by a Stockholm-based gaming company called It's Alive, BotFighters is offered exclusively to Telia customers. About 5,000 have signed up since its launch in April. Players join by going to the game's Web site (www.botfighters.com). There they can enter the robot lab and design their warriors, choosing from a range of armor, weapons, and ammunition. Once a player has built his character, he's able to locate - and be located by - other players. The fun here is in "shooting" a real person, who could be standing 1,000 feet away. Other BotFighters can then try to retaliate. The goal, naturally, is to kill as many people as possible. The designers provide players with help by inserting imaginary items into the real-world terrain. If a gamer steps onto a certain street corner, he might find that it "contains" a first-aid kit. A gun might be "stashed" at the next intersection, and so on.
BotFighters has grabbed headlines in Europe for showing how cell phones are mutating into location-aware devices. At the same time, the game has spawned all sorts of aberrant behavior: "A player, his alias is Silver, was awakened at 1 am by his girlfriend," explains Sven Hålling, CEO of It's Alive. "She saw that his phone was beeping - it was an old enemy, who just shot him. He got out of bed, into his car, and chased the guy all the way to the airport, where he caught up with him and had a duel. By the time he got home, it was 2:30." When the same player went on vacation on the Swedish island of Gotland, he located all the BotFighters there, drove around in a sneak attack, and killed every one of them. In retaliation, five players formed a team and "chased after him, giving him a good beating," Hålling says.
For Telia, BotFighters is more than just fun and games. Every time a player picks up an object, detects an enemy, or takes a shot at someone, the move is described by text messages. Since there's a preexisting billing mechanism for SMS (they tend to cost about 0.20 euros, or 16 cents per message), Telia makes money by tracking and charging for each message a player generates. Hålling says one Botfighter racked up charges of close to $1,000 in 60 days; the average user spends $10 monthly. The revenue adds up to nearly $50,000 a month. Hålling won't reveal how much of a cut his company gets from Telia, but he does admit that his long-term goal is to get a percentage of the profits, as opposed to a onetime licensing fee. It's Alive hopes that a little less than 1 percent of Telia's 3.5 million subscribers will eventually sign up for BotFighters, which translates to about 30,000 users and $300,000 in monthly earnings. That's just a small indication of how location-based services might increase carrier revenue as the market for voice-only services becomes saturated.
This fall, Telia says it will begin a big marketing push to turn customers on to the benefits of location-enhanced services. Since 80 percent of Swedes already own a cell phone, the primary way for the carrier to make more money is to create new offerings. Telia is segmenting the market, developing one set of products for adults, another for teenagers and people in their twenties. Soon, the company will launch a "post office finder" for grown-ups; the Swedish government is closing 1,700 postal stations, replacing them with 3,500 service counters inside other retail outlets, like grocery stores. "No one can find them," says Jörgen Jonsson, who runs Telia's location-based services unit. For the younger demo, they are planning the "buddy finder" to locate friends and arrange to hang out. For instance, you find the bar nearest yourself and five of your pals, then automatically SMS them with the address and time you're going to meet. Each step prompts another text message - and more revenue for Telia.
You can build the best network on the planet, but unless your billing system is sophisticated enough to generate different prices for different services, it won't add up to much profit. That explains why it may take a long time for location-based services to develop in the US; carriers here do not have the systems in place to price and meter wireless data usage. Instead, SMS and other services tend to charge either "all you can eat" flat fees or by the minute. That kind of price structure offers little incentive for carriers to add location awareness to their networks.
The real push in the US is coming not from consumers but from the government. In 1996, the Federal Communications Commission decreed that mobile phone companies must adopt technology to pinpoint the location of subscribers making emergency 911 calls. Carriers have already complied with phase one, which ordered them to pass along to emergency personnel the caller's phone number and the cell sector from which the distress call was made. Phase two directed carriers to start selling and activating location-aware handsets by October 1 this year.
Mobile phone companies have balked at the regulations, contending that it is nearly impossible to comply with the level of precision that the FCC is insisting on. "The nature of the technology that exists does not meet the accuracy requirements," said Andrew Clegg, who oversees new technology for Cingular Wireless, in a response to the FCC. "If anybody is telling you anything different, and everybody will, it's not true." The FCC has said it will consider requests for extensions of the deadline, but that companies failing to show significant efforts to comply could face penalties. (The European Union has delayed approving a similar measure pending what happens in the United States.)
The US carrier that may come closest to meeting the FCC requirements is Sprint, which expected to begin selling GPS-assisted handsets built by Samsung in October. Sprint is in some ways best positioned to lead the way in the United States for mobile media services. It's the largest carrier to have designed and built a nationwide network completely on its own; those with larger networks, such as AT&T, Cingular, and Verizon, acquired them through mergers with smaller regional carriers. Sprint's go-it-alone approach means it's easier for the telco to upgrade its network and to create new billing rules for mobile content services. By next summer, the company is also scheduled to deliver a nationwide always-on packet data network, running on what's called the 1XRTT protocol (a transition between the current one and so-called third-generation networks). That's about where Japan was two years ago, when NTT DoCoMo first deployed its i-mode service. "We admire what NTT DoCoMo did in Japan," says Paul Reddick, vice president of business development at Sprint. "We want to learn from that and then leapfrog what they did."
As Sprint and other companies gradually put into place the networks to support location-based services, the wireless industry will continue to change. Companies that want to establish a presence in the world of mobile media will have to abandon the approaches of the Web era and adopt new ones suited to this medium. And make no mistake: There are fundamental differences between the wired and wireless sectors (see chart).
Sometime in the next few years we will find ourselves surrounded by a pervasive, always-on network. It will be more advanced in some areas, less so in others. The world is moving toward hyper-connectivity. Mobility and physical space will be the new drivers of innovation. And location awareness is the ingredient that will bind the physical world to the virtual.
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