Location-Based Social Networking To Be A Robust Market

The industry will grow to $3.3 billion in five years, but concerns over privacy and data costs need to be overcome.
As more mobile phones become equipped with GPS chips, the market for location-based mobile social networking will swell to $3.3 billion by 2013, according to new data from ABI Research.

The new study, titled "Location-Based Mobile Social Networking," found that users are increasingly eager to share geo-tagged user-generated content, exchange recommendations about places, and identify nearby friends.

But the social networking companies will have to look beyond advertising for significant revenue streams, the report said.

"While location-based advertising integrated with sophisticated algorithms holds a lot of promise, the current reality rather points to licensing and revenue-sharing models as the way forward for social networking startups to grow their customer base and reach profitability," said principal analyst Dominique Bonte in a statement.

Bonte pointed to the recent deals GyPSii signed with Garmin and Samsung as evidence of this business model. Additionally, Loopt has established partnerships with all major U.S. mobile operators.

Many players in the mobile industry seem to agree with ABI's assessment of the market, as there has been a flurry of moves lately in this segment. Nokia recently acquired Plazes to beef up its mobile social networking options, and Apple's App Store is filled with location-based networking programs like Whrrl and Limbo.

But there are many factors that could get in the way of mass-market adoption, ABI said. At the top of the list is privacy, as Loopt recently found out when it was accused of disclosing user cell phone numbers and whereabouts without permission. Additionally, new mobile social networks will face the traditional challenges of brand awareness, as well as concerns about cost of data plans.

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