When mobile apps first came out, they were amazing, distinctive and differentiating. iPhone had 'em, everyone else wanted 'em. Then everyone else got 'em. Now all the mobile platforms have close enough to the same collection of available apps, more or less, so they're now necessary and popular, but no longer differentiating or cool.
When active widgets first came out, they were amazing, distinctive and differentiating. Now they too are necessary and popular, but not differentiating or cool.
What will be the next smartphone feature that will be differentiating and cool? What will take mobile apps and widgets to the next level? And most importantly, which smartphone system (iOS, Android, Windows Phone, etc.) will get there first?
The answers to this question matter as much to technology investors as to cutting-edge smartphone users. All the mobile companies have realized the importance of attracting app developers to their platforms or devices, and are spending a lot of money to do so, because many consumers are choosing a smartphone based on the apps they want to use. All of the app developer conferences and contest prizes, run by all the major mobile companies, are proof of how seriously they take this. If a new smartphone feature can enable new types of apps to run well on only one platform, the platform that gets there first will have a big edge.
This is all the more so if a new smartphone capability will enable new commercial applications or features. Making money off of smartphone apps is still something of a Holy Grail in the industry. The platform that enables more money-making apps than other platforms will attract business that adds to the bottom line.
One capability currently being researched by all the major mobile companies is called "GeoFencing." GeoFencing, in a nutshell, enables an action to be taken when a device enters or leaves a specific geographical area. With GeoFencing, a to-do list app can notify a user when nearing a store to buy milk, or a department store app can notify the user of a sale on their favorite shirts when they're about to walk by a store branch. The common element is an app waking up and alerting the user as the phone nears a given location.
The big picture here is amazing: GeoFencing enables next-generation apps to run automatically when they should, instead of waiting for smartphone users to tap on their screens. This won't necessarily change games, but it will work for any app that you need in specific places.
The implications for retail apps is obviously huge. Instead of users launching a department store app when they enter the store, the app can launch automatically when they pass near any store branch, and offer them promotions for items in their shopping cart or related to past purchases. Instead of users launching the Amazon (NASDAQ:AMZN) barcode scanner app when they walk into bookstores, it can launch itself and beep to remind users to compare prices, or offer same-day delivery for whatever item brought the user into the store in the first place. eBay (NASDAQ:EBAY) and its many subsidiaries are working on these areas heavily.
But the implications are much broader. Do I want to launch my navigation app automatically whenever I drive out of town? Do I want a beep not only when entering my favorite bookstore, but when walking by any bookstore? Do I want my phone to switch to vibrate whenever I enter the theater? Should my teenager's smartphone send me an SMS whenever they go near the arcade?
GeoFencing can also integrate into other phone services. Do I want my phone calls routed to a landline when I'm standing near one? Do I want my cellphone to warn me when I'm approaching an area known to have bad cellular reception? Do I want my phone to suggest apps to me that will be useful in the place at which I arrived? The uses and applications of GeoFencing are endless.
But the big challenge with GeoFencing is implementing it efficiently and effectively. If a smartphone checks its GPS every minute to see if it's entering or leaving a GeoFence, it will run out of battery very soon. It will also take phone CPU away from other applications. But if a phone doesn't check its location constantly, how can it know immediately when entering or leaving a GeoFence?
Other challenges with GeoFencing relate to the flexibility needed in effectively defining a GeoFence. Am I in a GeoFence around a department store if I'm 100 yards away but there's no highway exit to get there? Am I in a GeoFence if I'm less than a mile away but stuck in bumper-to-bumper traffic? Am I in a GeoFence if I'm at the right point on a map but on another floor of a building? Can I define a GeoFence that's not a circle or square, but a more complicated polygon shape?
These challenges are the reason that GeoFencing has been around for a few years but has not yet taken off.
Our recent report from Grizzly Analytics details almost a hundred research initiatives addressing these and other issues in GeoFencing. The word GeoFencing may not be in common use, but the subject has been researched for years by Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOG), Qualcomm (NASDAQ:QCOM), eBay, Nokia (NYSE:NOK), and many other mobile and Internet companies. It's starting to reach market in reminder applications and in "local deals" and mobile advertising systems.
Most importantly, GeoFencing is now offered by iOS and Android, as an API that third-party app developers can use. And Microsoft is researching GeoFencing within a general-purpose scripting tool. By incorporating GeoFencing into mobile OS APIs, it will become a building block for a wide variety of mobile applications that won't have to reinvent the GeoFencing wheel. These APIs aren't in heavy use yet, but as soon as their GeoFencing becomes more efficient and effective, these APIs will be the tipping point that will bring GeoFencing mainstream.
Several companies are researching the use of cellular antenna IDs ("cell IDs") to do coarse location tracking until a phone gets close to a GeoFence, and then use GPS only when in a cell containing a GeoFence. Others are researching how to estimate how long it will take to get near a GeoFence, and turn off GPS until that time passes before checking again. Some are exploring using motion sensing for this, where the phone checks its location only if the phone's sensors indicate that it's moving quickly.
Several companies are researching how to incorporate local search into GeoFencing, to trigger a GeoFence when the phone passes any shoe store, not just a single shoe store. Others are researching how to merge GeoFencing with navigation, both to better know where the user is going and to know whether the use has time to leave their route for a deal. Others are using navigation and traffic data to know if the user is not only near a location but can get there effectively.
So which mobile OS will be the first to enable GeoFencing for 3rd-party apps? The best bet appears to be Apple's iOS. Apple already offers, in iOS and OS X, its Core Location Framework that supports GeoFencing, among other location functions, for app developers. Apple has researched and patented a technology that they call multi-tier GeoFencing, whereby a phone monitors its coarse location easily and efficiently by cell ID until it gets close to a GeoFence, at which point it switches to GPS. One of the inventors of their multi-tier GeoFencing manages Apple's iOS Location and Motion group, and another inventor works on the Core Location Framework. It appears from this that more efficient GeoFencing will be part of iOS Core Location Framework soon.
But this is only a small sample of the GeoFencing technology being researched by major mobile companies. Microsoft, Google, Qualcomm, Nokia and many others are also researching the area. Another major mobile company, either an OS maker or a platform maker or a chip maker, may come out with more sophisticated, efficient and flexible GeoFencing even sooner.
One company well-poised to profit directly from GeoFencing, and transform their business in the process, is eBay, with their subsidiary PayPal. They have acquired several companies in recent years that show their intention to move from virtual commerce to location-based commerce, including Milo, where.com, RedLaser and others. Where.com in particular holds a broad granted patent in the area of GeoFencing. eBay and PayPal have researched efficient GeoFencing technology and applications for retail and commerce. And they're increasingly well-positioned to benefit directly from this new technology. But many others are also moving quickly in applying GeoFencing to retail.
For Apple, Google, Microsoft and other mobile companies, GeoFencing is one of the next in a long series of features that evolve the smartphone experience and the mobile industry. Apple is a good buy not only if they're first to support efficient GeoFencing, but because they've been first with many such features in the past and are likely to be in the future. But GeoFencing has more commercial implications than many new mobile features, which will add to Apple's bottom line immediately after GeoFencing is efficiently supported.
eBay, on the other hand, is poised to open up whole new business areas, as they spread into location-based brick-and-mortar commerce. This makes them a stronger long-term buy than they would have been on the basis of their auction business only. eBay will presumably want their services to run on all smartphones, but if Apple is indeed first to supporting efficient GeoFencing, they will likely launch on iPhone before others.
Next time you use a mobile app on your smartphone, think to yourself: Could this app have done this task on its own, if it tracked where I was? More importantly, next time you realize you forgot something, ask yourself: Could an app have seen where I was and taken action? Don't worry, GeoFencing is coming soon.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.