Apple's (AAPL) acquisition of WiFiSLAM is one of the first acquisitions of an indoor location positioning start-up. Since Apple has a tendency to start (or legitimize) trends, it's interesting to consider other major companies that are entering the area of indoor location, which are leading in their industry, and what start-up acquisition targets might interest them.
There are over 50 start-ups and over 40 major mobile companies developing indoor location technology, including several different approaches. Most of them combine several different approaches, to gain the benefits and compensate for each method's drawbacks. To consider which major companies might be interested in which start-ups, let's briefly consider five of the technology approaches taken.
Approach 1: The major mobile operating system makers, including Google (GOOG), Microsoft (MSFT) and Apple, are using "signal triangulation" to estimate indoor location. In a nutshell, if a cellphone knows the rough locations of every cellular tower and every Wi-Fi access point, and also knows how strong the signals are from each of them, then the phone can estimate its own location based on distance from each cell tower or Wi-Fi access point. This is a great approach for a mobile OS maker to deploy because it's very general - a database of estimated locations for each antenna enables indoor location estimation anywhere on the globe. Unfortunately, however, it's usually not as accurate as other approaches, and it's particularly inaccurate in areas with a lot of interference or a lot of thick walls.
Approach 2: Many of the start-ups that are deploying systems in malls and airports are doing what's called "Wi-Fi fingerprinting." In this approach, someone has to walk through each site to be included, and gather "fingerprints" every few meters. These fingerprints consist of signal strengths of all the Wi-Fi or cellular signals that the phone can receive. Then, the phone can estimate its location by comparing the signal strengths it receives to the collection of fingerprints. This tends to be more accurate than signal triangulation, but requires preparation (fingerprint collection) for each site to be covered.
Approach 3: The other primary approach by which cellphones can track their locations is called sensor fusion (also called inertial navigation). In this approach, a cellphone knows its starting location (say, from GPS, while outside) and then tracks its location indoors by sensing its movements using the sensors in the phone, including accelerometers, gyroscopes, compasses and barometers. When the sensors indicate that the phone moved for 5 seconds at 10 centimeters per second, in a certain direction, the phone updates its location to be 50 centimeters in that direction. This is conceptually a great approach, but tiny errors in sensors tend to add up over time.
Approach 4: If a site deploys dedicated radio devices, then much more accurate positioning can be done using their signals. The current favorite for this is Bluetooth 4.0, which works on the newest iPhones and is starting to come out in other phones as well. But this accuracy comes at a price: many sites don't want the expense or effort of deploying custom devices.
Approach 5: Several companies are taking a radically different approach - instead of phones calculating their own locations, the network itself tracks the locations of phones as they move around. This tends to work very well, and requires less work by the phones. It feels a bit like Big Brother, but most phone users accept being tracked if there are benefits. But again it requires that special systems be put in place by sites, or that high-end Wi-Fi networks that include this feature be deployed by sites.
There are some other, more esoteric approaches, but 95% of the serious work on indoor location takes one or another, or several, of these approaches.
Now let's take a look at WiFiSLAM and see why they were a good match for Apple. Apple was already gathering locations of Wi-Fi access points and using them to estimate location (approach 1), as Google and others are also doing. But this apparently hasn't been accurate enough. WiFiSLAM brings two technologies to the table. One is their very fast & easy method of gathering indoor maps & Wi-Fi fingerprints. Their system uses a cellphone camera to take a picture of an indoor map, and a mobile app to gather fingerprints as a phone user walks around the site. This will make it easy for Apple to add Wi-Fi fingerprinting. In fact, it's similar in spirit to Google's mobile app that adds Wi-Fi fingerprinting to Google Maps, although Google's app doesn't use cellphone cameras to upload maps (yet).
WiFiSLAM has also developed very accurate sensor fusion, for tracking phone locations using phone sensors (approach 3). If it really works as claimed, it would be very powerful if added to iOS.
But what acquisitions are likely to interest other major companies?
Google has their own huge deployment of indoor positioning technology based on signal triangulation (approach 1), and as we noted above they have also added fingerprinting (approach 2). They've also researched sensor fusion, and have deployed it in limited ways (Google Maps shows the green arrow turn as your phone turns around in place). The start-up that Google would most want to acquire seems to be one with very strong and accurate software-based sensor fusion. Another possibility would be a start-up that does a better job at signal triangulation (approach 1), but there are only a small number of start-ups in that area.
Microsoft would seem to be in the same position as Google, except that they have less success to date in actually deploying indoor location positioning. They seem most likely to acquire a company that does general-purpose signal triangulation (approach 1), in an attempt to leapfrog Google, but easy-to-use fingerprinting (approach 2) or sensor fusion (approach 3) are also likely.
Phone manufacturers, like Samsung (OTC:SSNLF), Sony Ericsson (SNE) and others, are still using Android or Windows Phone, but may want to add their own location tracking as well. Samsung appears to have the lead on indoor positioning research, but others may use M&A to catch up. Phone makers seem mostly likely to want technology that's completely independent of any infrastructure, which points to sensor fusion (approach 3).
Chip companies, such as Qualcomm (QCOM), Intel (INTC), Broadcom (BRCM), Texas Instruments (TXN) and others, are also getting into the indoor location area. Most of them have announced chips for indoor location tracking, using all of the methods listed above. Qualcomm, Broadcom and CSR are particularly advanced in this. Chip-based implementations of indoor location positioning are inherently general-purpose, so fingerprinting (approach 3) is less likely than signal triangulation and sensor fusion (approach 1 & 3). Sensor fusion is particularly applicable for chip companies, since it can be implemented very well in sensor processing chips.
Network companies, on the other hand, like Cisco (CSCO) and Aruba (ARUN), are getting into the indoor location services business themselves. They're likely to acquire technology for more precise positioning using signal triangulation (approach 1), but also to acquire start-ups with particularly good services to offer sites, like navigation, promotions, couponing, and more. In fact, Cisco already acquired a company in the location analytics area.
Mobile social networks, such as Facebook (FB), FourSquare, Twitter and others, or "deals" companies like Groupon (GRPN), are the most likely to see fingerprinting technology (approach 2) as a strong target, since their goal in indoor location is to recognize specific areas (such as stores or coffee shops) and not to show a blue dot on a map.
Lastly, e-commerce companies such as Amazon (AMZN) and eBay (EBAY), are already moving into non-virtual commerce, blending the on-line and physical worlds of shopping. They're likely to incorporate indoor location for retail applications, like location-based coupons and promotions, shopping list managers, and more.
So what acquisitions will be next? I happen to believe that Google or Microsoft will soon acquire start-ups to improve their positioning. Microsoft will probably be first, since Google leads in the area and Apple just acquired WiFiSLAM. But Google is likely to want to buttress their lead with an acquisition.
I also think that Facebook and other social networking companies are likely to acquire indoor location start-ups soon. They'll have more to choose from, since they're most likely to be interested in fingerprinting technology companies. Soon thereafter we'll see automatic location-based check-ins and update geotagging, along with "find my friends" features and location-based daily deals.
There are over 50 start-ups in the indoor location area, and each start-up has a different combination of technologies and services that it has developed. Particular companies to keep an eye on include Glopos in the signal triangulation area, SenionLabs in the sensor fusion area, Aisle411 in the retail area, and Qubulus and PoleStar in the general positioning area. But these are only a few of many likely M&A targets out there.
Whatever acquisitions are next, it's clear that the area of indoor location positioning technology is heating up. Will 2013 be the tipping-point year that it clamors to market?