Apple's Indoor Location Acquisition: It's About Apps, Not Maps

| About: Apple Inc. (AAPL)

Almost a month has gone by since Apple's (NASDAQ:AAPL) acquisition of WiFiSLAM, a start-up company with technology for indoor location positioning (a.k.a. indoor GPS). Numerous articles have seen this acquisition as a means to beef up their failed Maps system. While this is undoubtedly true, I think it's only a small part of what Apple will do with WiFiSLAM's indoor location technology.

In short: It's about apps. Not just maps. Apple doesn't just want to improve its maps application, it wants to enable a new generation of apps that won't run, or will be harder to run, on Android and Windows Phone.

Start with an observation: Apple has largely lost its advantage in apps. A few years ago, many of the best apps were launched first on iPhone and only then on Android, but that time appears to be over. iOS and Android have roughly the same number of available apps. While iOS apps rate a bit higher in user satisfaction, and iOS users pay more for apps, there are more Android apps downloaded than iOS. All in all, about even.

Another observation: Apple, as a company, makes its money from its device sales. Their revenue from iTunes, software and services is steadily around 8% of their revenues. Their business goal for iTunes and apps is to motivate device sales. This is exactly the opposite from Google (NASDAQ:GOOG), who uses everything to motivate software usage and thus advertising, and Amazon (NASDAQ:AMZN) who uses Kindle devices to motivate book sales. So while increasing map usage across all devices is a big goal of Google's, Apple most likely wants something big enough to drive users from Android to iPhones.

Enter indoor location. Indoor location solutions are being brought to market by over 50 start-up companies, and are enabling a wide variety of services in numerous industries. Until now, indoor location applications have been easier to deploy on Android than iOS, because of Apple's decision not to give signal strength data to 3rd-party applications. But if Apple now integrates indoor location technology into iOS, indoor applications will soon be a piece of cake to deploy on iOS.

Consider social network apps. FourSquare uses GPS to suggest locations to check into. If iOS gave accurate indoor location automatically, the FourSquare app would almost automatically be able to suggest which shop in the mall you should check into. Same for Facebook (NASDAQ:FB) tagging posts with your location, where it could know automatically whether you're in the mall's coffee shop or wine store.

Would friend-finding sites, like Google Latitude or Glympse, be more popular if their apps would know where in the mall or college building you were? Would you use local search, like store-finding or restaurant-finding, if it could find you the store that's near you in the mall and not the one on the other side of the mall?

And here's the key point: Suppose many of these social networking apps handled location properly indoors, based on iOS supporting indoor location well. Would kids in Junior High, buying their first smartphones, be more inclined to buy the phones that supported these extra features indoors?

The same is true of customized applications throughout a wide variety of industries.

The retail industry wants to use indoor location systems to send promotions to mall or store customers based on where they are and what they've bought in the past. They also want to cross-sell products related to the ones they're standing near, like sending a discount on chips to someone standing near the salsa. Hospitals want to use indoor systems to help people find the right departments without bothering the nurses, and also to keep track of patients and equipment as they move around the buildings.

Airports want to use indoor location systems to help people find their gates, as well as products they want in duty-free. Airports also want to remind people if they're at the bar when their flight is about to board. College campuses want to use indoor location systems to send messages to the security office if a student sees a suspicious person in a school building at night. Museums and exhibition centers want to use indoor location systems to give details and background on the items that users are looking at, as well as to help people find the restaurants and gift shops.

Until now, bringing these applications to market required developing one or more technologies for indoor location positioning. But if Apple can make it much easier to bring these applications to market on iPhones, by handling the indoor location positioning well within iOS, then they'll not only give a big boost to the area, but also make it worth the while of app developers to develop them first on iPhones.

Of course, Apple has serious competition in indoor location. All the major mobile OS makers, phone manufacturers, and chip makers, are researching indoor location. Google's already offering it, and Microsoft (NASDAQ:MSFT) is likely to soon. Chip technology from Qualcomm (NASDAQ:QCOM), Cambridge Silicon Radio and STMicroelectronics (NYSE:STM) will be adding accuracy to indoor location soon. So even if Apple integrates WiFiSLAM's technology into iOS quickly, they might not keep the advantage long.

But bottom line, indoor location isn't just about maps. Indoor location is about apps. Now the race is on to supporting indoor location positioning in a wide variety of mobile apps.

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.