Apple has taken a stand against location-based advertising within applications for the iPhone and iPod touch, a decision that has ramifications for the mobile advertising industry as a whole.

The company announced that it is blocking applications that use location-based information primarily to enable mobile advertisers to deliver targeted ads based on a user's location. Industry analysts are speculating whether that decision could have something to do with its pending acquisition of mobile ad network Quattro Wireless.

?Apple is acting like they normally do?they want to control the experience and the use of their devices and applications,? said Neil Strother, Kirkland, WA-based practice director at ABI Research. ?This a way for them to make sure the end user isn?t getting spam and controlling what goes into iPhone applications.

?If advertising is the main purpose, they frown on that, so the question is, what will Apple do with Quattro?will they want to control that as well?? he said. ?I?m assuming that in a larger context, Apple wants to control advertising through its devices, the iPhone, iPod touch and iPad, making it easier for developers to integrate ads, and location is a part of the targeting process.

?Location is a strong indicator of what people want to do to make advertising relevant?what advertiser wouldn?t want to know who?s nearby and send them a relevant offer??

Since the launch of the App Store, Apple has controlled which applications get in. Developers have to play by the company?s rules or they do not get in.

How in-application advertising will be targeted is an open question.

What is clear is that Apple did not pay $275 million for Quattro to not make mobile advertising a priority, despite some recent eyebrow-raising comments by Steve Jobs.

?It?s speculation, but I believe Apple will make it easy for developers and therefore advertisers to use the system they put together with the Quattro acquisition, although what that will be exactly I don?t know,? Mr. Strother said. ?They will find some way of integrating Quattro?s network with applications.

?I don?t know if the move to block in-app location-based ads is directly linked to the Quattro acquisition, but there may be a connection,? he said. ?Apple?s message is that if you?re tying location to your application, it has to bring something of value to the end user first and foremost.?

App Store tip: enhance apps with Core Location
Apple gave the following advice to iPhone developers on the Developer Connection section of its Web site:

The Core Location framework allows you to build applications which know where your users are and can deliver information based on their location, such as local weather, nearby restaurants, ATMs, and other location-based information.

If you build your application with features based on a user's location, make sure these features provide beneficial information.

If your app uses location-based information primarily to enable mobile advertisers to deliver targeted ads based on a user's location, your app will be returned to you by the App Store Review Team for modification before it can be posted to the App Store.

You can learn more about using Core Location by reading the CLLocationManager Class Reference and downloading the LocateMe sample code available in the iPhone OS Reference Library.

Limiting geo-targetable inventory
Many marketers bemoan Apple?s closed system, seeing the App Store rules and regulations as restrictive micromanagement.

One can understand Apple wanting to control its brand and ensure a good user experience, but if location awareness can make an ad more relevant, is that not a good thing?

?Why is Apple doing this? The public answer is user experience,? said Jorey Ramer, founder/vice president of corporate development at mobile ad network Jumptap, Cambridge, MA. ?Consumers may wonder, for example, why they need to provide location information to play a free game of chess.

?But the concern from the entire mobile advertising industry is that they will significantly limit the available geo-targetable inventory or even make geo-targeting available in such applications only for Apple?s own ad network, which is consistent with Apple?s track record of leveraging closed platforms to encourage increased adoption of Apple products and services,? he said.

What could this mean for mobile advertising? Competing mobile ad networks may not be happy with the answer.

?Fragmentation and complexity, such as limiting availability of location information to Apple?s proprietary services, can create significant barriers to mobile advertising adoption,? Mr. Ramer said. ?IPhone traffic is a large share of total traffic and is highly desirable for advertisers.

?But advertisers want to reach consumers across many different devices?iPhone, Android, RIM, Windows?and they want geo-targeting,? he said. ?And perhaps more than anything else, advertisers want simple solutions, those that work across platforms and operators.?

For better or worse, Apple has built a closed platform, and will continue to control it closely. The company must understand the truism that the more targeted advertising is, the more effective it is.

?The irony is that this is unfair to consumers: Getting less targeted ads is a bad user-experience,? Mr. Ramer said. ?Location-based ads are far more relevant and engaging than the alternative, and the performance data reflects that fact.

?Let consumers decide, as they have already,? he said. ?Location-based targeting is almost a universal requirement for mobile advertisers, whether on a country, state or DMA?Designated Market Area?level.

?This includes the needs of both direct response marketers and brand advertisers.?

Location, location, location
In addition to the Quattro acquisition, the acquisition of Placebase, which aggregates location content, patent filings and recent senior hires indicate that Apple is clearly intent on getting into the location-based advertising business.

What is not yet clear is the extent to which Apple plans to impede networks and developers from using location to generate revenue.

Apple also has such a strong focus on the user experience, so the company may want to improve the look and feel of how ads are delivered on the iPhone.

?The next wave of innovation on mobile is the incorporation of location to improve the relevancy of the experience, and we?ve seen a wave of announcements on this front from Google to Loopt to Foursquare,? said Alistair Goodman, CEO of 1020 Placecast, San Francisco.

?Location is now widely understood to be the key to successful mobile advertising because where a consumer is in the physical world and at what the time they are there is such a strong predictor of consumer behavior and intent,? he said.

Attempting to control the flow of all the marketing dollars on the iPhone will be a tough challenge, as marketers care more about reach, not the specific phone that a consumer owns.

?We?ve seen with carriers that walled gardens eventually open, and as Google?s open Android ecosystem grows, the mobile marketing industry is likely to move more towards the open Internet model,? Mr. Goodman said.

Savvy marketers realize that when deploying ads, it is all about context.

?I think this has to do with preserving a positive user experience?mobile ads should have context to what the user is doing,? said Dan Gilmartin, vice president of marketing at uLocate, Boston. ?If you are playing checkers on your phone, a location-based ad may be inappropriate.

?If you are looking for a local pizza place, a location-based ad with an offer at a nearby restaurant is appropriate,? he said. ?I think this is less about mobile advertising in general, more about location-based advertising.

?I think that for companies who participate in location-based advertising there has to be consumer value.?

Great ad platforms need to deliver value to the user. However, the more targeting factors brands have at their disposal, the more they are willing to pay for advertising.

Location is a key, and will become even more important going forward.

?Demand for location-based advertising continues to rise, and we are very optimistic in its future,? Mr. Gilmartin said. ?We are delivering LBA-specific ads in the seven figures daily.? 

Other mobile ad networks affirmed the fact that brands are clamoring for location-based mobile advertising. Will Apple eventually allow it within applications for its devices? Only time will tell.

?There is certainly demand in the market for marketers wanting to reach consumers based upon geographic location,? said David Gwozdz, CEO of Mojiva, New York. ?The balance has always been achieving scale, while narrowing the geographic area.

?With the explosion of apps and the combination of in-app LBS advertising, the market is starting to see promises of scale and tighter geo-location targeting,? he said. ?It remains to be seen what kind of unique control they want to put on this in the future.

?There are many other means and technologies that marketers can use to reach their geo audience?in-app is only one.?