What Did Apple Really Say About Location-based Ads?

Apple (s aapl) a couple of weeks back released a “tip” for developers on how to enhance its apps using its “Core Location” framework, which it touted as being able to imbue apps with location-based info on the weather, nearby restaurants and more. But while some said it signaled the death of the location-based ad industry on the iPhone, that seems more than a little premature.

The concern centered around the following statement: “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.” There have also been reports that applications may be required to ask for user permission to integrate location-based advertising, although I haven’t seen a direct reference from Apple to that effect.

It’s worth noting that the Core Location API features (which I imagine are based on technology being developed by Placebase, which Apple bought last summer) touted in Apple’s tip don’t seem to have been released yet, and that the last material change to location features seem came back in May 2009, in conjunction with an iPhone OS update.

3 Interpretations

But what should we take the developer tip to mean? I see a few possible interpretations:

User Protection — Maybe Apple is merely trying to help users by stopping massive LBS ad spam and potential problems with location-based tracking issues. After all, the company has so far done a good job of balancing user control of location info with a developer-friendly wrapper. Currently, when an app that wants your location tries to access it, the user needs to give permission by way of a pop-up dialog box. After a few times, the pop-ups stop and the app gets continued access to location data. So perhaps Apple wants to keep its users’ best interests at heart.

Commercial — The idea here is that location-based advertising on the iPhone isn’t dead, rather it’s going to become a walled garden or a short-fenced one, with, presumably, Apple/Quattro taking a significant cut of the revenues. While every ad network takes some portion of sales, Apple would not have the normal competitive pressures in setting this revenue share percentage. Possibly you could use other ad systems, but would then have to pay for access to Apple’s core location APIs.

Such an approach could benefit developers as well, as it would immediately create critical mass for location-based advertising on the iPhone (which barely exists today). Apple might even allow new ad networks to participate in campaigns, as long as users receive some location benefit. Alternately, it could disallow all other ad networks –- which would not sit well with Google (s goog), Microsoft (s msft) or anyone else trying to get broad advertising reach across mobile customers.

Irrational — I’ve seen numerous examples of this interpretation, with headlines including:

Location-Based Advertising Dead on the iPhone? — Technorati

Apple tells devs that location-based advertising is a no-no -– Ars technica

Apple Bans Location-based iPhone Ads -– InformationWeek

Apple vows to reject location apps geared for mobile advertising –- Fierce Mobile Content

But let’s face it: Apple is about as likely to kill location-based advertising on the iPhone as Microsoft is to start giving Windows away for free.

Some Conclusions Can Be Drawn, But Questions Remain

As its acquisition of Quattro at the start of year (and its interest in AdMob, before it was snapped up by Google) made clear, Apple is serious about mobile advertising. It’s also serious about its users. And it recognizes the impact location-based activities (in a variety of types) are going to have on mobile services, sooner than later.

Some questions remain, however, the most important of which is: Would a walled garden ad network on the iPhone be in Apple’s best interest? On one hand, it could serve to alienate a variety of people in the industry. But it would undoubtedly bring a huge boost in business to Quattro and give Apple enough critical mass to come out with industry-changing location-based ad products and a thriving network.

What did you think was implied by Apple’s Core Location tip to developers? Leave your thoughts in the comments.

Rahul Sonnad is the founder of Geodelic Systems.

Related GigaOM Pro content:

To Win in the Mobile Market, Focus on Consumers