Why Android Location Data Is So Important to Google

While the focus on handset location data has been focused largely on Apple recently (s aapl), new internal Google memos that emerged yesterday illustrate why the search company is also very serious about collecting Wi-Fi data through its Android handsets. The memos help explain why location data is so important and why, in particular, Google (s goog) has relied on data from handsets.

In a memo exchange last year, not long after Motorola (s mmi) chose to use Skyhook Wireless location technology in its handsets over Google’s, Google founder and current CEO, Larry Page, sent a short message to the Android team asking for a response. Android team members responded by saying that location data obtained through handsets was “extremely valuable” to Google, especially after it chose to forgo obtaining Wi-Fi location data from its Google Maps Streetview vehicles.

“I cannot stress enough how important Google’s wifi [sic] location database is to our Android and mobile product strategy,” Google Location Service Product Manager Steve Lee wrote in the memos, which were obtained by the San Jose Mercury News. “We absolutely do care about this (decision by Motorola) because we need wifi [sic] data collection in order to maintain and improve our wifi location service.”

The exchange helps frame both the battle over location and the litigation between Google and Skyhook, which is suing Google for interfering with its Motorola relationship by later pressuring the manufacturer to drop Skyhook, which it did. Had Google still had the use of its Streetview cars for gathering Wi-Fi data, it might have been less reliant on getting data through its handsets. But after it was discovered the vehicles were gathering personal information through unsecured Wi-Fi networks, Google vowed to give up using the cars for Wi-Fi data collection. The cars had been in use since 2007, helping Google gather the location of 300 million Wi-Fi hotspots, which help pinpoint a user’s location to within about 100 feet, according to the Mercury News.

Android phones are also able to help build a database of locations through mapping Wi-Fi hotspots, but it requires handsets to run Google’s opt-in location sharing service. However, if major handset makers such as Motorola chose to pay for Skyhook’s location technology over Google’s own free software, the search company ran the risk of having an imperfect picture of Wi-Fi locations. That’s the thing with location data based on Wi-Fi routers: It’s always changing, so Google and others need a reliable way to keep updating the information.

Ted Morgan, CEO of Skyhook, said the memos help explain the relation between the Google Streetview car situation, the competition with Skyhook and phone tracking. He said with the deals Skyhook was closing to signing with manufacturers, it would have locked up 7o to 80 percent of the Android device market.

“Location is one of the key chess pieces in the mobile platform battle that will rage for the next few years and clearly Apple and Google get it.  [The memos] also show why these companies have taken such an aggressive posture towards us, we invented most of the key technologies behind it all and our property is standing in the way,” Morgan said.

Now, Morgan has a big stake in this game. But he’s right in that location is a serious battleground, and whoever has the best handle on it, both gathering it and using it, is best positioned to reap a lot of money as we build a lot of services based on location. Mobile ad serving based on location is increasingly growing into a big opportunity because they put relevant ads in front of people based on where people are. Companies like WHERE, which was recently bought by eBay (s ebay), are basing their whole mobile ad business around delivering location-based ads.

With location such a pivotal tool, it’s possible Google leaned on Motorola and another manufacturer to choose its location technology as Skyhook has alleged. We’ll have to wait for a jury to decide that. But as the memos suggest, good location data is important for Android handsets and Android handsets are key in improving Google’s location data. Indeed, for Google, the location data on its handsets is no doubt, “extremely valuable.”