In Silicon Valley, there’s an old saying that it’s risky to pioneer new markets because pioneers are the ones that end up with an arrow in their back.
Eighteen months ago, Skyhook Inc., which provides location-tracking technology, looked as if it had taken not one but two fatal hits.
Apple, the source of the majority of Skyhook’s sales, announced it would no longer use the Boston-based company’s location software in its millions of iPhones. A few months later, most of Skyhook’s potential business with makers of Android-based smartphones such as Samsung dried up amid a legal spat with Google Inc. Skyhook filed patent infringement suits, and another that claimed Google pressured Motorola and Samsung to use Google’s location-tracking code while shunning Skyhook’s technology.
Turns out Skyhook is far from dead.
Some Android licensees, including Amazon.com, are choosing to skip Google’s location services and other free applications such as Gmail and YouTube. Amazon’s Kindle Fire tablet, for example, comes with none of those apps.
Skyhook CEO Ted Morgan sees licensees such as Amazon as potential customers. That could also include Facebook, if the social networking giant introduces a long-rumored Android-based smartphone. All of these Internet giants want to control, not share, the information on their users’ habits and in this case, their location. That’s where Skyhook’s technology could be an alternative.
Android phone and tablet makers may also face pressure to differentiate their devices, rather than ship the same set of Google apps and services. In addition, Android licensees that use Google’s services must give much of the ad revenues generated through those apps to the search giant.
“A lot of device makers realize that they need to control their own destiny,” Morgan says. “That creates a ton of new opportunities for us.”
Scott Raney, a Redpoint Ventures partner who recently met with Morgan and is considering an investment in Skyhook, believes more Android licensees will choose to use non-Google technologies.
“That’s a small opportunity today, but it’s going to get a lot bigger,” says Raney. Because no other independent company has as large a location database as Skyhook (or 32 issued patents), he thinks many mobile players might want to acquire the company. “There’s some legal risk, but this is a really unique asset.”
Skyhook also wants to pursue a business in analytics, selling aggregate data on where smart phones are at any given point, Morgan says. By looking at the ZIP code associated with smart phones with Skyhook’s software, the company can tell retailers the demographic make-up of, for example, people who pass a given billboard or storefront at 3 p.m. on Tuesdays.
The company isn’t just promising potential growth. Morgan says Skyhook’s sales rose more than 100 percent in 2010. He wouldn’t provide specific revenue numbers.
Skyhook’s software, which enables a device to determine location by calculating its distance from Wi-Fi hotspots, cell towers and GPS satellites, is being used in Sony’s PlayStation Portable game console. Symantec has also added the code to a mobile security service, so companies can lock and locate lost laptops or other devices.
Still, Morgan will need to keep scrapping to maintain growth. If it loses its patent suit with Google, a hoped-for river of royalties may never materialize. Also, in the next few years, Skyhook will stop receiving payments from Apple. When Apple decided to use its own location technology in 2009, Steve Jobs told Morgan that he would honor the terms of the five-to-seven-year deal.
If Morgan hasn’t pulled off his grand plans by then, those old arrow wounds could start to ache again.
Apple declined to comment for this story. Google did not respond to a request for comment.