As those two companies battle for dominance in mobile computing, they have increasingly been using their customers’ phones as sensors to collect data about nearby cell towers and Wi-Fi hot spots.
Google and Apple use this data to improve the accuracy of everything on the phone that uses location. That includes maps and navigation services, but also advertising aimed at people in a particular spot — a potentially huge business that is just getting off the ground. In fact, the information has become so valuable that the companies have been willing to push the envelope on privacy to collect it.
“Google envisions a world where even a small business can promote products to consumers nearby on a mobile device,” said Alistair Goodman, chief executive of Placecast, a location-based advertising company here. “That is a massive market.”
The companies are using the cell tower and hot spot data to build maps of the world, maps that help smartphones quickly pinpoint their locations. Using the signals as navigational beacons is particularly useful in places where GPS satellite signals are weak, like urban areas or anywhere indoors.
Shifting allegiances and legal battles in the world of location services suggest competition in this market is heating up.
Apple initially relied on technology from Skyhook Wireless, a company that was a pioneer in the technique of using Wi-Fi hot spots for location. But last year it began collecting its own data as well. And late last year, Skyhook sued Google, charging that Google had copied its technology and persuaded Motorola to break contracts with Skyhook and use Google’s competing service.
Google and Apple have said that they collect the information anonymously and use it to keep their databases of Wi-Fi hot spots up to date, not to track individuals. But because a person’s location is delicate information, the practices have raised privacy fears.
The use of this data by the companies has been under scrutiny since last week, when two technology researchers reported that a file stored on many iPhones and iPads keeps track of all the locations visited by a user. The file is unencrypted and is copied to people’s personal computers when they sync their devices.
The report prompted lawmakers in the United States to ask Apple for explanations. Several European governments said they would open investigations into Apple’s practices. On Monday, two customers sued Apple accusing it of privacy invasion and computer fraud. They contend the company is secretly recording and storing the location and movement of iPhone and iPad users.
Late last week, Google said it was collecting information about nearby networks from Android users, though it said that it was not tracking individuals and that it allowed users to decline to participate.
Lisa Madigan, the attorney general of Illinois, wrote to Google and Apple on Monday asking them to explain their location data collection practices.
Apple has declined to comment on the matter.
On Monday, the Web site MacRumors published an e-mail said to be from Steven P. Jobs, Apple’s co-founder and chief executive, in which he replied to a person who had said he planned to switch to a Google Android phone because Google did not track him. The reply said: “Oh yes they do. We don’t track anyone. The info circulating around is false.”
Apple declined to confirm the authenticity of the e-mail.
Some security specialists said they believed Apple was not tracking people, but rather collecting data to update its location databases, since Wi-Fi networks can quickly come and go. A letter sent from Apple in July to two members of Congress, Edward J. Markey, Democrat of Massachusetts, and Joe L. Barton, Republican of Texas, appears to confirm this and provides the most detailed explanation of the technology.
In the letter, Apple said it collects the location data anonymously and only when consumers agree to use its location-based services like maps, or any apps that ask for a user’s location, and for its advertising system, iAds. The company said it began relying on its own databases for location information in 2010. Explaining its need to collect data from its customers’ phones, Apple wrote, “These databases must be updated continuously.”
Security researchers said that they believed that the file with location data stored on iPhones and iPads was meant as a “cache” that would help the device pinpoint its whereabouts faster, and that it could help feed Apple’s giant database of network locations. But they said Apple should have been more diligent about encrypting the file and deleting old data.
“I don’t know why they would want to keep all that data on the device,” said Mark Seiden, an information security consultant in Silicon Valley.
Skyhook began collecting data about Wi-Fi hot spots by sending a fleet of more than 500 cars to drive around the streets of every major city in the United States, Europe and many Asian countries.
“We drove the world,” said Ted Morgan, Skyhook’s chief executive. The company updates the database by sending its cars to remap certain areas and by using phones as sensors when a user requests location data.
Google, which initially collected data on Wi-Fi hot spots with the same fleet of cars that was taking photos for its StreetView service, said it stopped doing so last year after it was found to have collected e-mails and other data streamed through those hot spots. It now collects much of that data and traffic information, through customers’ phones.
Mobile advertising could be a $2.5 billion market by 2015, according to Frost Sullivan, and ads tied to a location are much more lucrative than other ads. But Mr. Morgan said the location data could be valuable in areas beyond the Internet and mobile phones.
For example, a retailer that has eight outlets in a city could use data about walking patterns to determine where to open its next outlet.
“You are basically getting insight into human behavior that we’ve never had before,” Mr. Morgan said.
Jenna Wortham contributed reporting from New York.
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