Mobile location-based service revenues in Europe are forecast to grow from €220m (£185m) in 2009, at a compound annual growth rate (CAGR) of 12 per cent, to reach €420m in 2015.

The figures come from a new study from the analyst, Berg Insight, which estimates that one third of all mobile subscribers in Europe will use some kind of location-enhanced application on a regular basis by 2015. The company believes that local search, navigation services and social networking will become the top applications in terms of user numbers, with social networking forecast to experience the highest growth in the coming years.

“Location-based services are finally on the verge of mainstream acceptance,” says André Malm, senior analyst at Berg Insight. “Increasing sales of smartphones are driving end-user awareness of mobile internet services and applications in general. On-device application stores enable access to mobile services for a broader audience at the same time as flat-rate data plans make pricing more transparent. More and more developers are now adding location support in their applications to enhance the user experience.”

Malm adds that integration of GPS in handsets is also an important driver. “The installed base of GPS handsets in Europe has recently surpassed 15 per cent of total handsets and will increase to 50 per cent three years from now,” he says.

The study notes that the revenue model for many mobile applications in the consumer segment is shifting from premium fees to ad-funding. This is especially the case for location-based services, where navigation services are now being offered free to end users, with developers monetising their offerings through ads and various bundles. However, revenues may not grow at the same rate as usage, says Berg, because the mobile advertising ecosystem is still nascent. It will take some years before a successful model has been established that allows advertisers to reach out to a critical mass of active users. This is especially the case for emerging location-based advertising.