California: More and more companies in Silicon Valley are coming up with location based applications for mobile phones and are trying to link it to mobile advertising to cash in on this new mine of revenue. Applications or you may even call them virtual games from companies like Gowalla and Foursquare have already become popular around the valley area. Gowalla is an iPhone application which lets users check in and broadcast their location, find friends, and compete to see who's shown up somewhere the most, reports Aaron Ricadela of Business Week.

New York and Silicon Valley techies have lately taken to whipping out their smart phones when they cross the transom of restaurants, bars, coffee shops, and train stations, firing up Foursquare's or Gowalla's applications, and checking in to mark their turf. Enthusiasts say they like the bragging rights that come with being the most frequent patron of a place, and that the apps let them serendipitously meet up with friends. Frequent patrons can become the "mayor" of a venue by playing Foursquare, or stamp a virtual passport in Gowalla's game. Hundreds of merchants offer free beer, coffee, and pizza to the top denizens of their establishments. "In the Bay Area, it has turned into a pretty valuable utility," Kevin Rose, the Founder of Digg and an investor in both Foursquare and Gowalla, says of the software.

The popularity of the apps has attracted notice from other Web startups that rely on local advertising. Foursquare boasts nearly 300,000 users, and Gowalla has more than 100,000. Pinpointing users' locations could also help Facebook make its information more relevant, though the company hasn't yet begun to offer that capability. "Any time you have a database of people and you know their location, that's valuable to a lot of businesses," says blogger Robert Scoble, a Managing Director at Rackspace Hosting (RAX) and a heavy Foursquare user.

Currently, Foursquare and Gowalla are doing great in terms of funding. Gowalla on Dec. 9 raised $8.4 million in venture capital funding from Greylock Partners, Maples Investments, Founders Fund, and Shasta Ventures. Foursquare on Sept. 4 raised $1.35 million from Union Square Ventures, O'Reilly Alphatech Ventures, and angels who include Rose and Twitter co-founder Jack Dorsey.

Advertising through mobile phones is attracting attention from some of the most influential technology vendors. Sales of mobile phone ads, while still a small percentage of the overall Web advertising market, are expected to grow from $525 million in 2008 to more than $13 billion in 2013, according to market researcher Gartner (IT).

Google on Nov. 9 bought mobile advertising company AdMob for $750 million in stock, and its new NexusOne smart phone is designed to encourage users to conduct more of the searches that link to mobile ads. Apple on Jan. 5 acquired mobile advertising company Quattro Wireless for an estimated $275 million. Twitter is also trying to garner more data about its users' locations. On Dec. 23 the company acquired startup Mixer Labs, which lets application developers pair data about users geographic location with their tweets.

There is no doubt that GPS and location based applications are being successful but they are struggling to expand to other markets for wider adaptability. But mobile ads can very well provide the much need boost to these applications and make it an instant success worldwide. With big players like Google, Apple and Twitter jumping in the mobile advertising arena, the marketing strategies of these location based applications might change soon.