FORTUNE - August 12, 2008, 8:27 pm

By Michael V. Copeland

SAN FRANCISCO - Given all the drama surrounding Yahoo’s corporate activities, it’s easy to forget that there is a business still to be run and new products to launch. On Tuesday at Yahoo’s San Francisco-based skunk works - known as the Brickhouse - the embattled Internet company unveiled a new location services platform dubbed Fire Eagle. (Yes, it’s a silly name but say it 10 times fast and think of Firefox and it begins to sound OK.)

Location is one of those things that has huge potential for adding a layer of context to all kinds of services on the Web.  Geo-tagging - the practice of adding geographic information to Web sites, photos and videos - is gathering steam across all sorts of Internet-based properties, from restaurant review sites to social networks and house hunting services. What has been missing, however, is an easy way to insert yourself into that growing stream of geographic information.

In essence, that is what Fire Eagle does. You either tell Fire Eagle where you are, or give permission for some device to do it on your behalf - say your mobile phone -  and Fire Eagle broadcasts your location information to the services that you have approved.

So imagine that all your friends on Facebook now get feeds on your location, by city, neighborhood or even street address. If you are driving through a neighborhood house hunting, you could get updates on homes on the market, past sale prices and upcoming open houses. Hungry for Italian? The closest places for a decent plate of pasta come streaming to your phone. Note that you can do much of this today with individual services, but you have to tell each of them where you are. With Fire Eagle, you give your location once, and all kinds of services can access it (again, only with your permission).

Already about 50 applications have integrated Fire Eagle into their services, ranging from Six Apart’s blogging service Movable Type to messaging platform Pownce to neighborhood news site Outside.in.

Yahoo (YHOO) didn’t launch Fire Eagle with any of its own properties - photo service Flickr is an obvious one (automatic geo-tagging of photos) -  but you can expect to see Fire Eagle deployed in the world of Yahoo in the future.

“We really wanted this functionality for Yahoo services but we thought that if we just do it ourselves it is much less likely to get wide adoption,” said Yahoo co-founder David Filo, who was his usual low-key presence at Fire Eagle’s launch on Tuesday. “We’re still pretty early stages in this location stuff, but if we can get wide adoption of Fire Eagle across the Web we can become a leader.”

Yahoo will face competition from the likes of Apple (AAPL), which has made scores of location-based services available as downloads for the iPhone, and Google (GOOG), whose Android mobile phone platform is expected to do the same for a range of mobile devices. Yahoo isn’t competing head on with Apple or Google, but rather hopes to tie together all these devices and Web-based services through Fire Eagle. Whether Yahoo succeeds depends on Fire Eagle’s adoption by consumers, and whether it catches fire with the developers that it needs.

How Yahoo makes money from Fire Eagle is less clear, though there are several obvious options. One is to incorporate location into its online advertising services. If advertisers know where you are, they can entice you with deals/coupons/menus on the spot.  Yahoo could also help its partners, whether they are advertisers or application developers incorporate more location into their services with better software development tools that would take advantage of Fire Eagle. Presumably the partners would pay for those tools and expertise.

In every case, whether it’s a social network or an advertiser, a person’s location will only be made available to those services that individuals approve. And if you don’t want anyone to know where you are – illicit affair, job interview - you have the option of hiding your location for a period of time you determine, or even lying.

“We think it’s a good idea that users can lie about where they are,” says Tom Coates, head of product at Yahoo’s Brickhouse. “Like I don’t always tell my mother where I am.”

source: FORTUNE

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