They know - roughly - where you live
These services each work in a similar manner: They do a quick database lookup that correlates an individual user's IP address to a point on the globe. In some cases, they can give the state, city and postal code.
Some Web site managers are using the information to serve up regional content and advertising. Yahoo!, for example, uses Akamai Technologies' EdgeScape geolocation service to deliver country-specific content and gather demographic data.
Sniffing out online credit card fraud is another popular geolocation application. If Bob Smith's billing address is in Sydney, but someone in New York is placing an order with his card, that raises a red flag. HNC Software is using NetGeo's service to help predict whether a transaction is bogus. Web sites are also using geolocation to block access to content and services that are either legally or contractually off-limits in other jurisdictions.
Geolocation provider InfoSplit is working with two non-US gambling sites to make sure their users are someplace where it's legal to wager online.
The problem is that there's no authoritative record that matches single IP addresses with real-world addresses, so the geolocation providers have had to compile their own databases. Akamai, which updates its mapping database as often as every 10 hours, collects information from 820 service providers about where IP addresses are located and uses its network of more than 11,000 content distribution servers to triangulate the physical location of a given user. NetGeo uses 24 different sources of data to maintain its IP-mapping database, including information from the regional IP address registries, Internet traceroutes and reverse host name lookups - yielding some 200 gigabytes of data and counting.
The name of this game is accuracy. But being able to map the 1.6 billion IP addresses in use on the Internet with reasonable precision, instantaneously, is fairly difficult.
"It's impossible for these guys to be 100 percent accurate," says Peter Christy, a Jupiter Media Metrix analyst. "You can't use this for life-and-death situations."
At the country level, most geolocation services guarantee 99 percent accuracy or better. Figuring out which city someone is connecting from gets fuzzier. Akamai says it can accurately identify a North American user's city at least 85 percent of the time, while NetGeo promises an 80 percent success rate for cities worldwide. Part of this uncertainty is due to AOL's network design: All of its US users appear to be located where AOL aggregates its traffic. Most geolocation services are only able to discern AOL subscribers' country of origin, but Digital Envoy, an Atlanta startup that has received US$10.5 million in financing from AOL Time Warner and other investors, is independently developing a way to zero in on the location of AOL users.
Actually, this lack of omniscience helps geolocation providers argue that they don't operate Orwellian surveillance devices. "It's all anonymous information," says Amy Swotinsky, an Akamai product manager. "We don't actually know where you live."