The emergence of location-based mobile social networking services offered by providers such as GyPSii, Pelago and Loopt is changing social networking. It’s allowing users to share real-life experiences via geo-tagged user-generated multimedia content, exchange recommendations about places, identify nearby friends and set up ad-hoc face-to-face meetings.

According to ABI Research principal analyst Dominique Bonte, location-based mobile social networking revenues will reach $3.3 billion by 2013, but business models are likely to be quite different that is expected.

“While location-based advertising integrated with sophisticated algorithms holds a lot of promise, the current reality rather points to licensing and revenue-sharing models as the way forward for social networking startups to grow their customer base and reach profitability,” she said. “Recent evidence: the agreements between GyPSii and both Garmin and Samsung. Similarly, Loopt has established partnerships with all major US cellular carriers.”

New positioning technologies such as Skyhook Wireless’s hybrid solution combining GPS, Wi-Fi- and Cell-ID for improved indoor coverage have been licensed to several social networking vendors. Many social sites are powered by open location-based platforms such as uLocate’s Where. However, several factors are hindering mass-market adoption of location-based mobile social networking.

Privacy concerns are still a major issue. Small players are struggling to create sufficient brand awareness in a fragmented market. And the traditional concerns about the cost of data plans also cast their shadow over social networking.