2137087352_be1895e7df_oThe parent-child relationship might be the only domain in America where a surveillance state could be applauded. Or at least that’s something Emeryville’s Location Labs has spent the last decade quietly banking on.

The company, founded by CEO Tasso Roumeliotis in 2002, began developing a service that could track any cellphone in the country using cell tower GPS in the pre-smartphone dark ages when demand remained unclear. Over the past 10 years, as smartphone penetration among teens has risen to nearly 40 percent and parents have come to fixate on the revolving risks to their kids of Internet predators, sexting, bullying, revenge porn and regular porn, the company has come at the situation from a simple angle:

Teenagers are inseparable from their phones. Smartphones are easily traceable.

By using Location Labs, parents can essentially lojack their own kids. (Some would call this spying.) So far these parents seem happy to pay for the upper hand. In October, Location Labs passed one million paid subscribers, who each shell out between $5 and $15 a month. The company claims several million in EBITDA and five straight years of profitability.

The level of control Location Labs affords is impressive. Through their “device management” software, a parent can see who their child has been talking to, for how long, who they’ve been texting, how much data they’ve been chewing through, what apps they’ve been using and break this all down by time of day and day of week. Its platform can also be used to lock a phone down, set restrictions on who can be contacted from the device and follow the movements of a child, checking in on whether they’ve arrived at school and what time they left. A new program, launched last year, can even sense whether a phone is in motion in a car and lock it down to stop texting while driving.

“I have a 13 year old and a 10 year old,” Roumeliotis tells me. “I live this, every single day. These are tools parents are craving.”

To make all this control possible, Location Labs takes information either from the phone or works with carriers, depending on the platform. On Android, the phone’s client can lock it down. Apple won’t let the company access its API for the iPhone, so it relies on the carrier’s core network itself.

It would be a sickening amount of control if you flipped the situation, to say a jealous spouse monitoring his or her partner. To prevent nefarious use, the tracked party receives randomized text messages to remind of the surveillance. The child is aware that the parent is watching, but has no option to opt-out.

Roumeliotis boasts that Location Labs should double its consumer base in the next 12 months and thinks it could grow by a factor of 20 within the next few years.

Not everybody applauds enabling this level of parental oversight. A New York Times article from last year discussed the growing pool of services allowing parents to monitor their children’s online behavior. The 280 comments it received were deeply divided.

Lynn Schofield Clark, a Denver academic and mother whose last book ‘The Parent App’ addressed challenges to raising children in the digital age, commented to the ‘Times’ for its story that she felt such services presented too easy a solution and in the end only worked to undermine trust within a family.

Regardless, largely due to pairing itself directly with mobile carrier networks, Location Labs has found its way to a position of strength with a strong possibility for growth before it.

After Location Labs began in 2002 it bounced around in some odd directions (it even moved off shore in 2003 briefly and worked with the Korean equivalent of Match.com). It hit upon the family formula in 2005 and launched the first iteration of its service in partnership with Sprint. Changes in the market worked in its favor. The proportion of people on family plans had shot up in short time from five to 65 percent, giving carriers a strong family focus. The timing was fortuitous.

“The family idea was our third pass to Sprint, but they latched onto it. Some VP in marketing had told them family was important,” Roumelotis says.

Today, Sprint, Verizon, AT&T, T-Mobile and Telefonica all offer Location Labs software in conjunction with network family plans.

Location Labs runs the programs from its own servers, but the carriers distribute and sell it as their own, virtually pre-loading it, allowing for one-click sign up.

The company’s holy grail, Roumeliotis says, is to be offered by store reps when the phone is bought. It doesn’t pack much glamor, but it is lucrative when every 18 months on average, users buy new phones.

“The biggest mobile services success story is not Angry Birds, it is Asurion, which sells phone insurance for $7 to $12 a month,” he says. “It’s a small, private company that had two to three billion dollars in product revenue last year, by being able to be the attached product when you buy in store.”

It’s a multi-year negotiation to get to Asurion-level privileges (Roumelitos says that 85 to 90 percent of people accept its insurance), but he thinks Location Labs is getting there. The company is closest with Sprint, offered on a service sheet provided to customers in store, but “below the fold.”

Roumeliotis wants into this space, understandably. It’s a classic “do you want fries with that” style of marketing, as he describes it, with the potential for massive financial gain. Location Labs’ product fits with the concept of the family plan, he says, and offers a solution for everything from data overages to child safety.

That Location Labs products have a 90 percent gross margin is an added carrot, Roumeliotis says. A sudden surge in subscribers will fatten its bottom line drastically.

As a classic standalone add-on service, Location Labs would be imperiled significantly if carriers decided to launch their own version of the software, but the company says that this would be a historically anomaly. Service innovation has been a difficult spot for carriers and company’s like Location Labs are relied on to “innovate on their behalf.”

Working with the carriers, however, has come at the complete expense of name recognition for Location Labs.

“We’re not happy about that,” Roumeliotis says.

Roumeliotis looks at Location Labs and sees a company that is the only major player in the field, has 220 employees, strong technology and customers knocking on its doors. He claims ambitions to go public.

But press on Location Labs is scarce. At a consumer level, its name is not associated with its products.

“I see companies launch a product and make a huge splash when they get a few thousand free-users,” Roumeliotis says. “From a PR standpoint we are very undervalued. Our models are proven, our company is proven, our product is proven.”

Locations Labs has started to look at new services that it could launch to differentiate itself. One of these he’s evidently very passionate about, an API that 911 call centers could tap into that pairs more precise information about a caller’s location with social data about them.

The issue primarily right now is time. Roumeliotis says the company is stretched keeping up with product development and requests from the carriers.

Roumeliotis does seems aware that he’s in a tough situation to complain about, what with having a product that speaks to a specific need with a willing paid subscription base and a steady, reliable sales platform with the potential for strong growth.

“We don’t let it get to us. It’s Silicon Valley, right? We’ve seen so many flashes in the pan come and go,” Roumeliotis says.

“We’d rather be doing what we’re doing, than be them.”

Photo credit:  Lynell Burmark (Creative Commons)