Coming off recent announcements from Facebook about their new Places and Deals features, one thing is clear; location based mobile services are the future. A research firm Strategy Analytics is predicting smartphone sales to increase 55% from 174 million to 270 million in 2010. According to a recent article by Media Week, “During the next five years, local mobile advertising will take off, growing at a compound annual growth rate of 56.9 percent. By 2014, local mobile ad spending will reach $2 billion, up from $213 million in 2009 and increase its share of local ad spend from 0.2 percent to 1.4 percent.”

With the potential to reach consumers at any moment, at any location on their mobile device, the LBS space is becoming flooded with mobile startups. Just in Boston we have companies like Where, CardStar, Peekaboo Mobile, SCVNGR, Locately, Skyhook Wireless and the once Quattro Wireless now a part of Apple’s iAds, all trying to get a piece of the action.

So where does Facebook come into play?

SCVNGR has literally been on a trek of it’s own around the U.S. signing merchants and clients in one of the most aggressive sales strategies we have seen lately. Where Inc. is selling over 1 billion mobile ads a month and with their recent acquisition of Local Ginger will be focusing heavily on hyper-local deals. CardStar has just crossed the one million user mark with incredible customer loyalty. And new comer Peekaboo Mobile has seen very impressive growth and recently raised a seed round.

In August, Facebook announced Places to let you share where you are with your friends and see who’s nearby. Similar to Foursquare and SCVNGR, users can check in and broadcast their whereabouts. The good thing for the incumbents is that Places integrates check-ins from other service – i.e. checking in on SCVNGR will also update my Places on Facebook. Just last week Facebook announced Deals, allowing businesses to offer deals based on your location. You can now see what offers are nearby and share them with friends all on the Facebook platform. There is not much good news for mobile coupon providers other than they are currently in the lead with merchants [but not for long].

Pew Internet just completed a recent study that said 4% of online American adults use location-based services. Now with Facebook Places just getting its legs, you can imagine this number will increase.

Facebook is also reportedly delivering one in four of all display ads in the U.S. Imagine what the next Facebook app upgrades are going to look like? Perhaps, a lot more advertising and deal placement front and center, would be my guess.

This is obviously a crowded space and one of the most exciting to watch. How can these startups keep up with industry giants like Facebook moving in on their turf? And how can giant content producers like AOL and Yahoo keep up with Facebook’s aggressive ad and coupon campaigns?

For small startups the key is customer loyalty. If you own the customer relationships and can continually produce high ROI’s by targeting exactly what the consumer is looking for at exactly that point in time, you will be able to push out all of the other competitors in the space. For example, CardStar users only have the discounts and loyalty cards that they need – they are not constantly getting pushed discounts that they don’t want. When you open CardStar’s app you know what you want, where as opening some competitors apps, you are just pushed a feed of coupons where you may or may not find what you are looking for. SCVNGR for example, requires you to complete challenges in order to receive discounts allowing the user a simple but strong barrier to entry. Foursquare which has not yet adopted a full fledged discount platform sits in the middle, with very loyal app users to certain locations but no current way to redeem deals nearby.

Here is a chart representing some of the players in the mobile discounts scene, with their respective user numbers and customer loyalty.  For the most part, users are based on the number of app downloads and loyalty is a general estimate of app useage.

No where on this chart do you see content producers such as AOL or Yahoo, which both offer discounts and deals based on location.  All of these companies offer unique insights into mobile discounts and with the exception of Facebook Deals and the Best Buy app, it is likely we will see some acquisitions coming soon. I am particularly excited to see what’s in store for CardStar Foursquare, who are both sitting in interesting positions with regards to loyalty.

Do you use any of these applications for mobile discounts? Are you excited to try out Facebook deals?