Facebook is going to launch its location-based features “next month,” according to a report today from the New York Times — a confirmation of many months of rumors that we and other publications have been hearing. Sources close to the company shared specific knowledge of the tightly-wrapped project, including a clear message for developers: Get ready for location at f8, Facebook’s developer conference.

That’s where the new service will be unveiled, according to the report. Facebook will launch a way for users to check in at physical locations and share the information back with their friends on the site (possibly by attaching location data to status updates, for example). Crucially, there will also be a set of APIs so developers can access Facebook’s location service in their own applications.

Developer Impact

But certainly, by providing a location-based service itself, Facebook is making it harder for smaller companies to differentiate themselves through location alone. Foursquare, Gowalla and increasing number of other startups have been building services where users win “badges” or other virtual goods if they use their phones to “check in” at a physical place more regularly than other users. Given the details of Facebook’s plan, it seems the company wants to funnel consumer interest in these types of location-based games through its platform.

Facebook’s social graph likely reflects who many people would want to share their locations with, and for this reason some startups, including Foursquare, Gowalla and the FriendSpin iPhone app, among others, already offer ways to share locations with Facebook  friends — although the effort hasn’t converted to lots of users, that we’ve seen.

The promise is that Facebook’s own service would make location more popular, and so any company that relied on Facebook’s service might somehow ride that wave. On a related note, while Facebook may not be trying to build a location-based game, but game developers and other application companies on its platform could use the features to more directly compete with existing startups. For more, check out our panel on monetizing mobile social applications, happening at our Inside Social Apps conference a day before f8.

Location’s Long Time Coming

Facebook has been looking at location for a long time. But it has delayed launching the service, as many have previously heard, because the company has been concerned about privacy issues. It was also waiting for the concept to become somewhat popularized before launching anything, according to today’s report, something that is not yet clearly happening. But big web rivals have been testing their own location services, and startups are getting in to the fray.

As we covered last fall, the company updated its terms of service to reflect its interest in location:

Location Information. When you share your location with others or add a location to something you post, we treat that like any other content you post (for example, it is subject to your privacy settings). If we offer a service that supports this type of location sharing we will present you with an opt-in choice of whether you want to participate.

More recently, it has been rumored to be looking at acquiring location-based social network Loopt. And VentureBeat today notes, as we’ve heard, that Facebook has been working on a variety of location-related projects internally recently.

Given the lineup of location-based services launching at South by Southwest, a popular media and technology culture conference starting in Austin next week, we expect location — as a concept — to get even more buzz this spring than it has already. In fact, Facebook’s design team will have a location-related presence there, via a partnership with Gowalla. The team made a special set of drink coasters, it’s going to scatter them around the conference, and anyone can redeem the coaster for a free drink from the team; Gowalla is providing digital versions of the coasters, with the same reward.

In any case, f8 is looking like an especially opportune time for a launch.

Bigger competitors are also looming. Google and Twitter, in some sense Facebook’s main competition, both have location-based services already. Google’s Latitude has been out for many months, but it doesn’t seem to have caught on, partly because the interface is always on in the background, trasmitting your location. Changing Latitude to the “check-in” model and making it a more central part of Buzz, its new activity feed aggregator, could be a good way for Google to get in on the location action, as TechCrunch details — but now Buzz is out of the gate, with issues. But expect Google to work hard in this area, especially with its larger push into mobile with Android and the Nexus One. Twitter, meanwhile, has been testing a way for users to show the locations of their tweets for months, and that feature appears to going live for all users soon.

Location and Facebook’s Business

Getting into location will likely help Facebook accelerate into more local advertising. It has already been making location a part of its advertising services, in some sense. Advertisers can target ads on the site based on country, region or cities — as of today, thousands of cities. And Page owners can share news feed items with fans who identify themselves as being in certain geographic locations. Local businesses now have half of the 3 billion Pages on the site, according to Facebook statistics, and make up an increasingly large portion of spending on Facebook’s fast-growing performance advertising service.

A location-based service that allows users to specify where they are down to the building, for example, would provide data to Facebook and advertisers about the places they frequent. This could help Page owners and advertisers target ads to be more relevant.

Facebook has other reasons to want to try its hand at location now. It has quickly grown to 400 million monthly active users (it announced in early February, so the number is likely a bit  higher today). And around the same time it said that 100 million of these people access the service every month via their mobile phones, up from 65 million in September. Meanwhile, more and more mobile devices offer some way to share location. That’s a lot of people who can start quickly sharing their location with Facebook friends.