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The fact our smartphones can pinpoint our location on Earth and then find us a coffee shop, restaurant or movie rental store nearby is straight out of James Bond. But here's a dirty secret: As 007 as this technology appears, much of the location info you get through it is often years old and flat wrong.

"I was surprised to learn that the core data that allows [location-based software]to exist is copied out of old Yellow Pages books," says Grant Ritchie, founder and chief executive of Locationary Inc. in Toronto.

One day while on vacation, Mr. Ritchie found himself thinking about location data. There had to be a better way. Why not, wondered the serial entrepreneur with past projects in online gaming under his belt, ask local residents - the first to know when a business opens, closes or moves - to make the information up to date?

His idea: crowdsource location data. Crowdsourcing solves large problems by throwing them to large groups, who each contribute a small bit of work or information on a volunteer basis. It's what makes Wikipedia possible.

Mr. Ritchie created Locationary in 2009 with support from Extreme Venture Partners and Plazacorp Ventures, both Toronto venture capital companies. The business end of the venture is, where people can input and update information on locations of businesses and other points of interest. This in turn creates a huge database of information that's marketable, as it's more accurate than data most online location services currently rely on.

"Crowdsourcing is a great, low cost way of keeping a huge database up-to-date and relevant to everyone," says Patrick Connolly, U.K.-based senior analyst for telematics and navigation at ABI Research, a technology market research firm in Oyster Bay, N.Y. It's also a sizable opportunity, Mr. Connolly adds. ABI expects the location services market to approach $18-billion in five years.

If you're a business owner, you want people to find you - so you will plug your phone number and address into any online repository you can find. But if you go out of business, updating that failure isn't your top priority. And business people just plain forget to update information, even when they could gain clients by doing so

So, the first challenge for Locationary was motivating people to update data. Mr. Ritchie did this in a couple of ways. First, he created an incentive: entering or correcting information on gets you "tickets" that can be entered in online draws for prizes. This part of the strategy owes something to Mr. Ritchie's online games background.

"I thought, 'Well, what if you made it fun?'" he says.

There's a hard cash angle, too. If you update information and then Locationary earns money from it, you get a cut. "It's kind of like Monopoly, but for real," says Mr. Ritchie.

There are good games and bad ones, of course. Realizing that some people's idea of fun might be to flood his site with incorrect data, Mr. Ritchie provided incentives to correct errors, made sure there was an easy way to reverse changes and to block users seen to be entering consistently inaccurate information.

The tactics work. About 13,000 people have updated or added information to Locationary's crowdsourcing project, Mr. Ritchie says, and they've helped the company amass a database of 23 million locations in more than 150 countries.

So how does Locationary make money from this? That's the next stage of the plan, which the company is still working on. Mr. Ritchie says it will work with local businesses, providing them a way to update their information for a fee and then have it distributed to a variety of local search and location information sites.

Doyal Bryant, co-founder and chief executive of Universal Business Listing Inc., of Charlotte, N.C., says some in the industry use phone calls and other methods to verify their data. But, he admits, the existing methods can't keep up with the growing market. That's why he's working with Locationary.

Mr. Ritchie envisions Locationary being one of a number of intermediaries providing linking local businesses with location data companies offering a link to consumers. At the other end, it will get revenue from websites and mobile apps that use the data.

Universal Business Listing is another such intermediary, and Mr. Bryant says the two companies have worked together since December. UBL uses Locationary's data to help keep its own database up to date, and Locationary offers UBL's listing services to businesses as a premium service.

Today, Mr. Ritchie says, Locationary has eight employees. While it isn't making money yet, it does have revenue, and Mr. Ritchie says he hopes to be in the black by the end of next year.

Major location-data providers such as Google will be interested in anything that helps them provide more accurate data, says Brandon Mensinga, senior mobile analyst International Data Corp. (Canada) Ltd. in Toronto. There is a "significant level of inaccuracy" in location data on the Web, he says, and that makes Locationary look like a promising idea. "Clearly they have a big idea, and I think it's timely as well."

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