Why Google Maps is headed indoors

November 30, 2011, 11:47 AM UTC

By Dan Mitchell, contributor

FORTUNE — By including indoor spaces to the Android version of its Maps service, Google is positioning itself to take advantage of two concurrent trends: the spread of mobile communications and the increasing privatization of public space. After all, it can be just as hard to find the restroom in a mall as it is to find an address in an unfamiliar city.

What’s more, the move further solidifies Google’s (GOOG) lead over AOL’s (AOL) MapQuest. For years, Google engineers struggled to catch up to MapQuest. Now, the Mountain View, California-based giant is intent on not squandering its lead.

So far, only a handful of indoor venues are included: stores such as Bloomingdale’s, Macy’s (M) and Home Depot (HD); airports in Chicago, Atlanta and San Francisco; transit centers and other spaces in Japan; and malls including the Mall of America outside Minneapolis. (This latter spot comes as something of a surprise, considering the mall’s history of bizarre behavior when it comes to security.)

Google will accept floor plans from any indoor venue that wants to be included. The feature comes on top of the recent rollout of 360-degree Business Photos, a service that gives customers a remote, panoramic view of the insides of businesses. Google sends a photographer to a store, and the photos are posted on the store’s Google Places page.

Once the indoor service achieves scale, Google will be able generate revenues by tying it in with Google Places and Google Wallet.

Despite recent improvements to MapQuest that by many accounts put it on a par with Google Maps, AOL is having a tough time competing. In February, MapQuest introduced a turn-by-turn mobile app for Android. At the same time, it reported that its mobile Web site was drawing 8.6 million users per month. Also in February, Nielsen (NLSN) reported that Google Maps was just behind Facebook and The Weather Channel’s app in popularity among all smartphone platforms, far ahead of MapQuest. On Android phones, Google Maps was the No. 1 app, with 67 percent of all users accessing it at least once that month. On the iPhone, it was just behind iTunes at No. 2.

On the Web, Google Maps drew 67.3 million unique views in February, according to Nielsen, while MapQuest tallied 24.7 million. Yahoo Local (YHOO) was third at 13.1 million.

MapQuest, which had owned the online mapping space since before the Web was invented (MapQuest was created in 1967 as commercial cartography software; AOL purchased the company in 2000), first fell behind Google Maps in 2009 in terms of monthly visitors — which is pretty good considering how vastly superior Google Maps had been for several years before that. AOL’s advantage of having an installed base on sites across the Web eroded even as AOL, with its relatively limited resources, worked hard to catch up. MapQuest’s main problem seems to be that it’s owned by AOL.

One issue Google had to overcome with indoor mapping is that it’s hard for a phone to get accurate signals in buildings with thick walls and ceilings — not to mention underground spaces such as the Tokyo subway system. The accuracy is down to a several yards, which should work well enough in most situations. Google hasn’t said when or even if the new feature will be made available for the iPhone — but maintain its lead will no doubt require it.