Facebook (Nasdaq: FB) is developing a smartphone application that will track the location of users, two people with knowledge of the matter said, bolstering efforts to benefit from growing use of social media on mobile computers.

The app, scheduled for release by mid-March, is designed to help users find nearby friends and would run even when the program isn’t open on a handset, said one of the people, who asked not to be identified because the plans aren’t public.

Facebook is adding features to help it profit from the surging portion of its more than 1 billion users who access the service via handheld devices. The tracking app could help Facebook sell ads based on users’ whereabouts and daily habits. It may also raise the hackles of consumers and privacy advocates concerned about the company’s handling of personal information.

Regulators in the U.S. and Europe have already scrutinized Menlo Park, California-based Facebook amid concerns that it doesn’t do enough to keep data private.

Apple (Nasdaq: AAPL) and Google (Nasdaq: GOOG) have similar tools for continuously keeping tabs on user whereabouts.
Derick Mains, a spokesman for Facebook, declined to comment.

The team developing Facebook’s location software is being led by Peter Deng, a product director who joined from Google in 2007, one person said. The group also includes engineers from Glancee, a location-tracking startup Facebook acquired in May, and Gowalla, a location-based social network whose assets were purchased in December 2011, the person said.

Facebook fell 5.5 percent to $28.11 yesterday in New York. The stock has gained 59 percent since closing at a record low on Sept. 4.

‘Mobile First’

Chief Executive Officer Mark Zuckerberg emphasized the need for new mobile products in a Jan. 30 call with analysts.

“A lot of what we had to do last year was simply to improve our mobile development process,” Zuckerberg said. “The next thing we’re going to do is get really good at building new mobile-first experiences.”

Facebook already records the GPS coordinates of users when they post status updates or photos from their phones, or check in to a venue. With the new app, the company would go a step further by tracking user whereabouts in the “background” of Apple’s mobile operating system, even when other programs are running or the phone isn’t in use, one person said.

While Facebook would probably need to ask permission from users to track their location to be in accordance with Apple’s guidelines for developers, Facebook may have already gotten consent from its users to run such a feature.

Friends, Events

Facebook’s data-use policy tells users that the company may use information on location “to tell you and your friends about people or events nearby, or offer deals to you that you might be interested in.” The company said it may also put together data “to serve you ads that might be more relevant.”

“When we get your GPS location, we put it together with other location information we have about you (like your current city),” the data use policy reads. “But we only keep it until it is no longer useful to provide you services, like keeping your last GPS coordinates to send you relevant notifications.”

A host of apps, including Apple’s Find My Friends and Math Camp Inc.’s Highlight, constantly track user locations to help them find friends or places of interest. Many of the programs have failed to gain wide audiences because of privacy concerns and the heavy toll such apps have on the battery life of mobile phones.