I am using AdSense for Mobile Application platform to serve ads in APNdroid. It's hard to justify access to location just for ads serving, if it's not part of the core functionality. If you don't want to disturb user with requesting extra permissions to obtain the location, I have something for you. Here's a little 'trick' to improve location targeting without disturbing user with any permissions:
Pretty lame, right? Well sometimes it increases CTR up to 50% in APNdroid. Definitely depends on your current CTR and other factors, so result may vary. For example, I am using English locale, so it would not work on me :-)
Please, let me know how this worked for you and share some tips on this topic, if you have some!