Facebook announced it’s new Facebook Places last week and certainly took the social media world by surprise. Without a doubt, this is a clear knockoff of Foursquare’s services and functionality, although doesn’t appear that any patent infringement has occurred.

This new service is an outright Darwinian battle cry directed towards Foursquare, Gowalla and other location based companies and services. Facebook intends to jump into this red hot market with all the marketing muscle it can muster.

Facebook’s  Classic Brand Extension

Facebook’s services are quite similar to others; i.e.  users can share their location and follow the “places” consumers have visited in their network. We’d give them a D- for creativity but an A+ for leveraging the huge 500 million plus user base via classic brand extension.

The real killer app that Gowalla and Foursquare need to be worried about is linking Facebook Places with Facebook Business Pages. Facebook must have weighed this option prior to the launch - there is so much synergy between the two that it would be foolish not to do so. And, last week execs at Facebook  just about came out and said the market should expect this type of integration.

Foursquare’s Survival

Should Foursquare fold the tent call Eric and the Google M&A team for a deal? We don’t think so, but they better batten down the hatches and start adding much more than mayor titles, badges, etc. and start to integrate real business discounts that are location based.

Am sure they are looking at Yelp like features that would give them broader terms of services. Robert Scoble did an excellent post: “Here’s What Foursquare Needs to Do” in June that has some wonderful insight.

Right now Foursquare’s saving grace is their stronger feature set when you do a one to one comparison of Facebooks’ Places versus Foursquare’s real time stats: features that incorporates recent customers, frequency of visits, male/female listing, visitor’s tips, etc.

But, it’s only a matter of time until Facebook adds these types of features - reminds us of how Microsoft eventually took down Marc Andreesen and company’s Mosaic Browser (and ultimately Netscape) - a death of a thousand cuts via feature enhancements.

Digital Road Kill?

But, in the end, the real challenge for Foursquare and Gowalla will be the tremendous volume (scale) that Facebook can bring to the social enabled localization market. Hundreds of millions of consumers will be a powerful draw that will motivate businesses to utilize Facebook’s Places and don’t forget Facebook’s existing advertising platform. It will come into play at some point.

Expect M&A activity to heat up in this market moving forward - Google could certainly use some help putting a viable Social Media Service together and generating some real buzz……….