By Ryan Kim, GigaOM

Gowalla has had a good run in the location-based check-inmarket, taking on Foursquarea beforegetting lapped by its New York rival. Now, the company isconfirming aa reportathatit is moving to Facebook, which will use the Austin-based companyto bolster its new Timeline feature.

The deal spells the end for Gowalla, which will close up shop inJanuary just like many other Facebook acquisitions and relocate toSilicon Valley. Grabbing Gowalla gives Facebook a good team thathas recently shiftedfrom gamified check-ins to social city guides that users cancontribute to with their own pictures, highlights and lists.Earlier, the company announcedit would end the collection of virtual items, part of what Icalled an evolution in location-based services away from gamestoward more business opportunities.

Here’s the statement from Facebook:

We’re excited to confirm that Gowalla co-founders Josh Williams and Scott Raymond, along with other members of the Gowalla team, are moving to Facebook in January to join our design and engineering teams. In talking with the Gowalla team, we realized that we share many of the same goals: building great products that reach millions of people, making a big impact quickly, and creating new ways for people to connect and share what’s going on in their lives. While Facebook isn’t acquiring the Gowalla service or technology, we’re sure that the inspiration behind Gowalla will make its way into Facebook over time.

In a blog post, Williams said he was blown away by the things hesaw at Facebook’s f8 conference and a few weeks later,Facebook called. He said it makes sense to combine forces and makethe biggest impact together. Wrote Williams:

Three years ago Gowalla’s journey began when I took a photograph of Lake Tahoe on my iPhone. I had just finished a phone call with my dad, and I wanted nothing more than to share that photo and place with him. Not just in a text message or status update sort of way, but with a bit of weight that said “I wish you were here” and “this moment and place are meaningful to me.”

We created Gowalla to inspire people to go out and share those places, photos and stories. The past three years have been quite the journey, oft-times in a very literal sense!

The Gowalla Passport has become a record of all the places we’ve visited, the people we were with, the photos we took, and the stories we told. Many of you even use Gowalla like a scrapbook of sorts — a place to keep all those memories.

…We know how much many of you loved Gowalla. It’s been the highlight of our lives as we’ve built it with your help over the past two years. As we move forward, we hope some of the inspiration behind Gowalla — a fun and beautiful way to share your journey on the go — will live on at Facebook.

The sale of Gowalla also shows that the location-based market isstill in flux, and it’s still not quite clear how everyone isgoing to make money here. Gowalla launched in 2009 but struggled tocompete against Foursquare, which surged past 10 million users thispast summer, far outpacing the 2 million users Gowalla had. ButFoursquare is also stillworking out its business model. There is a big opportunity inhelping connect merchants with mobile users, delivering targetedads and offers to them and serving as an alternative to printedcoupons and traditional Yellow Pages. But it’s unclear howmany competitors can make a go of this and pull in enough money tothrive. Gowalla had previously raised $10 million fromathe FoundersFund, Shasta Ventures, Greylock Partners and other investors.

Facebook has a history of making so-calledacq-hires, buying up startups primarily for their talent, nottheir products. Gowalla is well regarded for its design chopsand could certainly help Facebook as it rolls out Timeline, itspersonal history feature. That could help Facebook compete with aresurgent Path, which just put out a new version of its app designedas a smart journal for users. Gowalla could also help Facebookrefine its location-strategy. Facebook has pulledback on check-ins and has instead opted to allow people to tagtheir locations in status updates. Also, Gowalla could help withimproving Facebook’s mobile product, which could use a boostespecially as more mobile-focused competitors emerge.

I liked Gowalla and thought it was a good-looking service. Butit didn’t seem to capture people’s attention in the wayFoursquare did. Even one of its defining features, virtual items,was ultimately a “distraction” for many users, thecompany said. The move to become a city guide came late and I notedearlier that it wasn’t clear if it was designed for locals ortourists. Facebook has picked up a smart team with good ideas andit’s going to need them all if it wants to stay at the headof a social market that is increasingly about mobile andlocation.

Related research and analysis from GigaOM Pro:
Subscriber content. Signup for a free trial.

Get access to over 75 technology market experts! Understand market fundamentals with research reports and commentary from seasoned analysts. Try GigaOm Pro FREE today

Copyright 2011 GigaOM. All Rights Reserved.