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Anyone reading the blogs in the lead up to this week’s South by Southwest festival in Austin, Texas, could see there was a showdown in the making among location-based social networks. Foursquare and Gowalla—the two most prominent examples of this year’s “breakout” trend, each preceded the week with a stream of news about enhancements and upgrades to their services. Foursquare, for example, gave details about partnerships with HBO, Bravo and other media, while revealing a revamped iPhone application enabling faster check-in and a more user-friendly design. Not to be outdone, Gowalla, ventured into the realm of virtual goods, teaming with brands such as Palm to offer gadgets to SXSW attendees that checked in under its service.

To date, Foursquare, which debuted at last year’s SXSW has been the perceived runaway favorite—adding over 100,000 users in the past 10 days to more than 500,000. Foursquare also reported a record check-in day of 347,000 on Saturday. Although Gowalla has had a more modest 100,000 check-ins in the past week, it scored major boasting rights by taking home title of “best site in mobile category” at the 13th SXSW Awards on Sunday.

Lest we forget, popularity only gets you so far. Funding is also key to keeping start-up momentum going, especially when Twitter and Facebook, with their sizeable user bases, will both have functioning geo-based services in place in the next month. Gowalla has so far raised $8.5 million in Series A funding, with AllThingsD reporting today that Foursquare is to embark on a new funding round, to add to the $1.35 million it raised last year.

With Twitter now location-enabled, Facebook to debut a geo-offering at its developer conference next month, things are only going to get more interesting. Facebook and Twitter may bring geo-services to the masses, but in so doing, they will make new users aware of Gowalla, Foursquare and the other niche options out there. Stay tuned, because if you’re at all interested in this location-based battle, you’ll want to make sure you’re in the right place as the players go head-to-head.

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