With a shade over five million members, Foursquare is tiny compared to say, emerging location giants Google (s GOOG) or Facebook. But when it comes to location-based services, Dennis Crowley, co-founder of the New York-based start-up, is viewed as one of the few people who can look into the future and see the redefinition of Internet and web services based on the location-beacon inside our mobile devices.

Crowley has been experimenting with local and location for nearly a decade, first at now-forgotten city guides maker Vindigo, then at Dodgeball, a hot social-networking-meets-location startup that he sold to Google. I’ve been following Foursquare since its launch.

Recently, I caught up with Dennis to talk about the importance of context to the future of location-based services, augmented reality and Foursquare itself. Given Dennis is competing with Google and Facebook, it was obvious that he didn’t want to talk about specific products and their evolution, but here are excerpts from what was a long, rambling, enjoyable and educational conversation

Om Malik: What is the mission for Foursquare? Are you a social network or more than that?

Dennis Crowley: Google has that noble mission statement: ‘to collect and organize all the world’s information.’ I think a lot of what we’re doing is taking that and putting a spin on it. I think a lot about [things like] how we can build things that really alert people [to] all the interesting things that are happening within the general radius of them.

OM: Sort of like augmented reality?

DC: You know, everyone talks about augmented reality. The version of augmented reality we’re serving up… it’s just like, “Hey, there’s something happening a block away that you should know about. Hey, there’s a cool piece of art around the corner that you should look at. Hey, this is the sandwich place that your buddies are always talking about.” All the little things that we’re doing — we’re kind of building that platform and ecosystem that enable such things to happen.

OM: From an average person’s standpoint, location is still kind of geeky and a lot of work.

DC: Yeah. I think your points are valid; it’s not for everyone yet. The same thing was true of cell phones. But eventually, it’s these things that prove their worth, and they prove how powerful they can be and how much they can affect your lives. And you participate in that: You buy a cell phone; you get on Facebook.

I think people say the same thing about Foursquare, and I’m like, “I know, I know. Don’t worry about it. We’re going to be here for a couple of years and come back to you when you’re ready for us.”

I think of what we’re doing is sort of interesting now, but it’s going to be super-interesting 24 months from now when more people are aware of things that we’re doing and aware of the value that comes out of it. We’re a little bit early.

OM: When was the first time you started to think about location as a contextual vector for data?

DC: The first phone that I had that had the ability was a Sprint (s s) phone with a great screen. This was in 2000. First thing I did [was] hack together a WAP site that would allow me to search for places from my phone.

I ended up working for a startup called Vindigo that was doing city guides on Palm Pilot. And I’m like, “Oh my God you have all these people pop in the screen, letting you know which venues they’re going to. That’s a mechanism for popularity, for interest.” This was before a lot of the social stuff was around, but we were thinking, “Maybe we should show the most popular restaurants.”

I got laid off in 2001, and that’s when I built the Friend Finder stuff. There was no language even to describe what we were doing. This was before social networks. Much later, we described it as, “Friendster on your cell phone.” That’s what made Dodgeball take off.

Of course, we brought the stuff to Google, and had an interesting two years there. While we were at Google, we were doing some experiments. Like, can we use game mechanics to encourage people? So we made a leader board. Which of your friends have checked‑in most often? You make this competitive, [and] people go nuts over it.

We started thinking a lot about a history page. Recommendation engines were just starting to get really good then. This [location history] was a good source of recommendation. We couldn’t get that stuff built over at Google.

People are giving us one or two or three pieces of data everyday about the places they go to. We can cut that data up. This is a new way to look at your neighborhood based on the places you’ve been, and your friends have been to. Places that people like you go to. I can look at the East Village of New York in an entirely different way because the Foursquare algorithm redefined the city for me.

We’ve been talking about it for years. Now we have a critical mass of people who are contributing data and willing to play with it. It’s like a perfect storm with the timing.

OM: Right now, Facebook’s social graph defines a lot of experiences. Do you think you will have this world where location just defines all content and data consumption experiences?

DC: The metric I like is that you should be able to stand anywhere in the world and Foursquare should be able to tell you something interesting nearby to do. It’s something interesting to strive for. You are right. It’s not just places; it’s experiences.

I think it’s getting there. The hard thing to figure out is its context. You’ve got the phone as the center [of the network], so it’s collecting all these data points. The next big thing to figure out is what is the contextual relevance of all that? Are you moving? Are you with friends? Where are you? Where have you been? Where are you headed?

All that stuff is interesting. You can take that stuff in and you can use that to make these choices and these decisions and hopefully serve up some interesting content. So, you’re [asking], ‘When is it going to happen?’ I think it’s happening.

OM: How do you think location will be part of our daily life and how it will impact commerce?

Dennis There are three ideas inside Foursquare. There’s latitude and longitude, and the time and day that you’re standing in right now. So this is the thing that’s most interesting to you (as of now.) That’s one of the things that we’re psyched about.

The second thing is the role that game mechanics can play in encouraging people to actually go out and do things they wouldn’t do. That’s a big idea that we’re still in the middle of trying to figure out.

I think the third big idea is the way that you can use a combination of location-based services and social media to empower local merchants to connect with customers in different ways. It’s fortunate for us that it’s one of the things that’s going to be very easy to monetize.

OM: The reason Facebook works is it maps real people together. That’s why its social graph works. You have this notion that mapping real physical places to the web and to people is the next big wave. Why?

DC: Everything that’s going on with social media is about sharing photos and about sharing links, sharing videos and sharing ideas. It’s all great stuff, but it all happens online. I think that’s the thing that frustrates me. It goes back to the core experience we had with Friendster.

In the past, I would spend all this time on my Friendster profile finding people and sharing the profile, and at the end of the day, it was close the lid on your laptop and that was it. It didn’t do anything.

So Facebook is amazing. It’s a thousand times better than Friendster was. But I still don’t feel like it’s working as hard for you as it should be. It’s like when you step away from it, it’s still there, [and] people are still sharing stuff, but it’s not surfacing. It’s not making the way that I interact with the physical world better.

It might connect me with people who obviously live in the real world, but it’s not connecting to me to the world in general. It’s all very abstract. Forgive me for being crazy.

Related content from GigaOM Pro (sub req’d):

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