Two years ago, Daniel Cozza and I spent a lot of time looking at location-based apps.  We brainstormed tons of ideas and prototyped one.  But we ultimately decided not to pursue it; the space (and the iPhone app space, generally), was starting to feel really crowded.

Later, it also became clear that many of our ideas were really nice features on existing platforms, not new products.  For example, Twitter and Google have been steadily adding new location features.  And a few days ago, Facebook finally launched their check-in feature, Facebook Places, as (presumably) a first step to making Facebook much more location-aware.

Facebook’s news is interesting from a number of angles, some I’ve written about before:

• Location features are largely absorbed by the existing ecosystem. “Location-based” is not sufficiently disruptive to create an entirely new market of apps and companies.  Would you switch to a Facebook competitor because they had location-based features?  Probably not.

• Gorillas rule. Facebook watched the app evolution closely, then made their move.  They won’t let anyone get big enough to threaten them in any one area, and if they do, they’ll (a) use their policies to control things (as they’re attempting with Zynga and payments), or (b) take over the functionality (as they’re doing here).

• APIs are a great way to seed an ecosystem. Foursquare’s original integration with Facebook was a huge part of their growth.  A continuous stream of check-ins in the news feed is a great way to acquire users.  Now, Foursquare’s integrating with Facebook’s new location API.  Foursquare PR spin aside, make no bones:  Facebook just grabbed a huge chunk of strategic functionality from Foursquare.  (My bet is that Foursquare devolves over time to a location-based game, or set of games).

For users, this is all great news — having Facebook be more “location aware” is hugely useful.  I can’t wait to see what new features become available.  For entrepreneurs and ecosystem players, it’s a bit more tricky:  how can you play here without having Facebook stomp you when you get too big?