Foursquare always had a better design. Hear me out:
Design is about 2 things: how it looks and how it works. Gowalla always had a prettier coat of paint, pretty interactions. But what mattered more was the design of the game - becoming mayor on Foursquare was easier to grasp and get addicted to than dropping the original Gowalla teddy bears.
Foursquare also beat feet to win the hearts and minds of small business owners - I've lost count of the number of bar and restaurant owners excitedly telling us about how the Foursquare rep came in to talk to them, pointing out the sign on the wall where the "Mayor goes," arguing with regulars over who's the Mayor this week, who cheated to become the Mayor last week, and so on.
We've travelled a lot, and this happens coast to coast in big cities and small.
I've always really dug Gowalla (when I check in, typically only around an event like SXSW, it's what I've used), but when real people are talking about you in real life (an initially slow, but snowballing and very effective advertising model), all over the country--you end up winning.
More than that you get free stuff if you checkin. I think this is the draw more than anything else. And this is the reason why foursquare solves a business need.
