9:15 am: Kara: I gave you a hard time earlier this year.

Dennis: I noticed.

Kara: I called you the Hamlet of Web 2.0, because you didn’t know what you wanted to do. When you were raising funding, what was happening in your mind?

Dennis: We were focused on the product.

9:16 am: We knew what we wanted the product to do, and I think we were figuring out what we wanted the company to be. We were choosing between funding and aligning with a bigger company.

Kara asks specifically about Yahoo and Facebook, and Dennis replies very non-specifically: “We talked to those company about hey, it would be interesting to work together.”

9:18 am: Dennis: Dodgeball was the perfect storm of bad timing. In the N.Y. Google office, right after the IPO. I think we’d be smarter about structuring the deal now.

Kara: What’s the difference between Dodgeball and Foursquare? Didn’t you just sell the same company to Google and are now starting it again?

Dennis: Dodgeball was just dots on a map. After Google I worked at a company called Area Code, and (Foursquare co-founder) Naveen (Selvadurai) was working at a company called Socialight, building social guides. We brought a little of both into Foursquare.

Kara: You should do it again, and the next one should be called Tetherball.

Dennis: Actually, I wanted to name Dodgeball “Foursquare” back in the day, but some guy owned the domain.

9:21 am: Dennis says Foursquare gets people to try new experiences and go to the gym more. “Our ultimate focus is about becoming the best social utility possible that overlaps with the real world. We’re not trying to build this amazing game.”

We didn’t think the mayor thing would blow up into what it is now. One of the things we’re most excited about tweaking is we’re getting really good at game mechanics and we want to overhaul them.

9:24 am: Kara asks about improving incentives, and Crowley replies he wants to build a couponing engine that’s like a rewards engine on top of the stats.

“Everyone’s gotten a buyback from a bartender”–Foursquare wants to bring that online. (Crowley always seems to be assuming his NYC party scene is the model for the rest of the world.)

9:26 am: Dennis, on making merchant relationships scalable: Foursquare now has a self-service system. Eventually all businesses will have TV screens that will integrate with Foursquare.

Also, developers are extending what Foursquare can do–for instance cab-sharing apps use Foursquare info to know who’s checked into nearby locations and may want to share a cab.

9:29 am: What about competition? Dennis: It’s all about evangelism. The check-in itself isn’t interesting; it’s all about after the check-in. What is on the screen that you show, the deals, learning about what friends are ordering. He is most excited about recommendations, games and incentives.

Dennis: We’re not raising money, though people have approached us. We have enough money to go through till the end of next year. The point is not to become profitable now, but to grow. When we figure out what is actually working on the local merchant front, then we’ll pull that lever. (Hmm…Groupon didn’t take quite so long to figure that one out!)

We don’t want to charge local merchants for a product that isn’t ready yet.

9:32 am: Our business model is to create and sell tools to local merchants. Along the way we figured out other ways to make money, like getting brands involved to help explore the world through their lens.

Some more rapid-fire topics:

Longer-term goals: We’re so focused on what happens before the end of the quarter.

Facebook: We knew Facebook was going to do location for a long time. The question for us is how do we make our product as special as possible.

Groupon: There are lessons we can learn from them and ways we can work together. We could easily pull Groupon deals into Foursquare and make them sweeter based on the stats behind them.

Valuations and frothiness: Ours was around $100 million. For us the goal is to build products, not an amazing company; hopefully that will come out of it.

All start-ups have the same problems: We want to move faster, hire faster, revise the road map faster.

9:38 am: Foursquare will have 40 people by Monday; we’re putting the pieces together. Crowley says he’s still focused on product and evangelism. I’m a lousy engineer, he says, but I’ve always been hands-on, and it’s been hard for me to delegate, but I am trying to do so with the team we have now.

Dennis: I have a solid idea of what the product will look like after two years. No idea if we’ll be sold or independent in five years. The most frustrating experience for me was having a lot of things we wanted to build with Dodgeball, and it was so frustrating not to be able to, and now we’re actually getting them done.

“I think location is underhyped. People don’t understand how the stuff that we’re building will help change the way people experience physical space.”

9:41 am: Audience question about passive check-ins. “Ultimately that’s the way this stuff goes. It just doesn’t work very well. GPS isn’t smart enough to snap you to the right place at the right time.”

It’s also a matter of battery life. GPS and batteries need to be fixed before we can do that stuff.

Audience question about “off-the-grid check-ins.” Crowley says they’re below 20 percent of all check-ins, though he doesn’t know the number. He personally does it to leave breadcrumbs at all the places he’s been to, but when he doesn’t want people to come up to him when he’s having dinner with his girlfriend, for instance.

Also, he adds, about 20 percent of check-ins go to other networks like Facebook or Twitter. The Foursquare social graph is “much much tighter” and gets the majority of check-ins.

Question about devices. We haven’t built for iPad yet. Crowley just bought an Android phone. Ultimately, wants to treat all devices the same.

“Everyone thinks we’re a 200-person company, but there’s just not enough engineers to do all the stuff we want to do.”

9:48 am: By the way, there are now 17 people checked in to D:Dive Into Mobile on Foursquare. Guess seeing Crowley in person was a good reminder!

No, Facebook is not in serious talks to buy Foursquare. Yet.

No, Microsoft is not poised to snap up the social location start-up, beyond a cursory should-we-look query to itself. Yet.

No, there is no longer a crazy bidding war going on among major venture players in Silicon Valley, all waiting with bated breath for Foursquare founder and CEO Dennis Crowley to make a decision about which of them he will deign to take a big pile of money from.

In fact, Andreessen Horowitz partner Ben Horowitz was entirely correct when he told BoomTown in an interview earlier this week that his firm was dropping out of the race to fund the company:

“This is playing out too much in public and clearly someone has an interesting agenda here, so this is not something we want to participate in.”

Interesting indeed, although cloddish is probably a better word for what the simple process of deciding on funding versus selling has turned into.

New York-based Foursquare, which hit one million users yesterday and is unprofitable, lets its users “check in” from a variety of locations.

It’s an innovative and entertaining concept and a lot of fun, unless you are among those trying to do a deal with Foursquare.

From VCs to Facebook to Yahoo (YHOO)–the only serious bid to acquire Foursquare so far–sources close to every single player mentioned in the hubbub around the start-up expressed stupefaction about the confusion Crowley’s endless Hamlet act has resulted in.

And, in no small measure, annoyance too.

“It’s hard to make rivals all agree on one thing,” said one person close to the situation. “But this just became a pig pile.”

Indeed, that was the impetus for Horowitz speaking on the record about the experience of dealing with Foursquare, a move that was unprecedented.

“If the process was changed, we still like the company,” said Horowitz. “But since it has been long and undefined, it is prone to manipulation.”

While some have suggested that this was just sour grapes on the part of Andreessen Horowitz because Foursquare decided to pass on a lower funding offer it made, others involved–including rival VCs–applauded the move.

“Foursquare is being just as vague and unclear to us, which I think means they don’t know what they want,” said one VC, who has been considering funding it. “No one minds losing out to someone else, as much as feeling like you’re being played.”

The game got another boost today by rumors that Facebook is intently interested in buying Foursquare and delayed its announcement of location features at its f8 conference Wednesday because the social networking site did not want to scotch the impending deal.

Actually, no.

What is true is that Crowley has been to visit Facebook execs, including CEO Mark Zuckerberg, and there were only cursory discussions about a range of possible ways to work together, including a plan to federate third-party location services at the social networking giant.

Also, why not meet?

“It’s was a free look,” said one person with knowledge of the chitchat, the kind that happen all the time between Facebook and companies. “You always say yes when people want to talk, because you can learn a lot.”

As to a purchase: Unlikely at the price of $100 million-plus that Yahoo offered, if ever.

“Yahoo needs a solution in the mobile location and local space, because they have nothing,” said another source of the build-or-buy decision. “Facebook has all the tools it needs, as well as 500 million users used to updating their statuses, so what Foursquare is doing is not hard to replicate.”

As for Microsoft (MSFT), sources said, it, as well as companies like Nokia (NOK), simply have had their interest piqued by all the noise surrounding Foursquare.

That is also typical around hot start-ups, and perhaps more so with Microsoft, since it recently signed a deal with Foursquare to integrate its customer data with the Bing search service’s map apps.

So what’s left? Well, Silicon Valley VCs, of course, who are always interested in a deal.

Despite negligible revenue, Foursquare raised $1.35 million last August, valuing it at $6 million.

Foursquare’s current VCs include O’Reilly AlphaTech Ventures and Union Square Ventures, as well as a spate of well-known angel investors.

New VC valuations have hovered from $50 million to $80 million.

But both Accel Partners and Redpoint Ventures, sources said, do not have active talks going on with Foursquare.

One wild card: Free-spending Russian moneybags Digital Sky Technologies, which has already sunk copious funds into Facebook and games powerhouse Zynga.

For certain, after Andreessen Horowitz pulled out, the last one standing seems to be Gideon Yu of Khosla Ventures.

And while the eager firm has made an offer, sources said, it has yet to hear back from Foursquare, which is taking its sweet time mulling things over, which can’t make Yu happy either.

In other words, mangling the old Eagles song, “Hotel California”: You can check in any time you like, but you can never leave.

So while Crowley searches for the most lucrative exit, let’s enjoy the Eagles classic in this video:

EAGLES – HOTEL CALIFORNIA
Uploaded by hushhush112. – Music videos, artist interviews, concerts and more.

Much to the chagrin of valuation-hyping Silicon Valley VCs, Yahoo is still in the running to acquire Foursquare, the hot social geolocation start-up, much longer than expected.

Foursquare’s board met last week about the possible acquisition deal. But, so far, it’s turned it down flat.

Nonetheless, (YHOO) is still interested, sources said.

Yahoo declined to comment, and I have an email into Foursquare, which has yet to respond.

But sources close to the situation said that Foursquare CEO Dennis Crowley is holding his cards very close to the vest about whether Foursquare will reconsider the offer–which could reportedly go up to $125 million to $150 million in cash–from the Internet giant.

Crowley’s alternatives are two powerful venture firms–Andreessen Horowitz and Khosla Ventures–which had put lucrative funding deals on the table, trying to entice Foursquare to remain independent and turbocharge its fast-growing status-update service.

Other big firms have dropped out of the race, although sources said more are now sniffing around, including free-spending Russian moneybags, Digital Sky Technologies. It has already sunk copious funds into social networking giant Facebook, game powerhouse Zynga and, today, social buying site Groupon.

The VC selling point is freedom, the ability to sell for more later and perhaps a more modest payout for talent, including Crowley, by buying some of their common shares. Their valuation is hovering around $80 million.

Crowley (pictured here) controls a large chunk of the shares of the start-up and has so far turned down the $100 million offer from Yahoo, despite the fact that Foursquare is still small (about one million users) and unprofitable.

But it has grown dramatically and raised $1.35 million last August, valuing it at $6 million. Funds came from O’Reilly AlphaTech Ventures and Union Square Ventures, as well as a spate of well-known angel investors.

Yahoo CEO Carol Bartz hopes to best all VC offers after having recently made some significant noise about starting to engage in aggressive M&A to attract talent and inject innovation into the company.

She has mentioned mobile start-ups specifically, and Foursquare is indeed among the hottest in the space, offering its growing base of users an ability to “check in” from a variety of places.

But the location-based services arena is heating up, with multiple competitors to Foursquare, such as Gowalla, as well as recent efforts by Facebook and Twitter to enter the space in a big way.

In fact, Wednesday at its F8 developers event, some expect Facebook to talk about its own version of Foursquare.

Still, Crowley may welcome the challenge after selling a similar location service called Dodgeball to Google (GOOG) in 2005 and ending up with very little. He left the search giant on bad terms two years later, and Dodgeball was closed down by Google in early 2009.

At the time, Crowley called the experience of being at a large company “incredibly frustrating.”

Which is why it will be interesting to see the choice he makes in what one person close to the situation called: “A very deft Hamlet act.”

Until he does, this is a perfect time for my Foursquare version of the indecisive Prince of Denmark’s most famous soliloquy–with apologies to Shakespeare–redone for a New York-based hipster Web 2.0 dude:

Dennis Crowley Does Hamlet:

To sell, or not to sell, that is the question:
Whether ’tis nobler in the mind to suffer
The slings and arrows of outrageous Facebook,
Or to take arms against a sea of Twitters,
And by opposing end them? To die, sleep,
No more; and by a sleep to say we become Digg with
The heart-ache, and the thousand natural shocks
That over-hotness is heir to, ’tis a consummation
Devoutly to be avoid’d. To die, to become Friendster;
To sleep, perchance to be crammed down:
Ay, there’s the rub;
For in that sleep of death what hotter start-ups may come,
When we have shuffled off this overhyped coil,
Must give us pause to check in constantly:
there’s the respect
That makes calamity of so long it takes for funding;
For who would bear the whips and scorns of bloggers,
The oppressor’s wrong, the proud man’s contumely,
The pangs of despis’d love by Andreessen and Yu,
the law’s delay,
The stalker ways of those scary Russian investors,
and the spurns
That patient merit of the unworthy lowball offers,
When he himself might his quietus make
With a bare bodkin of no profits?
Who would these fardels bear,
To grunt and sweat under a Yahoo life,
But that the dread of something after death,
The undiscover’d acquisition, from whose bourn
No Flickr returns, puzzles the will,
And makes us rather bear those ills we have
Than fly to VCs that we know naught of?
Thus overvaluation does make greedy piggies of us all;
And thus the native hue of resolution
Is sicklied o’er with the pale cast of Pets.com;
And Web 1.0 enterprises of great pith and moment,
With this regard, their currents turn awry,
And as was predicted by Economics 101.

At least that’s the suggestion from consumer research service YouGov, which measures “brand perception” via an online panel. YouGov’s BrandIndex survey, which interviews 5,000 people a day and rates brand scores on a scale from 100 to minus-100, shows a big spike over the last couple months for BlackBerry. Adults 35-49 gave the brand a value score of 7.5 on July 21, but by August 4, that number increased to 18.

The BrandIndex people figure that jump stems from the introduction of the Tour, and particularly from the push that Verizon (VZ) has given it–Sprint (S) is also selling the handset, but is keeping that news to itself for the most part. Go to a Sprint store and try to find a Tour. It’s not easy!

But! Even while the oldsters thought more favorably about the BlackBerry, young folks seem to have turned on it: Adults 18-34 gave the brand a value score of 21.5 on July 7, but that number tumbled to 7.9 by August 4. Here’s the chart (click to enlarge):

What gives? One suggestion: Verizon’s decision to drop the prices for almost all of its smartphones (but not the Tour) to $99, which presumably makes the BlackBerry product look…I don’t know…more expensive? I’m not buying it.

Anyway, I’ve been in the old fogey demo for several years now, and I will say, the Tour appeals to me. But then again, that’s mostly because the noisy complaints I hear about the iPhone–primarily AT&T’s (T) lousy coverage and the machine’s puny battery–have kept me from making the leap to Apple (AAPL).

Still, for now I’m hemming and hawing, Hamlet style, on my big purchase. Perhaps I’ll write a post when I make a decision!

There are two schools of thought about Twitter’s decision not to sell itself to Facebook, as it did not in the fail-whale of a deal that BoomTown reported on yesterday.

Here’s my favorite quote from an Internet exec who thought the microblogging service’s decision to turn down $500 million in stock (and some cash) in the hot social-networking site was–how can I put this delicately?–stupid:

“If Twitter turned down 500m in stock, they should go see a shrink.”

But, others disagreed, with another big Web player noting: “Why should Twitter hitch itself to Facebook’s horse, when they don’t have to?”

Debate raged, depending on your point of view, with change-averse Twitter users mostly seeming relieved.

I am more toward the middle of the road, not knowing–who really does?–what was the best move. Thus, I would agree with a sentiment in an email sent to me yesterday from yet another digital guru:

“I think strategic buyers are going to be considered as options for all venture backed companies going forward. Additional rounds of financing are not the given they have been in the past few years. Liquidity is at a premium I’ve never seen before.”

Yes, indeed, as in all things, it always comes down to money and means and time.

In other words, Twitter has made the big bet that it has plenty of all of it, to transform itself into a real business and killer app before others catch up to it.

Right now, its business is deadly simple: A registered user logs in via the Internet or a mobile phone and answers the “What are you doing?” question the service asks in only 140 characters or fewer.

But that single feature has allowed the San Francisco-based Twitter to grow to about six million registrations, as reported in October, up 600 percent over the last year.

And that’s why Facebook–for all its powerful online social connections–has watched carefully as Twitter has raced past it in innovating in the “status update” arena.

And that is also why Facebook wanted to acquire it, to be able to check that important feature off its list, so it could move onto other issues (like finding an advertising model that pays off big).

According to many I spoke to about the now-ended discussions between Twitter and Facebook, both sides got along well, felt the fit was a manageable one and the union of the two made sense on many levels–and still does.

But, for Twitter, the chance to make a run for the prize was paramount, with a feeling among its investors and execs that the start-up should still take a shot at building its revenues–there are none right now–as well as it had done at building its growth.

As for Facebook, it apparently plans to keep the pedal to the metal too, in terms of growth and acquisitions–powering through these bad times economically, in order to emerge victorious when the tides turn.

In a prescient piece last week, in fact, BusinessWeek’s Spencer Ante outlined the Facebook do-or-die strategy.

Wrote Ante:

“As gloom descends on Silicon Valley, most startups and giants are growing cautious and cutting back. But not Facebook. The social-networking Web site sees a bleak economy as all the more reason to press ahead with aggressive plans for growth. ‘This is not the time for tech companies to be cutting back; this is the time to be hitting the accelerator,’ says Peter Thiel, a Facebook board member and investor.”

Of course, this was the very same Peter Thiel, who told me in a video interview a year ago that “there was absolutely no bubble in technology.”

Well, with tech valuations now in the basement (as well as Thiel’s own hedge fund returns) from peaks last year, he’s right–that bubble has surely been popped.

As I said before, you just never know, a kind of equivocation that Hamlet spoke about so eloquently in his famous soliloquy in Act Three, Scene One, of William Shakespeare’s classic play.

It’s in text and video below–the Laurence Oliver version, of course!–because we all could use a little more insight than 140 characters or a post on a digital wall gives to any of us these days:

To be, or not to be: that is the question:
Whether ’tis nobler in the mind to suffer
The slings and arrows of outrageous fortune,
Or to take arms against a sea of troubles,
And by opposing end them? To die: to sleep;
No more; and by a sleep to say we end
The heart-ache and the thousand natural shocks
That flesh is heir to, ’tis a consummation
Devoutly to be wish’d. To die, to sleep;
To sleep: perchance to dream: ay, there’s the rub;
For in that sleep of death what dreams may come
When we have shuffled off this mortal coil,
Must give us pause: there’s the respect
That makes calamity of so long life;
For who would bear the whips and scorns of time,
The oppressor’s wrong, the proud man’s contumely,
The pangs of despised love, the law’s delay,
The insolence of office and the spurns
That patient merit of the unworthy takes,
When he himself might his quietus make
With a bare bodkin? who would fardels bear,
To grunt and sweat under a weary life,
But that the dread of something after death,
The undiscover’d country from whose bourn
No traveller returns, puzzles the will
And makes us rather bear those ills we have
Than fly to others that we know not of?
Thus conscience does make cowards of us all;
And thus the native hue of resolution
Is sicklied o’er with the pale cast of thought,
And enterprises of great pith and moment
With this regard their currents turn awry,
And lose the name of action.

Yesterday, BoomTown took a rather strong stand against Google and its recent aggressive efforts to defend its outsourcing deal to sell some of Yahoo’s search advertising.

Given that the pair have a more than 80 percent combined market share in the search business, I and many others–advertisers, publishers and state and federal regulators–are a bit nervous about further concentration of market power in one set of hands, even if they are such Googley hands.

But in the interest of fairness and because I like to argue with myself–combined with some insights from some smart people I have kibitzed with on the issue–here is a counterpoint with three key reasons why Google and Yahoo might hold firm in launching the partnership, which sources said is likely to start on Oct. 9.

1.) The Justice Department is not actually serious about taking on Google.

While it is true that the government has hired seasoned litigator Sandy Litvack–the former antitrust chief in the Jimmy Carter administration–to consider whether it has a case against the controversial partnership, the move by the DOJ’s antitrust unit might be more political coverage than anything else.

Assistant Attorney General for Antitrust Thomas Barnett (pictured here), who will likely be leaving that post after the November election, has not been much of a trustbuster, to say the least, taking a mostly hands-off attitude toward business regulation.

Thus, he might be making the move to placate intense lobbying by Microsoft (MSFT) and to look like the DOJ’s antitrust unit can act.

Interestingly, Barnett had, according to a New York Times piece last year, “urged state prosecutors to reject a confidential antitrust complaint filed by Google that is tied to a consent decree that monitors Microsoft’s behavior. Google has accused Microsoft of designing its latest operating system, Vista, to discourage the use of Google’s desktop search program.”

And even more interesting, Barnett previously worked for a law firm that repped Microsoft on antitrust issues (although Barnett did not work on Microsoft cases).

2.) The Justice Department will lose if it decides to make a case against Google.

Let’s be clear–Google (GOOG) has done nothing wrong yet, because the Yahoo deal has not yet begun.

Well, except that it has been scarily successful in its primary business of search.

Google has argued that such success is no crime and that the deal would have strong user benefits.

The company has also argued that working with Yahoo (YHOO) will not raise online ad prices, part of Google’s basic argument that its auction-style business model where advertisers set the price makes that impossible.

But what its critics are essentially asserting is that, because of its dominance, Google should simply not be allowed to strike a partnership with the second largest player, Yahoo.

Fears include that rise in online ad prices, a Google control over the market that would make it impossible for others to compete and an increased ability to dictate terms to customers.

But, Google argues, that’s all speculative and unknowable until the partnership with Yahoo launches.

Thus, there’s not a whole lot for the Justice Department to hang a case on, in contrast to its case against Microsoft, which landed in court because of bullying behavior that actually took place before the case was waged.

So why should Google run away, when there is no tangible proof of abuse?

Better still, if the DOJ did take Google on and Google won, the Justice Department would be hard-pressed to come at Google again for a good long time.

3.) If Google caves and walks away, it damages Yahoo and makes for a bad precedent.

It is not likely that Google wants to make an enemy of Yahoo, because even in its weakened state, Yahoo is a better to have as a friend than as a foe.

And taking away an expected $800 million Yahoo estimates it will make in added revenue on the deal is not any way to treat a friend.

In addition, one could argue that walking away now is premature. As Google’s power grows, there will never be a better chance for it to win its arguments.

And if Google gives in to DOJ pressure now, essentially admitting it is too powerful, it might have to concede one thing after the next in the future–from distribution deals to acquisitions to whatever it might try to do.

Finally, while I still believe Google should not be in business with Yahoo, I think it is indeed going to stick to its typically stubborn guns, launch on Oct. 9 and then make tweaks that regulators might request based on how the partnership goes.

But, in order to do that most smoothly, it might be a good idea for Google execs to stop making so much noise defending themselves and to resist the urge to attack Microsoft so loudly.

It might even take a clue from the unusually quiet Yahoo, from whom not a peep has been heard on the issue.

Google could do with some of that self-control.

Because that famous line from “Hamlet” certainly applies: The search giant doth protest too much, methinks.

(By the way, besides a press conference by CEO Eric Schmidt this week on the Yahoogle deal, here are two Google posts defending the deal on its public policy blog. One is by Google Chief Economist Hal Varian and another by U.S. ad head Tim Armstrong.

Please see this disclosure related to me and Google.