Such popular location-based services as Foursquare and Gowalla invite people to "check in" at locations using their mobile phones, let their friends know where they are, and collect rewards from businesses in the process. But these apps don't do enough to get people interacting with each other, according to the creators of new location-based services that aim to be much more social—and at least as lucrative.

Though the first-generation services encourage you to connect with friends, you often still end up interacting with the service as an individual, little affected by others' actions, says Dave Bisceglia, cofounder and CEO of The Tap Lab, which plans to show its iPhone game, TapCity, next week at South by Southwest Interactive. SXSW, as it's known, is the annual conference in Austin, Texas, at which Twitter first found an appreciative audience. TapCity will be one of several location-based services launching there this year.

Bisceglia and cofounder and CTO Ralph Shao wanted to design a location-based mobile game that puts users in touch with other people. "We wanted compelling narrative and real multiplayer competition," Bisceglia says. In particular, he says, they wanted to avoid the question that often plagues Foursquare: "What's the point?"

Bisceglia and Shao moved away from location-based marketing and plunged into designing a "pure" game. TapCity's users are assigned an "epic mission" when they start the game: to build a fantasy empire overlaid on real-world locations. Players can buy game-world versions of the real-world locations they visit; that gives them control over these places in the game and lets them build virtual fortified buildings on the TapCity map. By using virtual weapons—such as slingshots and wrecking balls for attack, or guard dogs and force fields for defense—they can try to take over others' locations or defend their own. Shao and Bisceglia intend this to be an intensely social game, in which players recruit friends to join them on incursions into new territory, or to protect locations that are under attack. Combat proceeds slowly, to give time for friends to arrive and join in; the game's algorithms weigh the resources each player commits to battle to determine who wins in the end.

TapCity's business model is unusual among location-based services. The company hopes to make money by selling virtual goods, such as clothes and weapons for avatars—an approach used to great success by Zynga, which makes social games that are popular on Facebook. Eventually, Bisceglia says, the company may try to make deals with businesses that reward players with in-game advantages if they visit a store or try a new product. But there are no current plans to enlist local retailers to offer players discounts or to try out any of the similar schemes that are the bread and butter of most location-based services.