Why Google's Acquisition of Waze Is a Win-Win

Dropping over $1 billion on social media-driven maps provider Waze might seem a bit much considering Waze didn't even attempt to monetize its service, and its 44 million users, until late last year. Obviously, Google (NASDAQ: GOOGL  ) has once again gone overboard in its efforts to grow and fend off competitors via acquisitions, right? As industry watchers know, Google has a long history of buying what it feels it needs -- be it talent or technology -- and removing opportunities off the table for its competitors. And with Waze, Google gets the best of both worlds.

What's the big deal about Waze?
What's intriguing about Waze, and why Google competitors including Facebook (NASDAQ: FB  ) and Apple (NASDAQ: AAPL  ) were once reportedly in the acquisition mix, is that Waze combines two scorching-hot mobile industry technologies: social media and mapping. Unlike Google or Apple's mapping tools, Waze relies on its social media-savvy users to update traffic conditions in real time.

The Waze mapping service alone may be worth the price of admission for Google. According to Waze CEO Noam Bardin, Google spent between $1 billion and $2 billion sending reps all over the world to take pictures for its Street View. Granted, those pictures are already taken, but you can bet more were planned as a means of updating the service. The reported $1 billion for Waze -- Google didn't release exact figures, but estimates range from $1 billion to $1.3 billion -- looks cheaper in comparison to Street View. And Waze users' continual updates will supply Google with what it loves most and utilizes best -- loads of customer data.

The social aspects of Waze, when added to its growing Google Plus service, could give Google even more ammunition in its efforts to de-throne Facebook. The desire to expand its social networking capability isn't a secret. According to Global Web Index, after less than two years Google plus is already the No. 2 social media site as measured by active users (Facebook is No. 1). Add in YouTube's active users, which some are beginning to lump into the social media mix, and by Q4 of 2012 Google was closing the gap with Facebook's nearly 693 million active users in a hurry.

Why not Waze, Apple?
Though Apple's name was bandied about in the acquisition discussions, CEO Tim Cook stated categorically at the recent All Things Digital conference that the company did not make a bid for Waze. It's interesting that Apple would shun a serious run at Waze considering the maps fiasco last year, in which Apple killed Google Maps to run its own mapping app on the then-new iOS 6. It was just nine days later Apple CEO Tim Cook issued an apology to iFans for its poor mapping effort, and only a few months before Google maps was back on iOS 6.

Cook's apology to users in late September 2012 now looks especially interesting given Google's Waze acquisition. In his statement, Cook said, "While we're improving Maps, you can try alternatives by downloading map apps from the App Store like Bing, MapQuest and Waze, or use Google or Nokia maps by going to their websites and creating an icon on your home screen to their web app." Even then Waze was on Apple's mapping radar, so why not give it some serious consideration?

Granted, Apple hasn't been as aggressive as Google when it comes to acquisitions, and the company prefers lower price points for them. But Waze would have made a lot of sense for Apple, and at the reported price of around $1 billion, it would have been a drop in its extremely large cash bucket.

For Google, Waze will almost certainly turn out to be a win-win. Mapping, as frustrated iPhone users from last year can tell you, is a critical tool for smartphone users -- some might say a must-have. With Waze, Google's already strong mapping services just got better, as did its social media tools, giving it even more ammunition to take on Apple and Facebook.

In addition to the obvious synergies, just knowing that Facebook and Apple don't have Waze is a win in and of itself for Google, too.

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  • Report this Comment On June 14, 2013, at 2:25 AM, st0815 wrote:

    That's really a very good point. I didn't think of this before, but Apple not picking up Waze was a major mistake by Tim Cook. In general it's unclear whether Apple's problems can really in fairness be attributed to him, but in this case: that's clearly a mistake by the CEO to miss such a chance.

  • Report this Comment On June 14, 2013, at 7:25 AM, luxetlibertas wrote:

    I disagree with the article. Neither Waze nor Google will win from the transaction.

    A whopping US$1.3 billion for 44 million users, with no profit or even revenue, it is as if the lessons of the tech-bubble in 2000 were never learned.

    Such acquisitions almost always mark the beginning of the end of the acquisition target, as the big money and the loss of independence make the key people leave for new projects or even early retirement.

    Incidentally, Apple's own maps effort is a very good move for its users, as broader integration of location-related services in the iOS and OSX platforms is key, and depending on services from a major competitor is not the way to achieve the required radical improvements in the applications of map tech.

    There are no "frustrated iPhone users from last year", as Google maps is still available and Apple maps is (and was) much more useful than it it is generally credited for.

  • Report this Comment On June 28, 2013, at 10:09 AM, VeryValerie wrote:

    Google buying Waze also brings up patent questions since Waze infringes on Nokia patents (obtained from Kurt Uhlir's Navteq team which Nokia acquired).

    IMO - Apple needed the data more than Google. After changing their maps o a cheap and inaccurate version, to the frustration of Apple users...they need the PR for iPhone users to know they are working on better map options.

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