Google (NASDAQ:GOOG) (NASDAQ:GOOGL) needs to shut down mapping service, Waze, and sooner is better than later. The company is getting plenty of value out of its $1 billion buyout anyhow, and recent controversy around the service will only hurt its public image.
That is the big takeaway from my recent interview with Pete Tenereillo, founder of GPS replacement service, PathSense, and noted expert on social networking and navigation services. His Trapster app helped motorists warn one another of speed traps years before Waze started offering a similar feature.
So with Waze running into trouble with the law enforcement community over exactly that type of police-tracking functionality, Tenereillo had already been through that battle many times.
Apple eventually banned Trapster from its app store, and the service shut down entirely at the end of 2014. That was four years after Tenereillo had sold the company to Nokia (NYSE:NOK) and moved on to found PathSense. It is hard to find an insider with a better view of the Waze situation than Pete Tenereillo.
And he was very clear about what Google must do. Waze was never a good fit for the "do no evil" image, but it was still a smart acquisition, even at the lofty $1 billion deal price. Tenereillo told me:
It's not about money, but it's about Google as a whole. Here's this "don't be evil" company, and they're getting a bunch of attention that is potentially not so positive. As the guy running Trapster, my goal was to get the media saying "Trapster" as many times as possible, and all publicity was good publicity. Even when it wasn't positive, I was getting my brand out there in front of people. But there is such a thing as bad press when you're Google, and you have a wholesome public image to defend. Or Nokia, who bought my company.
In Trapster, Nokia had this thing that they weren't really sure they wanted. The message changed from Trapster helping people to avoid speed traps and became less clear. Nokia presented it as something that helps you with traffic, and safety, but the core functionality was swept under the rug. And over time, Nokia lost the whole Trapster user community, which at 22 million users was fairly significant. They had to shut it down.
Does it ever makes sense for a multibillion dollar, multinational company to sell a product that clearly helps people avoid law enforcement?
It did not make sense for Nokia, and still does not for Google. It is not about the alleged use of Waze as a means of stalking police but as a way of avoiding speeding tickets and DUI violations. Then, we throw in the fact that drivers are expected to report accidents, police hangouts, and other traffic features while driving, all at a time when texting and driving is the focus of heavy media attention, and the whole picture just does not add up to something that Google would value.
Sure, shutting down Waze would alienate the 50 million users who love the service, but that is just a drop in the bucket next to the massive Google Maps user base. That comes installed by default on every official Android phone and tablet. How large is that market? Analysts reported over a billion Android devices sold in 2014.
So, if Google cares about its "don't be evil" mantra, the company had better close the door on Waze before its controversy starts to infect Google as a whole. But, Tenereillo assured me, Google did not completely waste $1 billion on this buyout.
Who are we kidding? The speed trap thing is a feature for avoiding police enforcement. And it's very effective. A company like Google can't do that. Shutting down Waze won't affect Google's stock price, with just 50 million users falling by the wayside. Mark my words: Waze will be gone within a year.
But the buyout brought a bunch of engineers into Google, with years of mapping expertise and crowdsourcing experience. Even if Waze hadn't brought in any users or an application, it would still have been worth a billion dollars to Google just for the staffing value. Certainly, Google didn't need another map. But even at $10 million per employee, Waze is a good way for Google to add high-quality talent.
So, Google may have to shut down Waze before the mapping service becomes a liability. But the buyout kept Waze out of the hands of Apple and other rivals, landed a ton of great engineering talent in Mountain View, and should help Google improve its core Google Maps service over time.
Basically, it is a deal with some collateral damage but a valuable buyout nonetheless. Foolish colleague Tim Brugger painted this picture before, and even yours truly saw Waze as a social media play more than as a mapping buy. Now Pete Tenereillo nods along in approval.
As a Google shareholder, I would have preferred to see the company gain a more direct benefit from this splashy big-ticket buyout, but I agree that Waze will not be a total loss for shareholders.
Anders Bylund owns shares of Google (A shares). If you thought that texting and driving was bad, he once saw a driver knitting at the wheel in rush-hour traffic. The Motley Fool recommends Apple and Google (A and C shares). The Motley Fool owns shares of Apple and Google (A and C shares). Try any of our Foolish newsletter services free for 30 days.