Google has paid over a billion dollar to acquire the Israeli Startup GPS navigation firm Waze (link), but why? Most of us has never heard of Waze before now. And why pay $1.1 billion for a company that makes less then $70Mil in revenues?!
Is Google beyond all reason on this acquisition deal? Did any of Google’s previous over-a-billion-dollar takeovers fail to pay back? There must be some very good reasons that justifies paying over a billion dollar, but Google is not known for sharing the reasons for their decisions. With some research, few possible reasons for such a steep investment come to light, which can also shed some light on the reason for the US FTC to investigate further this acquisition.
1. Keeping Google Maps at pole position
Google takes quite a lot of pride in Google Maps, especially now when nearly all mobile phones have GPS capabilities and need a global versatile mapping software. Google Maps is the de-facto market leader, and Google Inc. wants to keep it there. With rumors that Apple plotted to buy Waze for $500 million, and on its tail came Facebook with a similar offer of $1 billion in the last 12 months, it might wake Google up a bit and think this Waze thing might be worth it with two major competitors so eager to buy it, or at least to stop them from using Waze to compete against Google.
2. Usage Share
Waze, a free mobile navigation application, has over 30 million active users (with a total of over 45 Mil user), or in other words, 30 million cuts into Google Map’s usage share somewhat. In fact, earlier this year, Waze announced they were Google’s number 1 competitor (i.e. worst nightmare). Waze also announced that their user base grew from 30 Mil to 45 Mil in one year. If Waze keeps that trend, they will hit 60 Mil users by next year, and we see no sign that they would stop there.
3. Making Maps more social
As a crowd-sourced traffic mapping company, Waze has many appealing and smart social features (i.e. cops and traffic info), that Google must consider adding to its Maps. Google has already started making Google Maps more social with Google+ Local, but it’s a long road no doubt, so why reinvent the wheel when you can acquire it?
4. Waze knows how to make money
Making maps is a very expensive business, that you have only four global companies that can create maps. Still, there isn’t many possible ways that enable Google to make money from Maps. Google Maps makes money either by by charging commercial sites for API usage, or by showing ads.
Waze, however, makes money by licensing the source (map data), allowing advertisers to set small icons that will appear on a given location for an interested user.
Waze also offers a web interface to TV stations allowing them to broadcast current traffic and alerts reports directly from the app.
5. Self Driving Cars
Let’s take a look at what Waze is for a moment. A social-based community driven GPS network, that gathers the information from other users and allows users to help each other. These would be great features built into a car, wouldn’t it? If Google wants to get serious about self-driving cars, it needs to make sure it has one dam good GPS system. Google Maps is a good option no doubt, but Waze is better, as it adds that extra social layer that could be vital to the car’s success.
Just imagine cars in the near future being social, sharing traffic jams’ information on their own, and suggesting to their owners best routes to reach their destinations, and while at it, they might as well tell you what other fellow drivers are busy doing at the moment!
Liam Taylor is an independent Tech writer and programmer who can be found at liamtaylor.net