Google has acquired the mapping service Waze, a Google Maps competitor that relies on user data to build accurate maps with real-time traffic reports. Both Facebook and Apple reportedly considered buying it, and the negotiations with Google were first leaked three weeks ago. Google declined to name the purchase price, but a source familiar with the deal told The Verge that the $1.03 billion figure reported by the New York Times is correct.
That may seem like a premium for a company with just 28 million users, but the deal is largely a defensive play as Google moves to preserve its dominance in mobile mapping. There aren't many companies with mapping databases as good as Waze's, said Carolina Milanesi, a consumer technology analyst at Gartner. Waze would also have been a strategic acquisition for Facebook, Apple, or Nokia, she said. "Google is not leaving it on the plate for Apple or Facebook to buy," she said. "They're staying ahead of the game and being able to continue to be the leader in the maps space."
"Owning context is what matters."
Waze also uses crowdsourcing to add context that many other mapping applications don't have. Drivers can upload information about traffic accidents, construction, gas prices, and detours, adding photos and flagging problem spots on the map to alert other drivers. The app also lets users see when their friends are driving to a common destination.
"Owning context is what matters," Milanesi said. "It's not giving you turn-by-turn directions. It's about knowing where you are, who you're with, adding location and social together and making it very powerful from an application perspective, but also monetizable from an advertising perspective. So that's right at the core of what Google's business is."
Waze has been gaining attention for a while now. Investor interest jumped 238 percent from the last quarter of 2012 to the first quarter of 2013, according to Second Market, the marketplace for buying startup stock. Judging by Google's track record with similar acquisitions, the company will likely cherry-pick bits of Waze to add to Google Maps and eventually deactivate the Israeli service.
"We’re excited about the prospect of enhancing Google Maps with some of the traffic update features provided by Waze and enhancing Waze with Google’s search capabilities," Google said today in an announcement that emphasized Waze's strong user community and the accuracy and timeliness of its data. Waze said in an announcement that "nothing practical" will change at the company.
The Israeli business newspaper Globes reported that talks with Facebook fell through because Waze insisted that its 110 employees remain in Israel. Google has one large office in Tel Aviv and a second in the nearby port city of Haifa, meaning Waze employees can stay right where they are. There is just one possible obstacle to the deal: some attorneys have speculated that because of Google's leadership with mapping services a Waze acquisition could trigger an antitrust investigation from the US Department of Justice or regulators abroad.
Update: The AP reports that Google paid a total of $966 million for Waze. The total was disclosed in the company's regulatory filings.