You might have heard thatGoogle (NASDAQ:GOOG) is on the verge of completing its $1.1B acquisition of Israel-based mapping company Waze. On the surface, this could be seen as a surprising move. After all, if there is one company that does not need help with its mapping software, it would be Google. Not only do Larry Page and other Google execs think they have the best mapping product available (I doubt anyone would argue that), but they also feel like no one will be able to catch up.
Apple Reinforced That ConfidenceIf you remember well, when Apple (AAPL) upgraded its iOS over a year ago, it was forced to come out with its own mapping software because its deal with Google was going to expire. That ended up being a disaster for Apple as the product didn’t come close to meeting expectations. Instead, it made it obvious that the only way to get good maps would be waiting on a Google app which did end up being released a few weeks later. Since then, Apple has been working extremely hard on improving its product and while everyone would probably agree that it has done just that, it’s still years behind Google’s maps.
In Comes Waze…Waze is a unique product in the sense that it’s a mapping product used by tens of millions of users which also has a social aspect. Users tend to add and share information about traffic, road obstacles, etc. That makes it unique and explains why Apple and even Facebook (FB) are reported to have made offers in the past few months. Apple’s offer was too low and Facebook did not want Waze to keep its Israel based HQ which ended up paving the way for a Google deal. Larry Page offered a reported $1.1B and for Waze to remain independent.
Why Is Google Making This Move?I think it’s a very fair question to ask. The main thing that buying Waze brings is the ability to keep it out of its competitors hands. Google has a competitive advantage in maps. One that can be leveraged over and over. If I take a minute and look at Facebook’s social advantage, it’s a lot more tricky to manage. Why? Because potential competitors are coming up every few months (from Instagram, to Tumblr, Vine, etc). It becomes very expensive for Facebook to keep buying these companies. On the other hand, there are only a handful of decent mapping products and it’s very expensive and difficult to build one from scratch. Waze could have been leveraged to build better Apple maps or a more precise Facebook local. Instead, for a fairly small amount of money, Larry Page just made it even more difficult to compete with Google maps.
In my opinion, this was a brilliant move by Google. In retrospect, it’s not surprising though. Was it worth +$1B for Microsoft, Apple or Facebook to get a helpful partner in competing with Google maps? Perhaps. But it was worth much more than that for Google to keep one of the few solid mapping companies out of the hands of its competitors.