There is a lot of talk going on - chatter, we mean - that Facebook and mapping player Waze are in very serious talks for Facebook to acquire the company, possibly for as much as $1 billion - the same as for the Instagram deal Facebook pulled off last year. It's an interesting thought. Waze already has decent Facebook integration, but imagine the possibilities for Facebook. If it owned Waze, contributing not only its immense development resources to it, but also its 1.1 billion users as its target market, how would Waze fair?
It's safe to say it would fare pretty damn well. On its own - and keep in mind that Waze is an Israeli-based company that is more or less a startup - the company has now pulled in 45 global million users. Twelve million of them are in the U.S. today, and the company is essentially now considered the number two maps player behind Google. The company generates revenue through mobile advertising, obviously a model that is very sweet music to Facebook.
Before looking at deal synergies, let's take a brief tour of Waze itself. We count ourselves among those one might refer to as enthusiastic Wazers, as the company refers to us, and we've been so since July of 2012. In our humble opinion, Waze is awesome for providing voice-based turn by turn directions, and for providing extremely accurate projections for time of arrival and for automatically discovering best routes to follow. A user can choose from multiple routes and override any routes selected. It simply works, and it works exceedingly well.
But there is a lot more to it - the power of people (Wazers) who can communicate with each other and the power of the community (both those that are hyper local and the entire "Waze community" itself) is central to Waze. The company relies directly on real time input from locals in whatever areas one may be driving through, as well as on real time information from people who are sitting ahead of you on the same road you happen to be traveling. We won't detail everything Waze does here (e.g. where police are lurking, traffic jams, where accidents or roadwork projects are taking place, where to buy gas, and on and on), but we do hugely recommend downloading the app and checking it out for yourself. You will thank us for the recommendation.
Waze CEO Noam Bardin is a very interesting guy, and we believe he has a solid handle on how a map app should in fact work. Obviously it centers on the power of the community and real time data. He puts it as follows: "Fresh data and instant information directly from the road from people just ahead of you on the same road and from locals from wherever you are passing through is a huge advantage. Google has thrown a lot of money at its Street View efforts - which we don't have, but what they end up with is static street views that in most cases are already old as they become available."
Bardin continues, "We use daily and hyper local information not only for travel advice but to ensure our maps are accurate. In 2012 alone, we made over 500,000 edits to our maps - in the grand scheme of things this may not sound huge, but to the person in need of accurate directions at a certain point in time it matters a great deal. You can summarize it this way - Google uses money and we use people. We are happy with our model!"
A key challenge for Waze early on was to get people to use the app - Bardin understood that it was the only way the app could become valuable. The secret sauce was to make it fun and interactive, and to evolve it into a social network environment and experience. And this has worked enormously well. The size of the Waze audience today is all the proof one needs, and that audience is already large enough to provide the real time information and details needed across enough geographies to make Waze truly useful for people at the moment they are driving. Given the numerous data sources, Waze is able to effectively guide drivers to their destination in as short a time as possible and provides very accurate ETAs for any chosen route.
Interestingly, Waze felt that the original app was good enough for consumers when it launched, but consumers said otherwise. Developing the social networking-based user experience has been front and center ever since, and remains the key focus and Waze's largest R&D investment and expense. We'll leave our tour of Waze here, but we very much encourage folks to try it out.
Do Facebook and Waze Make Sense Together?
Back when Apple CEO Tim Cook offered his public apology for the lack of quality in the original iteration of Apple Maps, he called out Waze (and several others) as a good alternative to use while Apple improved its own mapping product. Later in 2012, rumors emerged that Apple was in talks to acquire Waze - but the talks fell through and Apple has since moved on. More than likely the roadblock to such a deal is how Waze would be delivered.
If Apple were to acquire Waze, it would turn Waze into an iOS feature - now that would be a beautiful thing for us iOS users, but it would lock out the entire Android community and the emerging Windows Phone 8 community. This is something that Bardin is loath to do. He has publically noted that he believes that such applications should not be vertically tethered to any operating system but should instead be horizontally available as an app across all platforms.
Given that perspective, Apple doesn't make any sense - and Bardin was confident enough in his Wazer community approach to walk away from an Apple acquisition. That was brave!
Now Facebook appears on the horizon with not only its app-based multi-OS approach but its new Facebook Home approach as wll. The Facebook model clearly allows Waze to function as the horizontal app that Bardin believes it needs to be, but it also opens up an entirely huge new world of potential Wazers to Waze (though we doubt Facebook would want to keep calling them Wazers).
For Facebook the deal is a clear no-brainer. Waze would easily integrate into Facebook, would allow Facebook to own three critical mobile app segments (Facebook itself, Instagram services and mapping), and would add a potentially huge mobile advertising platform. Many Wazers share their locations ongoing as they drive - hugely useful for Facebook for additional ways to deliver well-targeted ads, which is a priority for the company.
The mobile advertising possibilities are clearly front and center for Facebook, but the synergies go both ways immediately - along with a possible $1 billion payout for Waze and Bardin (who would no doubt remain with Facebook for at least a while). It all looks good - at least on paper.
Waze was founded in 2008 and has 110 employees based in California, New York and Israel (where it is headquartered). Kleiner Perkins Caufield & Byers, BlueRun Ventures, Magma Venture Partners and Vertex Venture Capital are all Waze investors - they would probably love to see a return on their investments. Its last round of investment in 2011 raised $30 million from Kleiner Perkins Caufield & Byers and Horizon Ventures. Though there have been a number of possible buyers, Facebook is probably the best positioned to both provide that ROI and to help Waze grow and succeed.
Speed Bumps and Roadblocks?
Currently, Facebook makes use of Bing Maps. Microsoft was an early investor in Facebook and remains one - how the company is likely to react to Facebook moving away from Bing is an interesting question. Not that there is much Microsoft can do about it, but one has to consider what kinds of moves Microsoft might make to hinder a Facebook-Waze map offering.
Then of course there is Google. Facebook would come into direct competition with Google on this front, and we have absolutely no idea how Google might react to Facebook giving Waze the necessary resources (including the "money" to add street views to it) to compete head-on with Google Maps. Google has been working towards a new user interface for Google Maps - we haven't driven it yet but it will be interesting to see if it has worked to incorporate any specifically Wazer features into it.
Another issue for Google is that it delivers yet another Android challenge. Facebook Home, interestingly, co-opts Android for itself without Facebook having to do any actual core Android development work - it’s a great position to be in. Bardin himself recently gave Facebook Home kudos on his own Facebook page. We've been thinking about how Google might respond to it - for example, might Google look to find ways to put Google+ front and center on Android and seek to prevent what Facebook is trying to make happen?
Now on top of Facebook Home, Google may end up facing Facebook Waze - possibly as an integrated part of Facebook Home. Faced with this and the potential for Waze to add street views over time, it all starts to look like truly serious competition for Google.
Finally there is the already spurned Apple. Without a doubt, a combined Facebook and Waze may very well give some users pause to think twice about sticking with Apple, but we believe this is not really an issue. For one thing, Bardin's belief in delivering cross-platform apps would keep Waze on Apple devices. And Apple has no problems with Facebook itself. In the end Apple merely faces the issue of improving its Apple Maps, but if it doesn't, well, Waze will still be standing by.
So then, to answer to the question posed in the headline, a Facebook-Waze deal would be made in heaven for Facebook and Waze, but it would certainly be made in hell for Google and, to a lesser extent, for Microsoft. For us Wazers and potential new Wazers, it’s also a deal that would likely count as landing in heaven.
We'll be watching the potential deal's progress - if it lands we'll be there with a breaking news alert. Stay tuned.
TechZone360 Senior Editor
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