Here’s Why Facebook Wants To Spend $1 Billion On Waze, According To Industry Sources Who Are Smarter Than We Are

Here’s Why Facebook Wants To Spend $1 Billion On Waze, According To Industry Sources Who Are Smarter Than We Are

Nicholas Carlson | May 12, 2013, 11:09 AM | 7,060 | 8

According to several reportsFacebook is in talks to buy an Israeli startup called Waze for $1 billion. Waze makes a “social” mapping app for smartphones. It was founded in 2009, and it has been backed by investors that include Horizons Ventures Hong Kong and Kleiner Perkins. Last July, when Waze hit 20 million users, this is how BI’s Alyson Shontell described the service: Waze relies on the community to give real-time traffic reports. If a user is on Waze while driving and hits traffic, a red line will appear behind the vehicle on Waze’s map to alert others in real time. Drivers can take pictures of accidents so other drivers will know why they’re not moving. They can also alert other drivers of upcoming speed traps. Why does Facebook want to buy a mapping app? We asked a few industry sources. Three came up with interesting answers. These sources asked to remain anonymous because they do business with Facebook, they wanted to be candid in their thoughts, and it’s just easier to talk to a reporter if they are allowed to be on background. We’ve presented lightly edited versions of those answers below.

Industry source #1:

Facebook is buying Waze because each of the major tech companies want to own a mapping service. MicrosoftGoogle, and Apple own one. Now, so would Facebook.   Waze is a crowdsourced map. Users turn on Waze and as they drive around, roads are drawn. They can tell traffic by how fast people are moving around on the roads via GPS.  If you put, like, a billion users on it, the map becomes really accurate.  If Facebook is committed to local search (pretty clearly they are), it would be helpful to have a maps UI in addition to a search UI, particularly one with road data that they can use their platform to make significantly more accurate and valuable.

Another example of all the big tech companies grabbing their own maps: last week, Alibaba took a huge stake in AutoNav, a German maps company with strong foothold in China.

A map will be a key interface for local discovery and commerce going forward, and Waze had a great one that FB uniquely could make a lot better.

The bottom line: Waze will improve Facebook’s local search, which is an increasingly important — and monetizable — application on mobile.

Industry source #2:

Facebook is buying Waze so Facebook Home doesn’t have to punt people over to Google Maps.

Furthermore, Facebook is probably stressed about Google playing the “if you are going to run a Facebook skin over our Android OS, we’re going to make it so your Facebook skin can’t use Google Maps” card.

I think it’s very obvious now that the future of maps / local is “social maps.”  It will be really interesting to see how the space evolves in the next few months.

The bottom line: Facebook believes maps are a core mobile application that it needs to own, even on Google devices. Waze can help it make social mapping software that users will prefer over Google Maps.

Industry source #3:

The simplest and most important reason is that Waze is an awesome, quickly-essential-to-users mobile app, and mobile “real estate” is what Facebook desperately needs.

Facebook needs apps with strong enough appeal that they cannot be displaced by the “house” apps from Apple or Samsung (or Google, etc.).

Reason two is that Waze lets you see where your friends are. That’s a bigger value than just driving. But unlike check-ins, the user doesn’t need to do anything. So, integrated with the FB social graph, that’s amazing.

The last reason is that buying Waze helps Facebook realize its vision for the News Feed — a content feed that knows everything about you, and can use this information to determine what you need and want to see at that very moment. A big part of knowing everything about you is knowing where you are at that moment.

The bottom line: Owning Waze gives Facebook more mobile usage, and might even make its core product, the News Feed, more robust.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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