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Google (NASDAQ: GOOG) Acquires Waze

Written By Jason Stutman

Posted June 12, 2013

Your daily commute just got a whole lot easier. Google (NASDAQ: GOOG) is looking to help you outsmart traffic by integrating social media into its electronic mapping service.

The rumors have been going on for some time now but it’s finally official – Google has acquired social media and traffic mapping application Waze.

Waze gathers GPS data from its subscriber network and uses this information to provide users with real-time feedback regarding accidents, speed traps, and traffic.

The mobile-app can even tell you which which lane is the fastest by comparing the speed of users in different lanes. That is, of course, if enough drivers are running Waze. Luckily, the Waze community is getting some help on this end.

Google’s procurement of Waze is the company’s fourth largest deal in its history so it is worth analyzing the reasoning behind the acquisition.

Some will argue that the $1 billion purchase by Google was exorbitant but there is no denying that Google and Waze are absolutely perfect for each other.

Added Features

Google has been a clear winner of the mobile mapping market for some time now but has definitely not held a monopoly over it. Waze and Google compliment one another in ways that will benefit both operations.

First, Google will provide Waze with more users which comes hand in hand with more data. The more information that Waze has on its users’ movement patterns, the more accurate the application becomes.

And just as Google will improve Waze with Google’s search capabilities, Waze will improve Google Maps with its traffic update features.

Google Maps will soon be able to report accidents, speed camera locations, road blocks, and emergency vehicle presence. Users will also likely be able to share their location and estimated arrival times with their contacts on Google.

The combination of these two systems will change the way people travel. Instead of receiving a notification that you have a meeting in thirty minutes, you’ll now receive a notification on the precise time you need to leave your house in order to get there.

Competitive Edge

It is worth noting that both Apple (NASDAQ: AAPL )and Facebook (NASDAQ: FB) have previously expressed interest in acquiring Waze. These companies saw value in the mapping service and Google has strategically boxed out the competition.

In January 2013, there were rumors suggesting that Apple was planning to buy Waze for $500 million. Apple denies these rumors, but they don’t seem too far fetched considering Apple’s misfortunes with its electronic map system.

When the iPhone 5 was released last year, Apple received plenty of negative feedback due to its broken mapping system and desire to separate itself from a reliance on Google’s mapping data. The company decided to buy alternative mapping data which resulted in warped images, Berlin relocating to Antarctica, and navigational mishaps that almost killed several users in Australia (seriously).

Facebook was also in talks with Waze this May but the $1 billion deal fell apart due to a disagreement regarding Waze’s future location. Facebook wanted the company to relocate to the United States while Waze insisted on remaining in Isreal. In turn, Google was quick to offer a similar price while accommodating to Waze’s location needs.

Most importantly, Google made a friend out of a potential enemy. Even if Facebook and Apple never acquired the company, Waze was gaining solid traction in the electronic map market and would have likely continued to strip Google of its user base.

Social Media

In addition to denying competition access to Waze, Google has also procured a culture of social media use. Google previously attempted to penetrate the social media market with Google Plus but the results so far have been unimpressive.

Facebook is still miles ahead of Google in terms of social media. Google needs higher rates of active user engagement and the Waze community will help to provide this.

Waze currently boasts 50 million users and this base will grow now that the company is operating under Google’s umbrella. You can expect to see the integration of Waze’s social community into other Google services such as Google Plus and Google Maps.

As previously mentioned, the acquisition allows Waze to continue operating in Israel but only for three more years. After this time frame Google could simply consume Waze after integrating its technologies into Google Maps.

Bullyish Awareness

The most important thing to be taken out of these developments is that Google will continue to bully its way through the technology industry. Google currently holds over $50 billion in cash so $1 billion acquisitions definitely aren’t going to put the tech giant in any financial trouble.

Even if Google and Waze’s relationship wasn’t symbiotic, it is worth the cost of kicking Facebook and Apple while they are down.

GOOG ytd

Source: Yahoo Finance

Google has seen strong  growth this year in the face of an already massive share price and its competitor’s woes. Year to date, Apple is down 20 percent and Facebook is down 14 percent. Google, on the other hand, is up 22 percent.

To say that shares trading at $880 have plenty of room for growth may seem counterintuitive, but Google still has a ton of tricks up its sleeve. Self-driving cars, wearable computers, and affordable fiber internet are only a few areas among the many where Google is still set to make a significant impact.

Turning progress to profits,

  JS Sig

Jason Stutman

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