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Google wants to show drivers the Waze, buys Israeli maps startup

June 11, 2013|By Jessica Guynn
  • A microphone stands in front of a Google logo during a press announcement at Google headquarters in New York in May.
A microphone stands in front of a Google logo during a press announcement… (Emmanuel Dunand / AFP / Getty…)

SAN FRANCISCO -- Google, which has already outpaced all other competitors in online maps, has sealed a $1-billion-plus deal for Waze, an Israeli social mapping company that is popular with drivers who use it on mobile devices to avoid traffic congestion.

Waze had been in discussions with Facebook with which it already had a partnership and had drawn attention from other technology giants.

Instead Google could extend its lead in maps while improving their reliability and usefulness.

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"The Waze product development team will remain in Israel and operate separately for now. 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," Brian McClendon, Google’s vice president of geo, said in a blog post.

The deal ends weeks of fevered speculation about the fate of the tiny but highly sought-after startup which has soared in popularity by tracking the routes of its users over GPS. Volunteers also submit edits to the maps to help drivers make adjustments for traffic conditions, road construction and the like.

Even though it's a crowd favorite, Waze has struggled to make money and had reached a fork in the road: Either it had to raise another round of venture funding or sell itself.

As more and more drivers rely on mobile devices to navigate the world, demand has increased for real-time traffic information. At its annual developers' conference last month, Google showed off a new version of its Maps product that includes more real-time traffic information, but it still has a ways to go.

Waze, McClendon said, can help drivers "outsmart" traffic.

The company is based in Israel but has an office in Palo Alto. It has about 100 employees and 47 million users around the world. It's most extensively used in Israel where nearly nine in 10 drivers deploy it, the company says. Joining Google could give Waze a powerful platform to preach the benefits of its products.

Financial terms were not disclosed but Google, in bidding against Facebook and Apple, is believed to have settled on a price of $1.03 billion. It's unclear if the deal will undergo any antitrust scrutiny.

"The big question is: Can it get through antitrust?" said Pivotal Research Group analyst Brian Wieser. "I expect it will be much more difficult for Google than it would have been for Facebook."

Cantor Fitzgerald analyst Youssef Squali said the deal "should help improve Google's own mapping technology and offerings, add a unique social layer that is complementary to the platform and further differentiate Google from the competition, primarily Facebook, Apple and Microsoft."

Google, he noted, has $50 billion in cash and marketable securities on hand (albeit outside the United States).

"We view this deal as strategic and potentially very valuable over time," he said in a research note.

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