Critics may be tired of hearing about billion-dollar acquisitions of startups that make no money, and now they can add Waze to that list.
Earlier this week, Google acquired Waze for $1.1 billion. Waze is a turn-by-turn navigation app for Android and iOS with crowdsourced traffic updates. It uses its 44 million users to update road statuses in real-time.
But Google is the maps leader of the world. So why does it need Waze? The extra 44 million users are nice to have, but that's not what compelled Google to make its pricey purchase.
TechCrunch's Rip Empson broke down why the acquisition makes sense. Here are four reasons Google buying Waze can make sense:
1. Social data.
Waze has mastered real-time traffic and it's a big data product. While Google is the ultimate big data company, it could use some help in the social front. Its traffic routes on Maps could be vastly improved by all of Waze's user-submitted data. It can also take advantage of additions like cop hideouts and accident locations that Wazers submit on the fly. Google+ isn't strong enough to easily create the robust, socially-driven navigation network Waze has created.
2. Collecting real-time navigation information.
Another reason for the acquisition: Waze is a cheaper way to collect up-do-date navigation information than Google currently uses. In an April 2013 interview, Waze CEO Noam Bardin said Google spent $1-2 billion on Street View, sending cars to take photos all over the world. Waze obtains information for free from a community of 40-50 million volunteers.
3. Local advertising.
Empson also thinks Waze could be valuable to Google from a local advertising standpoint. Late last year, Waze added its first advertising product, a self-service solution that let businesses claim their listings in the app. It then advertises the locations to drivers as they approach the listings, similar to Foursquare's ad products. It'd be easy for Google to take this implementation and run with it.
"Local, mobile advertising spend in the U.S. is expected to skyrocket over the next few years, making Google’s vast index of local businesses and search extremely valuable to Waze, and to an extent, vice versa," Empson writes.
4. Keeping it away from the competition.
Last but not least, Google's move prevents Apple and Facebook from improving their map products. And there aren't many runners-up in the startup market. Waze was really the only mobile navigation game in town.