Here’s Why Google Is Buying Waze, a Red-Hot Mobile Traffic App, for $1 Billion

Have you heard about Waze, the crowd-sourced navigation app? If not, you’re about to, because Google is buying this Israeli company for $1 billion. This deal could give Google a major boost in the escalating battle for advantage in the fiercely competitive mobile-mapping space — and spite Apple and Facebook for good measure.

Why would Google want to shell out more than $1 billion for a relatively unknown start-up? Three reasons: First, Waze’s collaborative, user-based approach to mapping represents a real breakthrough for mobile-navigation apps. Second, the company poses a threat to Google’s own popular Maps product, so this acquisition is a smart defensive play. Third, by buying Waze, Google is able to keep it out of the clutches of archrivals Apple and Facebook, which both have been circling the company in recent months.

As GPS-equipped smartphones have become increasingly ubiquitous, map apps have soared in popularity. For well over a year, Google and Apple have been fighting an increasingly intense battle for user loyalty in the mobile-map space, which explains why both companies have been circling Waze. Because map apps are so widely used, they’ve become a key priority for software companies in the mobile wars.

Waze, a free application currently available on the iPhone and Google Android devices, delivers a unique innovation: by incorporating real-time GPS data from its nearly 50 million users, the company delivers highly accurate and useful traffic and navigation information. Users can also edit maps with details like gas prices, speed traps, road construction and traffic accidents.

Think of Waze as the “wisdom of crowds” meets digital maps. “Join other drivers in your area who share real-time traffic and road info, saving everyone time and gas money on their daily commute,” Waze says on its website. The goal? “To outsmart traffic and get everyone the best route to work and back, every day.” Waze users receive mobile alerts about traffic hazards based on their location.

“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, a Google Geo vice president, wrote in a company blog post. Terms of the deal were not disclosed, but Google is reportedlyspending $1 billion in cash, plus $100 million in performance payouts to the Waze staff.

Waze’s “social” component differentiates it from the leading mobile-map apps, which happen to come from Google and Apple. For this reason, Google’s interest in the company is, in part, defensive. Often, when tech juggernauts like Google, Apple and Facebook encounter a start-up that has developed a product that poses a threat, the easiest solution is to simply buy it and remove the competition.

That’s what Facebook did when it spent $1 billlion in cash and stock to buy Instagram, which had built a superior and more popular photo-sharing service. “Buying Waze is all defense but great defense wins championships,” observed tech entrepreneur and investor Howard Lindzon.

Google’s purchase also keeps Waze out of the hands of Apple, which could have incorporated the company into its own map service, and Facebook, which might have integrated the app into its giant social network. Facebook reportedly offered Waze nearly $1 billion last month, but the talks apparently fell through over the purchase price.

“We evaluated many options and believe Google is the best partner for Waze, our map editors, area managers, champs and nearly 50 million Wazers globally,” Waze CEO Noam Bardin wrote in a company blog post. (Champs are Waze power users.) “Google is committed to help us achieve our common goal and provide us with the independence and resources we need to succeed.”

Waze, which was founded in 2007, has about 100 employees, mostly based in Israel, with offices in Silicon Valley and New York. According to the Israeli business publication Globes, which first reported news of the deal, another sticking point with Facebook was that Waze “insisted that its Israeli employees should continue working in Israel, which Facebook did not accept.”

Waze could remain an independent app, although some of its features could be incorporated into Google Maps. According to CrunchBase, the company has raised $67 million in venture-capital funding, including $30 million in its most recent round, led by Silicon Valley titan Kleiner Perkins Caufield & Byers and Hong Kong billionaire Li Ka-shing. Microsoft was also an early investor, but apparently did not make a bid for the company.

Steve Jobs in his own words

I'll always stay connected with Apple. I hope that throughout my life I'll sort of have the thread of my life and the thread of Apple weave in and out of each other, like a tapestry. There may be a few years when I'm not there, but I'll always come back

-- Steve Jobs, 1985

That's a quote from a Playboy interview Steve Jobs gave back in 1985. February of 1985, to be specific, right before Steve would be ousted from the company that he co-founded with Steve Wozniak and Ronald Wayne in 1976. Apple of course famously grew out of a garage, the brains of Woz, the drive of Jobs building the company over the next nine years into a powerhouse in the burgeoning home computer market.

Join us for a look back at the life of Steve Jobs. 

Steve has always had his own way of doing things, a famous temper that left many engineers crying. When things were going well, he was worshipped. But, when things started turning sour, that unique way didn't earn him so many fans. In May of 1985 Jobs was effectively fired by John Sculley, who'd joined Apple from Pepsi as CEO. Steve Jobs was free to do his own thing.

The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life.

-- Steve Jobs, 2005

Steve went on to found NeXT Computer, a highly advanced (and highly expensive) desktop computer that won favor among developers for its object-oriented foundations. But, it never found financial success. His other main diversion, however, would find plenty.

There are downsides to everything; there are unintended consequences to everything. The most corrosive piece of technology that I've ever seen is called television - but then, again, television, at its best, is magnificent.

-- Steve Jobs, 2003

In 1986 Jobs bought a company called Graphics Group, a small firm that was responsible for visuals like the Genesis effect in Star Trek II. Jobs paid $5 million for the company. In 2006, 20 years after Jobs acquired it, Disney purchased that company (now called Pixar) for $7.4 billion.

A lot of times, people don't know what they want until you show it to them.

-- Steve Jobs, 1998

Apple acquired Steve's NeXT in 1996, bringing the man back into the fold and, before long, bumping him back up to the CEO position. From here, Steve went on a spree of killing off unsuccessful projects (like Newton) before ushering in many of the changes that would, ultimately, turn Apple into the company we know today.

When you first start off trying to solve a problem, the first solutions you come up with are very complex, and most people stop there. But if you keep going, and live with the problem and peel more layers of the onion off, you can often times arrive at some very elegant and simple solutions.

-- Steve Jobs, 2006

Steve would come up with many, many elegant solutions to problems that many people didn't know they had over his next 15 years at Apple. The iMac would be released in 1998 under his watch, a device that he said marries "the excitement of the internet with the simplicity of Macintosh." But, in 2001, Apple would really hit its stride.

Creativity is just connecting things. When you ask creative people how they did something, they feel a little guilty because they didn't really do it, they just saw something. It seemed obvious to them after a while.

-- Steve Jobs

It would be in 2001 that Apple really turned into the company that we know today. It re-invented the Mac operating system with OS X (built from NeXT foundations), launched its own retail chain of Apple stores, and launched both the iPod and the accompanying iTunes. At first, these were curiosities. They'd soon become unshakable industry behemoths.

We're just enthusiastic about what we do.

-- Steve Jobs, 1985

From here Apple would launch the iPhone in 2007, the App Store in 2008, and the iPad in 2010. All three launched as curiosities, all three having their doubters, and all three following the (ever-expanding) iPod line to heights that nobody could have foreseen -- surely even Jobs himself. People may have been a little disappointed with the iPhone 4S recently, but that's only because Apple has impressed everyone so much in the past.

I'm sorry, it's true. Having children really changes your view on these things. We're born, we live for a brief instant, and we die. It's been happening for a long time.

-- Steve Jobs, 1993

Steve Jobs has had a remarkable effect on the industry as a whole. His impact on the progression of personal electronics cannot be overstated and his swift departure leaves a hole none could fill, but he has built a legacy that few could ever hope rival. Apple computer now stands firmly as a leader in consumer electronics, and for many it will always be known as The House that Steve Built.