Is Waze a Billion Dollar Company?

wazeWaze is back in the acquisition rumor mill.  In January, it was a rumor about Apple (propagated and debunked on successive days by TechCrunch).  Today, the rumored buyer is Facebook.  The one constant seems to be the price:  $1B.

Not sure if it’s true this time, but even if it’s not, it does raise the question: Is Waze a billion dollar company?

The comparable most often used is Instagram.  Given that Facebook is the subject of the rumors this time, that’s in every article I’ve seem so far.  The parallels are obvious, small company with limited revenue but growing user base bought for a $1B.

I don’t think the parallel holds.  IF Waze is being bought for that amount (and I think it could happen), it is not for the same reasons that Facebook bought Instagram.  If Waze is worth  $1B, it is not for the 40+M users of their traffic app.  It would be for the underlying map data that they are building.

Facebook bought Instagram because they had a fast growing user base in a space (photography) that was near and dear to Facebook’s heart.  Neither of those factors justify that sort of money for Waze.  Even considering their 44M users (and I suspect that the active users are a fraction of that), that barely shows as a blip on Facebook’s 1.1B users. And Facebook hasn’t shown any interest in maps and location, much less navigation, much less traffic. I doubt they’d buy Waze to get a traffic app.

What’s really valuable at Waze is what most people don’t see:  the underlying map data that they are building as a result of all those GPS traces collected from their users. By compiling millions of these traces overlaid on publicly available map data, they have been building a crowd-sourced road map database. And worldwide map data is very hard to build, which is why there are so few of them.

If the rumor is true (and the price is in that ballpark), it would indicate that Facebook wants to complement their moves into local search (Facebook Nearby) with their own mapping platform and their own mapping data underneath that. Waze gives them both, at least at some starting level. Said another way, if the price really is in the $1B range, it’s not for the revenue, or the team, or the 44M users or even the quirky traffic app.  It would have to be for the map data.

I have noticed that Waze management has been describing their company much more as a mapping platform in recent interviews (for instance, here with Liz Gannes).  A year ago, it was all about the app.  Not so much recently.  They seem to have focused on the maps and the data.

From the outside, it is hard to know how good this data is. I suspect it is good in some areas and not so good in others.  However, Waze’s map methodology gets much better if you extend it from their 44M user base to Facebook’s.  You get 1.1B users and much better geographic coverage. That could possibly combine to bring the quality of that map up very quickly.

I have no inside knowledge as to whether the rumors are true.  But if they are true, I think that you go down a wrong path by thinking about Waze as a second Instagram acquisition.  They would be valued for the underlying data, not the app.

And if it is true, advanced congratulations to Waze!

Addendum:  Why OSM isn’t a better option is another whole discussion. I suspect it revolves around ownership and data rights.

 

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9 Responses to Is Waze a Billion Dollar Company?

  1. Isabelle says:

    Hi Marc,
    Your post may have been inspired by this TechCrunch article, or maybe not, I just thought I’d post this additional related link here for quick reference (link below).
    To summarize, it mentions that 3 Israeli reports [in Hebrew] also talk about this rumour about FB being in advanced due-dilligence phase to buy Waze. http://techcrunch.com/2013/05/09/reports-facebook-is-buying-social-mapping-and-traffic-app-waze-for-up-to-1b-to-court-more-mobile-users/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Techcrunch+%28TechCrunch%29

    • Marc says:

      Hi Isabelle- There are a lot of posts out today about the rumor, that TechCrunch article being one. All came from the same source article in Israel. The tech press there jumps on rumors pretty hard so I can’t tell if there’s validity to this or not. I mostly wanted to address whether Waze could be worth $1B and if so, why. If my hypothesis is right (It’s about the data) then the value would depend on the quality and coverage of that data plus the potential to rapidly expand that data if it were introduced into a massive user base.

  2. Peter says:

    The question that remains unanswered is what would FB do with the waze map data? If they’ve shown little inclination and interest towards spatial data, why would they be interested now?

  3. Peter says:

    Why not buy TomTom? Decent maps, global coverage, hd traffic and a lot of customers from Apple to carbrands like Mercedes and Toyota. Plus some real ground truth (mapping vans) and their MapShare technology.

  4. Marc says:

    Hi Peter. I think there are a lot of possible answers, including that this whole thing is just another unfounded rumor. Or there could be a deal, but at a much lower price. I personally have a hard time seeing the $1B price but weirder things have happened. The big unknown is the quality of the Waze map data. Mike Dobson, who is pretty good on map data quality, thinks that if Facebook bought Waze, it would be an expensive mistake. I’d recommend his post here: http://blog.telemapics.com/?p=423
    Regarding TomTom, I think Anonymous is right: The owners don’t want to sell. They’ve certainly been pitched by a dozen bankers.

  5. NoTimeToLose says:

    We do you think Waze data are not good? How is this an unknown? You can check it out yourself. Remember, its not just the street data but waze’s real time traffic information and traffic movement that’s MUCH better than any other source.

    Real ground truth? TomTom? LOL, no. People getting paid to collect data are notoriously poor at it. People who travel to work every single day (and waze collects their habits as much as the road data itself) probably are actually on roads and as soon as they deviate from that behavior (en mass) guess what? Detour.

    • Marc says:

      Dear NoTime: Thanks for your comments. I’ve used Waze but not regularly…probably because I don’t do a regular commute. They have a lot of very happy users. I don’t doubt that Waze’s data on streets and traffic is very good in places. What I don’t know is how good that data is across all the roads in the world. That’s the bar if you’re going to offer a map data platform that will compete with Google’s. Check out the Mike Dobson article mentioned above for a fuller explanation of the issues. The map data world is replete with anecdotal evidence of goodness in places. My point is that I don’t know how good they are all over. Waze doesn’t really give out the data that you’d need to evaluate that. I hear 44M users all the time. How many are active on a weekly basis? What is the density (active users per linear mile of road by area)? What is their coverage outside major urban centers where their traffic app is popular? I don’t know of any public guidance on those. If you do, please let me know.

      • NoTimeToLose says:

        I guess it would depend on what you want to do, and how you want to grow. Facebook isn’t the big player everywhere in the world, so perhaps Waze suits them best where they operate. There is the fact that Waze is, by definition, social, and that fits their agenda.
        I should point out that I personally am not a fan of Waze’s data, because it is of no use to me. But in the interest of anecdotal evidence, I decided to compare some places I know about in Waze, TomTom, OpenStreetMap, Google, and Navteq and then just Waze, Google, and OSM in the world (as we don’t have licenses for other vendor software). Each seems to hit and miss depending on what you are after and where you look. Google is surprisingly good given that when they left tele atlas not that long ago. World wide I would say Google and OSM at the forefront, then waze dead last depending on country. You were on to something there.

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