Waze 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.