Weighing the Importance of Google’s Waze Win

After months of courtship from the Google-Facebook-Apple tech triumvirate, Israel-based social navigation app Waze ultimately chose to partner — for more than US$1 billion — with Google. The price tag shows how valuable Waze has become, and that’s to say nothing of the overtures it received from the world’s tech giants.

To break down the recent deal and how it came about, TechNewsWorld talked with David Shamah, the tech correspondent for The Times of Israel.

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Here are excerpts from the podcast:

TechNewsWorld: Google is, we now know, going to pay north of $1 billion for Waze. That in itself shows how valuable people think the company is, but it’s also interesting that before Google, there were reports that Facebook and Apple were also trying to acquire the company. It seems like there was maybe something of an obsession with social navigation and that Waze was kind of in the center of this social navigation storm.

This is something you touched on in your recent article about [the acquisition], saying that Waze was kind of in the right place at the right time. Talk if you would about this emphasis on social navigation and how Waze ended up being in the middle of it all.

David Shamah: Absolutely — you’re right when you say “right place at the right time” because that is exactly how Waze lucked out with this huge deal. Obviously it’s also due to their very hard work; they have an excellent product. As you know, Google has its own driving and navigation app, but it doesn’t inspire the same kind of affection that Waze does. Waze users are very loyal… .

In terms of the various potential offers that Waze reviewed and/or rejected — we’re not sure exactly why those rejections came. Obviously Apple had not offered enough money. The rumor at the time was that Apple offered something like $400 million. Having spoken to a company insider, I know that they thought that offer at the time was very low-ball and they knew they could have gotten a lot more.

In fact, there are some people on the board of directors who think they could have gotten more than a billion dollars if they had gone public, if they did an IPO, but then there were development issues — when you go for an IPO, there’s a lot of static that you have to deal with — and I guess the company didn’t want to deal with it.

I think what’s really surprising is that Facebook allowed the deal to die, because they’re the ones that really need this app. Google, as I said, has its own driving and mapping app, and they certainly have the resources that would be needed to improve it and bring it up to speed, whereas Facebook isn’t in that space that at all. And the fact that they lost out on Waze really puts them behind the eight ball.

TNW: I wanted to ask you about why the Facebook deal didn’t go through, and I’m curious if you could shed some light on that. There were reports, from yourself and others, that a point of contention with Facebook was the location of where Waze would be. Facebook apparently wanted Waze to relocate to either the U.S. or to Europe. And it was interesting to think about that nugget when reading the Waze press release about the Google partnership. Because in that press release they specifically said our main operations will remain here in Israel. I’m curious if you think — is there any connection between the potential of relocating? Or is that kind of just connecting dots that aren’t really there?

Shamah: No question about it. And the proof in the pudding is that both Google and Facebook offered pretty much the same amount of money for it — and Facebook was there first! They were negotiating with Waze before Google, and they offered a billion dollars, and the negotiations broke down, apparently, over this location issue.

Look, it’s a combination of factors here. No. 1 is that the company likes Israel, they like the startup spirit here, they like the idea of working with engineers locally, they like the kind of talent they can get here. But there’s another aspect of it also and that is — as your listeners may know — there is a lot of Israeli technology that gets bought out by multinational from abroad: the United States, Europe, even from Asia.

Very, very often what happens is that when a multinational buys an Israeli company, they sort of fold the operations into their regular day-to-day operations. Whatever the corporate structure is — managers, etc. — and very, very often, people get fired. There is a lot of consolidation, different departments may be redundant now because they already existed in the [first] corporation — and a lot of people end up losing their jobs.

So one of the motivations for the Waze people was that they didn’t want people to get screwed by getting bought out, as happens so often. It’s not an uncommon thing — and, you know, kudos to them for watching out for the rest of the workers. And again, having spoken to people in the company, I don’t know if that was the main motivation, but that was certainly on the minds of the bosses and management and directors. Even though it doesn’t necessarily sound like it should be a major issue — and you know, the cynical person could say “yeah, well, that’s just an excuse” — but there is a good reason for them to have felt that way.

TNW: One of the things that’s interesting about Facebook and Google and Apple reportedly going after Waze as hard as they did is that these companies — it seems like everything they touch turns to gold. They have brilliant people, brilliant programmers, huge market shares. What is it about Waze that these companies couldn’t live without, or couldn’t do by themselves? Is it a vastly superior product? Or is it an instance of, Waze was there first, and therefore everybody needs to latch on to the first guy.

Shamah: Like I said, Google has its own driving app, and technically they could have probably put a lot of resources into it and improved it — but Waze has that X factor. People like it. I don’t know if it’s because it was there first, but it’s just got a lot of personality. You know, Google Maps and Google’s driving app does not have that kind of personality, and Google wanted to [incorporate] that into its sphere.