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Google Said to Consider Buying Waze Presaging Bidding War

May 24, 2013

Google Said to Mull Buying Waze Presaging Possible Bid War

The potential bidding tussle for Waze, which uses information from online communities to improve driving directions, reflects the widening importance of maps on smartphones and other handheld gadgets. Photographer: Chris Ratcliffe/Bloomberg

Google Inc. (GOOG:US), maker of the Android operating system, is considering buying map-software provider Waze Inc., setting up a possible bidding war with Facebook Inc. (FB:US), people familiar with the matter said.

Waze is fielding expressions of interest from multiple parties and is seeking more than $1 billion, said one of the people, who asked not to be identified because the talks are private. The Palo Alto, California-based startup might also remain independent, instead seeking to raise a round of venture capital financing, the people said.

As consumers gravitate toward mobile devices away from laptops and desktops, Facebook, Google and other companies are beefing up efforts to court customers on the go. The potential bidding tussle for Waze, which uses information from online communities to improve driving directions, reflects the widening importance of maps on smartphones and other handheld gadgets.

Facebook, based in Menlo Park, California, has held talks to buy Waze for as much as $1 billion, two people familiar with the matter said earlier this month.

Google, based in Mountain View, California, and other large tech companies have approached Waze about a possible deal since the Facebook talks became public, the people said.

None of the bidders is close to clinching a deal and the talks may fall apart, they said. Waze may also walk away from the discussions and use more venture backing to expand its mapping program, which has more than 40 million users.

Apple, Microsoft

Google has a widely used mapping tool and could adopt Waze’s technology to add social features to the software. A takeover would also eliminate a competitive threat and keep the startup out of the hands of another company, according to Greg Sterling, an analyst at Opus Research.

“If they put a lot of effort behind it and really try to develop a social mapping product, it could be something significantly differentiated from what Google is offering and could grow into a competitor for Google Maps,” Sterling said in an interview.

Apple Inc. (AAPL:US), which distributes a competing mapping tool, is not currently part of the discussions, a person with knowledge of the matter said.

While a Google purchase of Waze might not be blocked by U.S. regulators for its potential to alter the competitive landscape, it could still end up being scrutinized, said Allen Grunes, a former antitrust attorney for the Justice Department in Washington.

Antitrust Review

Incorporating Waze technology into Google Maps may “complement a product they already have and make it better, as opposed to representing a leading product they already compete with,” Grunes said in an interview. The transaction “could get looked at anyway by regulators because if Google gets it, it’s quite possible Facebook will be in there complaining, even if there isn’t a real antitrust problem.”

Grunes compared the transaction with Facebook’s acquisition of Instagram, which received an extended review by the U.S. Federal Trade Commission before the agency approved the deal in August.

The Justice Department, which has examined Google’s acquisitions for the past two years while the FTC conducted a broad antitrust probe of Google’s business practices in search, would also likely be the agency to look at a Waze purchase, Grunes said.

Waze Investors

The FTC, which closed its search probe in January without taking any enforcement action, is now investigating Google’s practices in online display advertising, people familiar with the matter told Bloomberg yesterday.

In the U.S., Waze’s mapping app attracted 6.3 percent of users on Apple Inc.’s iPhone last month, compared with 32 percent for Google’s navigation tool, according to Onavo Inc., which provides user-engagement data on applications for mobile developers.

Waze’s investors include Redmond, Washington-based Microsoft Corp. (MSFT:US), people said. Waze raised $30 million in 2011 in a funding round led by Kleiner Perkins Caufield & Byers and Hong Kong billionaire Li Ka-shing’s Horizons Ventures Hong Kong. Earlier investors include Qualcomm Ventures, Magma Venture Partners and Vertex Venture Capital in Israel and BlueRun Ventures in Silicon Valley.

Julie Mossler, a spokeswoman for Waze, declined to comment yesterday.

Waze announced a partnership with IMS Internet Media Services in April to expand in Latin America. Waze’s mobile app alerts users to potential traffic slowdowns or suggests alternative ways to reach destinations. The service also notifies drivers of road work, speed traps other potential hazards, using input from users.

Waze, a free service, generates revenue via location-based advertising. Its tools are also available over the Web.

Google’s shares fell 1.1 percent to $873.32 at the close in New York. The stock has advanced 23 percent this year, compared with a 16 percent gain for the Standard & Poor’s 500 Index.

To contact the reporters on this story: Douglas MacMillan in San Francisco at dmacmillan3@bloomberg.net; Brian Womack in San Francisco at bwomack1@bloomberg.net; Ari Levy in San Francisco at alevy5@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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