Months after the rumors that Apple was planning to buy Israeli crowdsourced traffic and navigation app Waze for $400m, the stakes have been raised. According to reports in the Israeli business press on Thursday morning, Facebook is now seeking to buy the company for between $800m and $1bn.
The deal is now in the advanced stages, according to a report in the Israeli business daily Calcalist, with both companies already signing a term sheet and Facebook teams doing due diligence.
There's thought to be one issue holding back a final deal, Calcalist reports: Waze management, including CEO Noam Bardin and president Uri Levine, are insisting on keeping the company's R&D facility in Israel, while Facebook would prefer to integrate it with its existing facilities overseas. That issue could prove a key one, given Facebook's tendency to take the startups in acquires and move them to existing facilities in the UK, Silicon Valley, or New York.
According to a source with knowledge of the negotiations who spoke on condition of anonymity, there is a substantial difference between the Facebook talks and those held when there was a possibility that Apple was going to buy Waze. "You could term the interaction between Waze and Apple as a series of 'dates,' whereas this seems more like an 'engagement.' The deal makes a lot of sense for Facebook, and of course Waze would be getting a lot more money."
It's not clear if the location issue is crucial to the deal, but in previous interviews, Waze's Levine has said that the company is very proud of its Israeli roots, and that he did not foresee moving anywhere.
Waze is chiefly a navigation and mapping app, with routes, traffic information, and up to date mapping data supplied by some 45 million users in countries around the world. All the information is crowdsourced, with users either passively (via GPS and location services) or actively (via the app's social network) supplying information about how fast they are going, whether they are stuck in traffic, road hazards, construction, and even the presence of traffic cops.
As a result, Waze has built an active and loyal social network, one that is highly engaged with the app – just the kind of user Facebook craves, said analysts. Waze also has a built in mobile ad platform, and in its latest version supplies Google Maps-like recommendations. "That's a big plus for Facebook, in the ongoing war for interaction with users," and a plus for Waze, which wants to ally with a big company in order to remain relevant, given Google's plans for its Waze-like Navigator app, said local social media expert Yotam Tavor.
"Waze has the platform, the ad system, and the loyal users. All Facebook would have to do is brand it, Tavor added. What's more, Waze's latest version allows users to sign up for the service using their Facebook credentials.
The deal could also help Facebook with its ongoing struggle to establish itself in the local ads market. "Waze's geolocation technology will give Facebook a strong advantage, with the ability to advertise local shops, restaurants, and services to drivers. Waze itself already does this, but on a limited scale, so there, too, Facebook could simply integrate it into its own platform from Day One."
According to the report, Facebook would pay half the amount agreed on in cash, and the rest in company stock. If Facebook buys Waze, it would be the company's third acquisition in Israel. Facebook bought mobile application platform Snaptu in 2011 for $70m, and face recognition technology maker Face.com in 2012 for $60m.
If the pricetag for Waze is as rumored, it would make for a fantastic payoff for investors. The company has raised $67m in three financing rounds so far, most recently in October 2011.