Why Facebook might drop $1B on a map service
Acquiring Waze would give the social network added ammunition for advertisers on at least 2 fronts.
Acquiring Waze, which is based in Israel, may help keep users on Facebook site for longer periods -- a key selling point for advertisers -- instead of them going to rivals such as Google (GOOG) and Apple (AAPL), which have both invested heavily in their mapping apps. This also underscores CEO Mark Zuckerberg's philosophy of sacrificing short-term profitability to strengthen the Palo Alto, Calif., company for the long run.
Waze differentiates itself from its rivals with a robust user base that offers real-time reports of traffic jams along with other useful information, such as where to find the cheapest gas. At the end of last year, Waze claimed a community of 36 million drivers.
It has plenty of fans in Silicon Valley. According to The New York Times, Apple and Google "may be interested in a potential acquisition of the startup to improve their own mobile mapping services."
The idea behind an acquisition by Facebook is twofold. First, getting users to remain connected to the site for longer periods would increase the odds that they'd notice ads. This is particularly important in the fast-growing mobile area, which Wall Street is keenly interested in. Facebook's new interface for Android users, dubbed Facebook Home, is designed for this purpose as well.
Facebook could also use Waze to deliver targeted local advertising. People who want directions to a city such as Philadelphia would be served ads for restaurants, motels and attractions they'd encounter along the way. This is a huge market. Researcher Borrell Associates expects businesses to spend $24.4 billion on local advertising this year, versus $18.7 billion last year.
The question for investors isn't whether Zuckerberg will write another huge check to buy a promising startup but when.
Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The stock market ended the holiday-shortened week on a mixed note as the Dow Jones Industrial Average shed 0.1%, while the S&P 500 added 0.1% with seven sectors posting gains.
Equity indices faced an uphill climb from the opening bell after disappointing quarterly results from Google (GOOG 536.10, -20.44) and IBM (IBM 190.04, -6.36) weighed on the early sentiment. Google reported earnings $0.15 below the Capital IQ consensus estimate on revenue of $15.42 ... More
More Market News
Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'