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Waze Gives the Location Industry a Lesson in How to Create Value

by Roger Lanctot | Jun 12, 2013

When executives heard about Verizon’s acquisition of Hughes last year they laughed, they gasped and then they applauded.

They laughed because $612M sounded crazy. They gasped because they realized that Verizon was very serious about telematics, maybe more serious than anyone realized - $612M serious. And they applauded because it was good news for every other company in the space looking for an exit-strategy story to tell their investors and boards.

It has happened again, this week, with Google’s reported acquisition of Waze for an estimated $1.1B. Observers laughed and scoffed – myself included. We gasped. And, now, we applaud.

Google will soon be telling us why it made this acquisition.  The available reasons include:

·         Access to Waze’s crowdsourcing platform for location information which offers a level of engagement with users that exceeds in depth anything Google has achieved with its various properties;

·         Access to Waze’s engagement with media – broadcasters such as ABC have demonstrated a strong interest in Waze’s traffic information – especially its personalized elements (Has “waze-er” made its way into the dictionary yet?);

·         And 47M+ users globally is nothing to sneeze at.

What is the impact of this acquisition?

Traffic information services are inherently social.  Waze was the first organization to not only recognize this insight, but to aggressively put it to work.  And when driver distraction became an issue, Waze found a way to enable traffic reporting by waze-ers in a hands-free, non-distracting manner.

INRIX has its partnership with Aha for reporting traffic incidents in real time via the Aha Radio app.  Multiple organizations capture probe data to report traffic flow in the aggregate.  But with the exception of InkaNet in China, Waze was the only company that allowed one user to see the progress of another user on the road.

Waze-ers (apologies to Diann Eisnor) gained recognition, particularly during Los Angeles’ Carmageddon construction project on the 405 (fears of a traffic calamity did not pan out, though Waze was prominently featured by local television traffic reports trying to help hapless drivers).  At each step of the way Waze showed the power of a very personal connection with drivers including gaming elements and reporting of real-time events on the road.

Some car makers already understand the power of probes, as Audi, Ford, Toyota and BMW have partnered with INRIX to capture and share vehicle probe data to enhance their own traffic information services.  But even these forward looking organizations have failed to deliver the personal touch.  (Fiat’s Eco-drive does offer some game-play and community elements, though not in real time. 

The next step will be to build embedded platforms capable of capturing and uploading on-board camera and sensor inputs in the event of a “delta event” while driving.  Cars with embedded telematics systems ought to leverage historical data such that they are able to identify when traffic conditions are out of the norm and automatically capture and transmit relevant on-board data. 

With its market advantage in aggregating probe data from embedded telematics systems, INRIX is perhaps the greatest beneficiary of the Google acquisition – especially in light of its upcoming IPO.  Other valuation beneficiaries ought to include navigation providers (deCarta, TeleNav, Navmii, Fullpower, Nokia, TomTom), though none of their stocks rose. 

But, finally, the billion-dollar acquisition of Waze by Google ought to be a big heads up to every car maker.  From GM/OnStar to Toyota, Volkwagen, Hyundai and Geely, the embedded connection in the car represents an extraordinary opportunity to connect to the customer for the purpose of delivering a personalized traffic information experience.

As I have said and written many times, traffic information is the single most important telematics application.  Car makers implementing telematics must leverage vehicle probe data to enhance traffic information services.  And personalizing that service by allowing real-time reporting – either in an automated or in an ad hoc hands-free fashion – will deliver immense value to the customer AND stockholders.

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