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TheStreet Open House

Why Google Was Smart to Buy Waze

NEW YORK ( TheStreet) -- The battle for Waze is finally over, and it's Google (GOOG) who comes out looking like a winner whereas Facebook (FB) and Apple (AAPL) appear to have lost an opportunity to outpace their chief rival.

Waze, the Israeli-based geo-location said yesterday it was being acquired by the Mountain View, Calif.-based Google though terms were not disclosed. (It's been reported the deal was worth between $1.1 billion and $1.3 billion). Google already has a very strong presence in mapping with its popular Google Maps application, but Waze brings a whole new level of data to Google, a company that thrives on data crunching. Waze is powered by its 50 million users, who update in real-time, traffic, accidents and other road conditions useful for drivers.

With the acquisition, Google not only gets the maps aspect, but since Waze is powered by its users, Google can continue to expand its Google+ social network, tying in more people to its products and services. It allows Google to strengthen its hold in mapping, while keeping Facebook and Apple at bay in maps.

Waze CEO Noam Bardin wrote in the blog discussing the acquisition that the company had evaluated many options on a exit strategy, "and believe Google is the best partner for Waze, our map editors, area managers, champs and nearly 50 million Wazers globally."

Maps have become an important aspect for technology companies to have with data becoming increasingly essential as companies try to learn more about their users. Whether you like it or not, Google knows your search history, what you're looking to buy and with Waze, can now better serve you ads based on where you are. That's a large reason why Facebook was also looking at Waze.

Apple, though CEO Tim Cook publicly denied making a bid on Waze, could have acquired Waze for a slightly different reason. Apple Maps has been a perception problem since it was released in late 2012. It caused such a public relations mess Apple and Cook apologized for the fiasco, and may have directly led to Scott Forstall's ouster at the company.

By acquiring Waze, Google hurts Facebook, one of key its competitors in the advertising market. It hurts Apple, who has increasingly moved away from using Google services in iOS, as it focuses on software and services made by itself. For $1.1 billion, Google acquired the perception that it is using its significant cash hoard to better itself. The perception is that Apple's cash hoard ($145 billion at the end of last quarter), is not being used for acquisitions. Facebook's acquisitions, outside of Instagram, have yet to have a major perceived impact on the company's business.

Google shares were dropping 0.9% in mid-day trading to $872.11.

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