Posted by Will Stabley on Jun 22, 2013 in News, Tech |
Google was so eager to get its hands on the social mapping technology at the heart of an obscure app called Waze that it acquired the company at an 11000% markup over its annual revenue. It was also so eager to close the deal that it didn’t bother to seek FTC approval before closing the deal. And now the FTC is retroactively looking into whether the deal violated any antitrust provisions, as Google dominates the online maps market and Waze was technically a competitor. If the Feds don’t like what they see in the deal, they’ll force Google to sell off Waze, which is a problem because no one else out there thinks Waze is worth what Google thought it was worth.
In an era where tech behemoths are acquiring upstart mobile apps for a billion dollars a pop left and right, Google trumped them all by paying a billion and a third for Waze. But the annual revenue of the Waze app for iPhone and Android has only added up to seventy million dollars, meaning it has both a small customer base and a small earnings potential. If the FTC forces Google’s hand, unless it can somehow find another suitor who sees strategic value in Waze’s underlying social technology, Google could be left spinning off Waze for a loss of more than a billion dollars. Even if Google does find a suitor, it would be selling Waze to one of its direct competitors in the online mapping field, as that’s the only market in which Waze has value. Interestingly, both Facebook and Apple toyed with the idea of acquiring Waze before deciding its founders wanted far more money than they were willing to pay.
But if Google is forced by the FTC to spin off Waze into its own unit, there would be nothing to stop either competitor from swooping back in and acquiring Waze for a song. After all, its founders already got their payday and are out of the picture – unless Google sells Waze back to them for a fraction of what they paid for it with a provision that they can’t turn around and sell it to anyone else.
Will Stabley is the Founder and Senior Editor of Stabley Times.
Google was so eager to get its hands on the social mapping technology at the heart of an obscure app called Waze that it acquired the company at an 11000% markup over its annual revenue. It was also so eager to close the deal that it didn’t bother to seek FTC approval before closing the deal. And now the FTC is retroactively looking into whether the deal violated any antitrust provisions, as Google dominates the online maps market and Waze was technically a competitor. If the Feds don’t like what they see in the deal, they’ll force Google to sell off Waze, which is a problem because no one else out there thinks Waze is worth what Google thought it was worth.
In an era where tech behemoths are acquiring upstart mobile apps for a billion dollars a pop left and right, Google trumped them all by paying a billion and a third for Waze. But the annual revenue of the Waze app for iPhone and Android has only added up to seventy million dollars, meaning it has both a small customer base and a small earnings potential. If the FTC forces Google’s hand, unless it can somehow find another suitor who sees strategic value in Waze’s underlying social technology, Google could be left spinning off Waze for a loss of more than a billion dollars. Even if Google does find a suitor, it would be selling Waze to one of its direct competitors in the online mapping field, as that’s the only market in which Waze has value. Interestingly, both Facebook and Apple toyed with the idea of acquiring Waze before deciding its founders wanted far more money than they were willing to pay.
But if Google is forced by the FTC to spin off Waze into its own unit, there would be nothing to stop either competitor from swooping back in and acquiring Waze for a song. After all, its founders already got their payday and are out of the picture – unless Google sells Waze back to them for a fraction of what they paid for it with a provision that they can’t turn around and sell it to anyone else.
Will Stabley is the Founder and Senior Editor of Stabley Times.