Facebook's willing to pay somewhere between $800 million and $1 billion for Waze, an Israeli mapping start-up, likely because of the location based ads it could bake into its app. That's a pretty hefty (rumored) price-tag for a start-up. But a crowd-sourced GPS service makes a lot of sense for Facebook, mostly because the location data will give Facebook one more point of reference for targeting its increasingly invasive advertisements.
Facebook makes pretty much all of its money off advertising and is trying hard to figure out how sell ads on when people use its mobile services. The strategy Facebook has been following is the more information it can offer brands about its users the more valuable their advertising. Facebook has already been linking your online identity with your offline buying behavior, and adding your exact whereabouts could help the social network offer the rumored location-based ads. With Waze's GPS data, if you're near that CVS where you bought some deodorant about six months ago—something the social network knows because of its partnership with places like Datalogix—Facebook could serve you an ad for Arm & Hammer while you're in the neighborhood.
In Facebook's theory, this will make the network's ads more useful. Rather than see a sponsored story for something we don't need at a time when we have zero intention of buying, this alerts our consumerist senses at the "right" moment. To others, however, this might come off as creepy or invasive.
Waze, a "community based" traffic and navigation app that uses real-time data from users to give the best directions, already has a big, rapidly growing user-base. It has more than doubled in size since last July, now reporting to TechCrunch's Ingrid Lunden that it has 47 million users. The app works a lot like a Garmin on your phone, giving travelers turn-by-turn directions. The innovation is how it gets that data: Rather than use satellite information from navigation companies like TomTom, it relies on its users for intel on traffic, construction, and road reports. Just by driving with the app turned on, people contribute to the maps. But, people can also actively report accidents, hazards, police and other road happenings. The flow of information also works the other way, with the app sending road alerts as a person drives.
This move also fits handily into the network's plans to get smartphone users using its products. It has either amassed or built all the important software parts and apps to do that—besides a maps app. People spend about 31 percent of their time on smartphones deciphering their whereabouts, according to January ComScore numbers. And, as we've seen with the whole Google and Apple Maps fiasco, people develop deep loyalties to their mapping apps. Rather than building its own copy-cat app, Facebook could just scoop up all the Waze users and brand them Facebook maps users.