SAN FRANCISCO, CA - JUNE 06: Brian McClendon, Google VP of Engineering for Google Maps, speaks... [+]
You know Apple (APPL) is in trouble when you see that it is trying to buy its way out of problems with its products. In the good old days, Apple used to try to fix its own problems.
But TechCrunch reports that Apple is in the advanced stages of acquiring Waze for $500 million.
I interviewed Waze's CEO, Noam Bardin, back in March 2010. As I wrote, "Years ago, Ehud Shabtai, a software engineer, was given a handheld device that came pre-installed with navigation software. Thrilled with the possibilities, Ehud took it for a test drive and became quickly disappointed. The problem: The navigation software knew the roads well enough, but it wasn't able to let him know, for example, if a certain road was under construction and not passable."
"Shabtai figured there had to be a better way. He had the technical skills needed to solve this problem and started to build the first traffic platform that combined GPS technology with open source software. His idea: To create a system that would be continuously updated by drivers themselves, giving everyone all the relevant and up-to-date information they need to decide which roads to drive on. No more turning on to closed streets or getting stuck in traffic."
By March 2010, Waze had made some impressive progress. According to Bardin, in the first year after the company launched in 2008, it had 250,000 users in Israel representing 20% of the country's smart phones. It was also one of the top-selling applications of Apple's App Store. In August 2009, Waze launched in the U.S. and the App Store here had 100,000 users by March 2010. By November 2009, Waze had expanded to 85 countries.
Waze generated revenues by selling its data and through advertising. "We sell our map and road condition data to companies such as trucking and freight companies," explained Bardin. "We also make money by selling advertising from companies interested in reaching our users based on their location."
In the last three years, Waze has made progress. So much so that CNET reports that Waze wants Apple to pay $750 million for the company but Apple is "so far only willing to offer $400 million in cash and an additional $100 million in earnouts, based on performance."
In case you missed it, Apple has been having problems with its Apple Maps service. Google (GOOG) has a huge head start over Apple. After all, Google has been solving the problem of creating accurate mapping data for much longer and Google Maps is a far better service.
One reason is that Google Maps has a way for its users to let it know of gaps between reality -- as reported by users -- and what Google Maps thinks is reality. That process of fixing bugs is something that Waze does quite well.
The problem is that if Apple buys Waze, there is a good chance that the organizational dysfunction at Apple that led to its problems with Apple Maps could snuff out the strengths that Waze might bring to the party.
And it looks like Google has already figured out the process. It might be better for Apple to hold onto its cash and fix its own internal processes for creating accurate mapping data.
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