The company formerly known as Google — now Alphabet (GOOG, GOOGL) — may have just struck a deal with Uber, one of its fiercest new competitors in mapping and self-driving cars.
Nothing has been announced yet, but the writing is on the wall.
In late October, the Google logo began to appear in the Uber app, overlayed atop the in-app map. Around the same time, reports began to surface on social media that the Google Maps app was recommending Uber as a transportation option for some users.
Apparently Google Maps has incorporated Uber (for users in certain cities) since November 2014. But the same is not true for the Google logo, which just popped up on Uber’s maps late last month.
It’s important to know that Google is an investor in Uber, a $51 billion company with plans to compete against GOOG, Apple (AAPL), and Tesla (TSLA) in the driverless cars space.
So what exactly do these incestuous integrations mean? Let’s take a look at some possibilities.
Will Google Buy Uber?
This scenario seems unlikely. Google is one of the smartest companies in Silicon Valley, and buying into the ride-hailing company at a $51 billion valuation would be the equivalent of a retail investor buying the Uber IPO, which looks to be a ripoff for a multitude of reasons.
Shelling out $51 billion would suck up 70% of Google’s cash assuming the transaction was an all-cash deal — and that’s assuming Google doesn’t pay a premium. No, an acquisition is not on the horizon, especially considering it already owns a piece of the pie.
There are two far more likely scenarios:
A Power Play/Data Sharing Agreement
Scenario #1: Uber and Google Maps aren’t friends; Google is actually ticked off. It’s a power play.
On October 19, TechCrunch broke the news that Ubers with mounted cameras on them had hit the streets, as Uber begins its all-out push to develop its own maps technology. Seeing as the first reports of the Google logo appearing in Uber’s app started popping up the next week, it could be that Google demanded some respect from Uber.
After all, not only is Google an investor, it currently does the heavy lifting in powering Uber’s own mapping technology. Uber even bought mapping tech from Microsoft (MSFT) to lessen that reliance earlier this year.
That gives Google quite a bit of leverage over Uber, particularly in the short-term.
Scenario #2: Uber and Google are sharing data in a quid pro quo arrangement.
It’s still unclear whether Google Maps recently expanded its practice of recommending Ubers for certain users, although if certain comments on social media are taken at face value, that would appear to be the case.
When Uber announced that Google Maps was integrating driver pickup times into its app a year ago, the company said it would only be “for users with Uber installed on their Android or iPhone.”
It was rolled out in 30 cities, and would only appear for users selecting the “transit” or “walking” options.
However, a series of tweets from Twitter (TWTR) user @betsybookworm would seem to refute that:
Dear Google Maps, when I ask you for walking directions I don’t need or want Uber as an option, thanks.
— Betsy (@betsybookworm) October 24, 2015
Seriously, since when did Google maps directions start including ads for Uber? — Betsy (@betsybookworm) October 24, 2015
And it is an ad, because I have never signed up for Uber or installed the app, and I never will
— Betsy (@betsybookworm) October 24, 2015
So, in a nutshell: Perhaps Uber wanted more information on how users worked within Google Maps, and Google wanted some branding (and maybe some data, too) out of it.
Or, it could just be a real estate/monetization trade, where Google Maps refers more users to Uber in exchange for the branding and prime real estate on one of the most popular apps today. You’d think Google would also get a referral fee for any paying customers that came over as well.
At the end of the day, don’t read into whatever arrangement the two companies have as signs Uber will be bought out. All that’s clear is that these two companies are increasingly frenemies — frenemies with a lot to gain from one another.
As of this writing, John Divine was long shares of AAPL. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
