Google Maps from Alphabet Inc (GOOG, GOOGL) is unquestionably the most dominant mapping software in the world. Google’s been building it out for more than a decade, and its prowess in mapping the streets of the world has come in super handy as it builds and tests self-driving cars.
Enter Amazon.com, Inc. (AMZN) and Microsoft Corporation (MSFT), who are out to ruin Google’s day.
Both AMZN and MSFT are likely teaming with Mercedes-Benz owner Daimler AG (DDAIF) and acquiring minority stakes in the HERE digital mapping service, which was acquired from Nokia (NOK) for $2.85 billion last year.
The move is a clear pivot into the arena of self-driving cars, an emerging industry with a meteoric trajectory. Google has famously developed a small fleet of self-driving cars that drove a combined 1.5 million miles without a single accident being caused by its computer.
The move shows that Amazon and Microsoft are not content to let Google coast by as the go-to mapping technology behind autonomous vehicles; and with the future of the industry very much an unknown, the relatively small, yet strategic investment in HERE could have enormous long-term repercussions.
Maps: A Crucial Part of Self-Driving Cars
HERE isn’t just another street-mapping software. Daimler AG, BMW AG, and Audi AG, the current co-owners of the tech, are working toward creating real-time HD street mapping, something essential to the effectiveness of self-driving cars in the future.
The so-called “connected car” of the future will not only drive itself, but upload vast amounts of usage data and real-time traffic information to the cloud, where it can help inform other drivers of wrecks, weather and road conditions. That’s where AMZN and MSFT come in.
The German automakers have sought out cloud computing partners for the processing, storage and analyzing of data, and reportedly were worried about GOOG getting too close to the data, which they feared Google might monetize unfairly.
Amazon Web Services and Microsoft Azure are currently the two market leaders in cloud computing, and you better believe they’d both like to fend off Google’s advances in that area, too.
AMZN and MSFT shareholders should cheer the investment in HERE, which I view as a necessary move to block Google’s mapping dominance. Microsoft shareholders are all too familiar with what it can look like when you miss the boat on an emerging trend; MSFT was extremely late to take the smartphone, tablet and digital music markets seriously under Ballmer.
If you measure the opportunity cost by even a portion of subsequent dominance of Apple Inc. (AAPL) in those areas, that foot-dragging was awfully expensive.
What’s so promising about HERE is the fact that it’s essentially a consortium of auto and tech companies building out the software together.
They have shared incentives, and Daimler hopes to add more automakers to the mix, giving it an even greater number of cars from which they can pull data and build HERE.
That’s an advantage that Google Maps doesn’t have, and Amazon and Microsoft are smart to seize upon it.
As of this writing, John Divine was long AMZN. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
