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There are rumors swirling this morning that Facebook will acquire Waze. For those unfamiliar, Israeli based Waze is a red hot social navigation app that focuses on traffic conditions among a growing set of features.

If the rumor is true, it makes a lot of sense and is just the next footfall in Facebook’s march towards becoming a socially-driven local discovery engine. It would follow the launch of Nearby/Local Search, Graph Search, and the recently re-designed mobile SMB pages.

More specifically, Waze plugs right into Facebook’s product framework because real time status is the lifeblood of the news feed. In Waze’s case it would add an additional dimension to what you’re doing or thinking by adding where you’re going. It would be like Nearby on steroids.

The other reason this fits together is that Facebook is increasingly making location a key dimension of status, so that it has more content and “signals” to help you discover things. Signals can include current location, that of friends, places you’ve been, and where you might go next.

Whereas Google is all about algorithmically determining relevance based on a combination of keyword and page prominence, Facebook wants to do so by using real time sentiment data from your friends. That includes what they’re doing, saying, seeing, eating, liking and tagging.

Real-time traffic and location information simply extends that with a richer mosaic of content about what’s happening now. That makes it more sticky for users and eventually more attractive for advertisers to be present in the native ways that Facebook continues to develop.

The other reason I believe this rumor is because it fits Facebook’s acquisition M.O..  The company has a history of buying companies with strong engineering teams and technical chops. So this could partially be an acquihire. Whether Israeli staffers would be asked to relocate is one question.

But perhaps more notably, Facebook acquires products which it admires for user engagement, design and technical proficiency. It knows it can take those products to the next level through the massive usage boost they’ll get from Facebook’s deep-pocketed resources and promotion.

That’s particularly relevant for a product like Waze whose value is driven by network effect. The more people using the product, the greater the richness of content and interactions.  Again, this fits the M.O., because you could replace “Waze” in the last few paragraphs with “Instagram.”

Like Instagram, a Facebook-owned Waze would likely remain a standalone product where Facebook could learn from its design and product focus. What will be interesting to see is to what degree Waze would infuse over time with Facebook’s own mobile and local features.

There is of course a lot more to this, especially the native advertising implications for navigation-based products (see Telenav/Scout). Some hints might lie in the directional (no pun intended) advertising Waze currently does (see screenshot below). More on this as it develops.

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