RUMOR: $1 billion Facebook move for Waze

The latest deal talk in Silicon Valley on Waze is an eye-popping, $1 billion price tag that’s hard to ignore.

Facebook is said to be gearing up to buy its way further into the mobile and location-based space by purchasing the popular social traffic and navigation app, which is based in Israel. The two companies are said to be discussing a deal worth between $800 million and $1 billion, according to multiple reports in the Israeli press. Israeli newspaper CAlcAlist reports that both companies have signed a term sheet, and that Facebook is doing due diligence.

Waze and Facebook spokespeople aren’t commenting, and Waze CEO Noam Bardin could not be reached for a comment.

The company currently has a store-front-style office in Palo Alto (occupying what used to be a Radio Shack), but the majority of the workforce are based in Israel. The company was founded in 2007 and has raised $67 million in venture funding from the likes of Kleiner Perkins, Blue Run Venures and Hong Kong billionaire Li Ka-Shing. If such a deal were to go through it would be highly-lucrative exit for all concerned.

This isn’t the first time Waze has been the subject of acquisition talk, though. Six months ago reports swirled that Apple wanted to buy the company for approximately $400 million plus $100 million in incentives, while Waze itself was pushing for $750 million. No deal manifested, though it made sense that Apple might want to use Waze’s community of users to improve its own, much-criticized Maps product.

Waze has been touted as a Facebook for drivers. Its biggest strength has been in creating a system that allows drivers to share traffic updates with the app. If a user gets stuck in traffic, they post an update and other drivers are routed away from the scene. The company meanwhile builds up its mapping data by tracking users – the more users it has, and the more they share, the more accurate Waze maps become. The company claims to have more than 47 million active users, up from the 20 million it reported in July last year.

If such an acquisition were to mirror Facebook’s purchase of Instagram, Waze might continue to operate as an independent service, with perhaps more integration with Facebook features such as Facebook Check In.

Waze’s big challenge till now has been building out its location based ad network, which it only launched late last year. By January 2013 the company had struck ad deals with a few big names including AT&T and Taco Bell, so that whenever Waze driver found themselves stationary on a journey (at a stop light, or parked) an ad from one of the companies popped up on the screen. In January of this year the company was still a long ways off from being profitable.

Interestingly, Waze made a subtle appearance last month at Facebook’s launch of Home, a free launcher that integrates Android phones more deeply with Facebook features. During the announcement, screenshots of Facebook Home featured Waze as one of the apps on the phone’s home screen. “We are honored to receive this kind of recognition from Facebook,” Waze said in a blog post at the time.