Why Did Ford Just Buy A Software Startup?

One auto giant thinks smartphone apps on car dashboards are the future–and just paid roughly $10 million for a company specializing in them.

Why Did Ford Just Buy A Software Startup?
[Image: Flickr user Daniel Dionne

Automakers are in the business of putting engines, gears, and sheet metal together–not buying software startups. This is why Ford raised some eyebrows last week with its acquisition of Livio, a Michigan-based company whose main product is an API for in-car smartphone apps and is best known for Bluetooth car kits. Although the purchase was small potatoes by the standard of automaker budgets (Livio was acquired for less than $10 million), it’s an indicator of something much more important: Automakers want apps in your cars.

The calculus for automakers is simple: Customers love apps, even if they’re driving. They’ll use Apple Maps or Google Maps for GPS. They’ll listen to Pandora in the car. When they’re looking for a restaurant on the road, they’ll use Yelp. Not to mention find cheap gas, SMS text message family or friends, even read Kindles in traffic (which is massively unsafe, but we’ve seen it). For automakers, creating APIs and OS ports that allow familiar smartphone apps or their clones to migrate to touchscreen auto dashboards or voice-operated commands creates an entire new revenue stream.

This is why Ford’s purchase of Livio matters–whether automakers reap profits by charging popular app makers for in-dashboard use or charge users to access these services (or both), it’s a whole new revenue stream and the biggest redefinition of how we use our cars since GPS and the first generation of electrical vehicles. Livio won’t be the last acquisition of a software firm by an automaker.