Here’s Why Google Is Buying Waze, a Red-Hot Mobile Traffic App, for $1 Billion

  • Share
  • Read Later
Nir Elias / REUTERS

Waze, an Israeli satellite-navigation app, is seen on a smartphone in this photo-illustration taken in Tel Aviv on May 9, 2013

Have you heard about Waze, the crowd-sourced navigation app? If not, you’re about to, because Google is buying this Israeli company for $1 billion. This deal could give Google a major boost in the escalating battle for advantage in the fiercely competitive mobile-mapping space — and spite Apple and Facebook for good measure.

Why would Google want to shell out more than $1 billion for a relatively unknown start-up? Three reasons: First, Waze’s collaborative, user-based approach to mapping represents a real breakthrough for mobile-navigation apps. Second, the company poses a threat to Google’s own popular Maps product, so this acquisition is a smart defensive play. Third, by buying Waze, Google is able to keep it out of the clutches of archrivals Apple and Facebook, which both have been circling the company in recent months.

(MORE: Apple E-Book Trial, Week 2: The Emerging Case for Letting Apple Off the Hook)

As GPS-equipped smartphones have become increasingly ubiquitous, map apps have soared in popularity. For well over a year, Google and Apple have been fighting an increasingly intense battle for user loyalty in the mobile-map space, which explains why both companies have been circling Waze. Because map apps are so widely used, they’ve become a key priority for software companies in the mobile wars.

Waze, a free application currently available on the iPhone and Google Android devices, delivers a unique innovation: by incorporating real-time GPS data from its nearly 50 million users, the company delivers highly accurate and useful traffic and navigation information. Users can also edit maps with details like gas prices, speed traps, road construction and traffic accidents.

Think of Waze as the “wisdom of crowds” meets digital maps. “Join other drivers in your area who share real-time traffic and road info, saving everyone time and gas money on their daily commute,” Waze says on its website. The goal? “To outsmart traffic and get everyone the best route to work and back, every day.” Waze users receive mobile alerts about traffic hazards based on their location.

(MORE: Google Chairman Eric Schmidt Raps Apple on iPhone Maps, Floats Yahoo Search Pact)

“We’re excited about the prospect of enhancing Google Maps with some of the traffic-update features provided by Waze and enhancing Waze with Google’s search capabilities,” Brian McClendon, a Google Geo vice president, wrote in a company blog post. Terms of the deal were not disclosed, but Google is reportedly spending $1 billion in cash, plus $100 million in performance payouts to the Waze staff.

Waze’s “social” component differentiates it from the leading mobile-map apps, which happen to come from Google and Apple. For this reason, Google’s interest in the company is, in part, defensive. Often, when tech juggernauts like Google, Apple and Facebook encounter a start-up that has developed a product that poses a threat, the easiest solution is to simply buy it and remove the competition.

That’s what Facebook did when it spent $1 billlion in cash and stock to buy Instagram, which had built a superior and more popular photo-sharing service. “Buying Waze is all defense but great defense wins championships,” observed tech entrepreneur and investor Howard Lindzon.

Google’s purchase also keeps Waze out of the hands of Apple, which could have incorporated the company into its own map service, and Facebook, which might have integrated the app into its giant social network. Facebook reportedly offered Waze nearly $1 billion last month, but the talks apparently fell through over the purchase price.

(MORE: Apple Planning Pandora Rival: Is Web Radio Ready for Prime Time?)

“We evaluated many options and believe Google is the best partner for Waze, our map editors, area managers, champs and nearly 50 million Wazers globally,” Waze CEO Noam Bardin wrote in a company blog post. (Champs are Waze power users.) “Google is committed to help us achieve our common goal and provide us with the independence and resources we need to succeed.”

Waze, which was founded in 2007, has about 100 employees, mostly based in Israel, with offices in Silicon Valley and New York. According to the Israeli business publication Globes, which first reported news of the deal, another sticking point with Facebook was that Waze “insisted that its Israeli employees should continue working in Israel, which Facebook did not accept.”

Waze could remain an independent app, although some of its features could be incorporated into Google Maps. According to CrunchBase, the company has raised $67 million in venture-capital funding, including $30 million in its most recent round, led by Silicon Valley titan Kleiner Perkins Caufield & Byers and Hong Kong billionaire Li Ka-shing. Microsoft was also an early investor, but apparently did not make a bid for the company.

June 11, 3 p.m. EST: The post has been updated with comments from Google and Waze

10 comments
BennieMcKinney1
BennieMcKinney1

I finally had an opportunity to use the GPS mapping feature a few days ago. Wow... I must say I'm impressed!!!!   This is app is by far the best I've ever used.. .it takes me directly to my destination without taking me all over town to get there!  The maps are updated in real-time according to user input, so the more people use it the better it is.  I see why Google wants to buy this, but I don't understand why for $1B.  Aren't they savvy enough to develop their own navigator???  Anyway, I'm pleased and will definitely recommend the app!

Maarlon1
Maarlon1

this is just crazy to pay 1B for better commuting app. Who can guarantee you that user data will be accurate and updated, you may end up in bigger jam than usually. What will happen after novelty fade away like so many times before


Looks like we are approaching new bubble burst, like many times before. Signs are clear.

Mladen
Mladen

Actually, Waze should have come up with the version of their software which would be very useful for the southern part of Israel. Since the south of Israel has been numerous times under Qassam and Grad rocket attacks from Hamas in the Gaza Strip forcing residents to find shelter in 30 to 60 seconds, the app would find the optimal route between two points (usually between home and work) while minimizing the time to take cover, i.e. the route would stay close to buildings where one could take cover within a few seconds. I am sure that this “Grad Waze” version would be a hit in these parts

Be'er Sheva under Grad attack

http://www.madisdead.blogspot.co.il/2012/11/beer-sheva-under-grad-attack.html

dylanphotog
dylanphotog

I've used both Google Maps and Waze for more than a year now, and love both. With Google Maps, I love its look and professional-ness (sp?). With Waze, I love it's crowd-sourced features. It's saved me from traffic jams numerous times. The problem I've had with Waze is that I thought it always looked a little too much like a cartoon, making it hard to read. I've always thought that if I could get a map app that looked like Google Maps but had the features of Waze, it would be perfect. Looks like that may be coming true. Fingers crossed.

pidsleyscackle
pidsleyscackle

I agree withunkersonGooglemaps is the best I've seen so far, though I can't get the audio to work....I'm using an ipod not an iphone.  I wish there were an app for bicycling which incorporated routes with the least amount of traffic.   

yroth
yroth

Waze and Google Maps are in my opinion the two best Map Apps I wonder why apple didn't jump in after their Map fiasco last year.

benniemckinney
benniemckinney

I've been using the Waze app for a couple of weeks now.  So far I'm pretty impressed.  It's definitely real-time traffic reporting; by far, the best I've seen yet.  I haven't used it for getting directions from point A to B yet, but just in keeping up with traffic conditions on my commute, I give it 10 of 10!

CBDunkerson
CBDunkerson

The weird thing is that Google already does the same thing with passively tracking phones to identify traffic jams... and with every Android phone that allows location reporting tied in they've got a much larger network for that than Waze. Thus, all Waze is bringing to the table for Google is the manual gas price and speed trap reporting. I can't see their user base on that being worth a billion dollars. Thus, I can only imagine that Google is exploring buying them to keep a competitor from gaining access to a rival traffic tracking system.

garoud
garoud

@Maarlon1 as with any user based  networking thingy, no one can make any type of warranty. However, here in Santiago de Chile this app is highly used, with updates from many users and is a huge time saver. Does the app works? yes it does. does your community can make it work? up to you.