June 19, 2013
Google swoops in and rocks the future of Israeli high tech
Just a couple of years ago, the Israeli entrepreneurs behind the traffic-fighting smartphone app Waze were knocking down the door of every news outlet in Los Angeles. They were seeking publicity to help forge their way into the iPhones and Androids of L.A. drivers by promising some reprieve from “Carmageddon” weekend on the 405 freeway. Waze argued that its brave new method of crowdsourcing map and traffic data — via social media, with input from an active user base — would be the perfect tool to navigate drivers around the monster 405 freeway project and resulting traffic jams. The company needed press, and bad — because if enough people didn’t use the app, it wouldn’t work for anyone.
Well, they don’t need the press anymore. On June 11, Google Inc., the American tech giant at the forefront of online mapping, bought Waze Mobile for between $1.1 billion and $1.3 billion, according to various media reports (neither company has disclosed the final sum). Google’s acquisition is one of the largest in the history of the Israeli tech industry and stands as a major vote of confidence for both Waze and Israel’s startup scene at large.
These days, the Waze guys, who once reached out to Los Angeles eager for attention from any reporter, are mum. They are happily cloaked under Google’s strict no-press policy. “We are Google employees” now, says one of the app’s three founders over Facebook chat, “and we cannot speak to the press.”
Even without Google, Waze picked up a fast and loyal following in its first five to six years on the market: The app already boasts almost 50 million users in 190 countries and counting.
But no one will ever love Waze quite as fiercely as Israel.
[Related: What is it with Israelis and high tech?]
The buzz of the billion-dollar sale could be felt last week through the summer heat in Tel Aviv and environs, where Waze has long been regarded a national treasure — the top of the class in a nation of 1,000 startups. “Congratulations, you have reached your destination,” cheered Israeli Prime Minister Benjamin Netanyahu in a reported phone call to Waze’s founders on the night of the sale.
“The Israeli people feel that they have some part in this huge success story,” said Izhar Shay, head of Israel operations at venture capital firm Canaan Partners. “We were the test group. We were the first users of an international breakthrough project, and we were part of the reason why Waze was so successful.”
The local market may only be about 7 million strong — a shortcoming that some say has slowed the overall progress of consumer-oriented invention in Israel — but it’s famously hands-on.
“By nature, people here are happy to try out new technologies, new concepts, new ideas — especially if they’re introduced by Israelis,” said Shay. “When Waze started, everybody knew somebody at Waze. So if people had bugs or issues with something that didn’t work properly, they would pick up the phone and call to yell at somebody at Waze.”
There have been local concerns, over the years, that large foreign companies are harvesting many of the best Israeli business ideas at an unripe age. But industry analysts who spoke with the Jewish Journal argued that the Waze buyout, which reportedly includes an agreement to keep Waze’s headquarters in Israel for at least the next three years, is the best possible scenario for a local company looking to go global.
Gil Ben-Artzy, co-founder of UpWest Labs — a training program in Silicon Valley for Israeli startups — called the sale a natural and smart evolution for Waze, and a “beacon” for other Israeli entrepreneurs.
“I find it hard to accuse somebody who sold their company for over $1 billion of selling too early,” said Jonathan Medved, head of Israeli crowd-funding venture OurCrowd.
Waze “fought like a lion to keep its development in the country,” Medved said. “The fact that these guys showed that you can fight that battle and win, and still sell your company for a good price, means that everybody’s going to try to do it.”
Up until now, Google Maps has been a dirty word in Israel; everyone wants to support the home team, plus Waze appeals to the Israeli nature to jump into the conversation, so the app has become extremely accurate due to all the input. But the two companies’ new all-star collaboration has now set the tech blogs on fire with speculation on the future possibilities of online mapping.
One thing they all can agree on: Waze’s secret weapon in a world clamoring with startups — and undoubtedly one of Google’s top reasons for scooping it up — has always been its devoted army of Wazers, who together helped the app reach the critical “viral” stage by telling all their friends and helping chart new territory within Waze’s virtual map system.
In combining their strengths — manual and social-media mapping, respectively — Google and Waze have hit such a sweet spot in the online map market that Southern California-based interest group Consumer Watchdog has even expressed concern that the duo might become a monopoly.
Facebook and Apple, who were also rumored bidders in the race for Waze, can’t be too happy about the new superpower.
“When you are driving in your car and you’re using Waze ... you’re stuck in traffic, and all you have is this small screen in front of you that delivers the most important news to you,” Israeli investor Shay explained. “Now Google has access to our hearts while we are at a very significant part of our day, and we have nowhere to go.”
Israeli techies and investors are also touting the Waze acquisition as a ribbon-cutting of sorts for the new and exciting “consumer-oriented” frontier of Israeli innovation.
In the past, the country has been known more for its security software, semiconductors and other business-to-business (read: boring) technology.
Waze is the polar opposite — a people’s product to the core. With its cutesy icons and game-like elements — including swords and badges for those drivers who submit warnings about “objects in the road,” police stakeouts, etc. — the app has proven as addicting as any Farmville or Angry Birds, only loads more useful. For the Waze addict, a commute is no longer complete without the soothing voice of Waze’s token she-bot, coaxing her customer through each lurch and turn.
To be sure, the app has had its detractors. Some traffic-safety advocates have worried that Waze’s highly interactive, video-game-like experience can prevent drivers from paying attention to the real-life road in front of them. The company has responded by installing voice-command and motion-sensor functions, as well as a keyboard lock for when the vehicle is moving — although drivers can easily override the latter by telling Waze that they are in the passenger’s seat. Last week, New York Magazine blogger Kevin Roose wrote in a concerned post on the acquisition: “As Google considers adding revenue-generating features like local advertising to Waze’s already-packed interface, it may raise the question: How much information is too much for drivers to handle safely?”
Yet, for Waze’s defenders, the proof is in its adaptability — and with Google’s latest infusion of cash, the app will no doubt keep adapting to meet user demands.
Consumer-oriented innovation “requires a certain aesthetic understanding, and a certain design excellence” that Israel hasn’t necessarily been known for in the past, said Mick Weinstein, a longtime tech writer based in Jerusalem. “And that’s part of what’s so wonderful about Waze, is the user experience.”
In the wake of Google’s winning bid, Oren Hod, co-founder of video creation marketplace VeedMe, which connects videographers with prospective clients, said startups like his are catching Waze fever.
“I think [the sale] gave hope to some entrepreneurs and Israeli startups that are not super technology-oriented ... to make it big in the U.S. market,” said Hod.
Local and international investors, too, are apt to be inspired by Google’s big move, said Shay — and “we should expect to see additional votes of confidence in Israeli startups as a result.”
Medved added that he has “never seen a time when there have been more good-quality Israeli startups that are really attracting worldwide attention — I think it’s a golden age.”
Waze, for one, doesn’t need the press anymore, nor the hasbara. As Google’s gorgeous Tel Aviv campus buzzes with new life and Waze enjoys its hard-earned spot on top of the world in Ra’anana, it begins to sound superfluous — even old-fashioned — to rave about Israel’s “Silicon Wadi” as if it were a niche or an underdog.