June 10, 2013
Google set to buy Israeli navigation application Waze
Steep price tag is $1.3 billion
This story originally appeared on themedialine.org.
When Dr. Gary Ginsburg, who lives in Jerusalem and works at the Ministry of Health, drives to Tel Aviv, he makes sure not to forget his smartphone and the Israeli traffic application Waze.
“I’m a Waze fan,” he told The Media Line. “When I’m in Tel Aviv I’m usually lost except for knowing where the Mediterrean Sea is. So I turn on Waze and I trust it. I go left and right and get to where I need to be – it’s phenomenal.”
Even on the highway to Tel Aviv, he says, he turns it on.
“It tells you if there’s traffic or an accident,” he said. “And not that I speed….but its nice to know there’s a policemen 450 yards ahead and I can slow down.”
Ginsburg is not alone. Waze, founded in 2009, boasts almost 50 million users. It works because many of those users take the time to report traffic accidents or delays. Unlike a dashboard-mounted GPS, which costs at least $150 in Israel, Waze is completely free for download. The company makes money from businesses that advertise on the ap, such as telling drivers where the nearest McDonalds is.
Now the founders of Waze seem set to make a lot of money. Globes is reporting that Google, Inc. will acquire the company for $1.3 billion. The reports come after months of speculation that Waze would be sold to either Google or Facebook.
Israeli media reports say Waze pulled out of a deal with Facebook, both because the offer was not high enough, and because Facebook would not agree to keep the development in Israel. Google, which already has a swanky office in Tel Aviv, has no problem with that demand.
In 2012 Waze announced it had received $30 million in investment from several companies including Horizon’s Ventures. If and when the deal with Google goes through, some of Waze’s founders will become very rich. Chief Technology Officer Ehud Shabtai will earn $78 million, and president Uri Levine will take home $38 million.
Some Internet analysts say the deal will give the Israeli high-tech industry a boost.
[Related: Can an app solve L.A. traffic?]
“Every success story encourages more young people to go into high tech and believe they can be the next big company, Yair Amichai-Hamburger, author of The Good, the Bad, and the Ugly: The Psychology of Life on the Internet told The Media Line. “It empowers the image of Israeli high tech around the world and opens new doors with investors. It doesn’t make sense that we’re such a small country but we such an impact on the high tech world.”
Amichai-Hamburg says that Google has long been interested in building a social network to rival Facebook, and Waze also functions as a social network.
“This is part of the big competition between Facebook and Google over who will be the big boss,” he said. “If Google gets Waze, it will be a small victory for them.”
Waze works because users take the time to report traffic accidents. In return for doing so, you get Waze “points” and frequent users can become “lieutenants” and “majors.” The ap appeals to social solidarity. “Waze, outsmarting traffic, together” is the company’s slogan.
Gary Ginsburg says he takes the time to report traffic accidents because he wants to pay back those who have helped him.
“Once I was driving my daughter back to her army base near Tel Aviv,” he says. “After I dropped her off, I saw there was a huge traffic jam. I turned on Waze and it guided me through the back streets of Lod and Ramle, (two lower-income Israeli towns). I was dubious at first but it saved me at least 40 minutes of sitting in traffic.”