PODCAST

Acquired Episode 17: Waze

— ·44 min read

Brief

Waze and Google is the episode's subject: the hosts trace Waze from a 2006 Israeli hobby project (Free Map Israel) to a highly valuable crowdsourced navigation platform acquired by Google in June 2013 for about $1.0–1.3 billion. David walks through the firm’s early pivot — building its own map data rather than relying on third‑party GPS vendors — the Series A ($12M, March 2008), Series B ($25M, Dec 2010) and Series C ($30M, Oct 2011) rounds, and rapid user growth (roughly 2M users in 2010 to ~34M by end of 2012). Ben and David attribute Waze's surge in attention to the WWDC/iOS 6 Apple Maps debacle in 2012, noting Tim Cook's public apology and his letter recommending alternatives that explicitly named Waze, which helped accelerate adoption (Ben cites peaks of ~100k new users/day). David also references Noam Bardin's later critique that an early Series A valuation diluted the founders and shaped the company's path.

The hosts agree the Google acquisition was a classic data/asset buy rather than a people, product, or immediate business‑line deal. They argue Waze's primary value was its real‑time, user‑reported road data and the product mechanics that reliably harvest that data — assets valuable to Google Maps, autonomous driving efforts, and defensive against rivals (Ben and David). Ben highlights that Waze's monetization (sponsored gas stations, location ads) was nascent and unlikely to justify the purchase on its own; David emphasizes the strategic defensive play (keeping Facebook or Apple from owning the data). Broader themes the hosts draw include: successful disruption by giving away previously paid services to collect data (David), the maturation of mobile advertising into native, experience‑specific formats rather than banners (Ben), and the globalization of innovation — Israeli teams (and companies like Mobileye) competing in transportation and automotive tech while maintaining ties to Silicon Valley. The pair largely agree on the analysis: Google bought a data‑gathering machine and a growth engine more than a replacement mapping product, and keeping Waze's team and mechanics intact was central to the deal's value.

Cleaned source text

title: "Acquired Episode 17: Waze"

author: "Acquired"

source_type: podcast

content_hash: fa38e3b41e6f837506af93ffc3160df6de0481edbbca05b778ffa955d1a40173

extraction_method: generic_website

Transcript:

(disclaimer: may contain unintentionally confusing, inaccurate and/or amusing transcription errors)

Ben: Welcome to Episode 17 of Acquired, the podcast where we talk about technology acquisitions. I’m Ben Gilbert.

David: I’m David Rosenthal.

Ben: And we are your hosts. Today, we’re going to be talking about Google’s acquisition of Waze. But first, we talked about in our last episode we are going to be doing a community showcase and this week, it’s one of our listeners, Brian Sanders. He and his team are building something called Nexcast. Nexcast is a next generation podcasting client that has a lot of interactivity baked into it. So they look at the existing kind of flat one-way medium of podcasting as it is today. Brian and his team are looking at ways to make it kind of more of a two-way street so you can have a relationship with a podcaster and click links and watch videos and things like that.

The app is not totally built yet but their customer development process and kind of their pitching for funding and things like that is being covered in a podcast called Building Nexcast. So check him out at BuildingNexcast.com if you’re interested.

David: It’s really cool that we launched Community Spotlight and we did an episode about podcasts, and it’s like they were listening to the episode. This is perfect.

Ben: Yeah, it's awesome.

David: So if anybody out there is building a social navigation app, please ping us.

Ben: Yeah. If you would like to be on our next listener showcase and you’re working on something that you want to tell people about, shoot us an email at

[email protected]

or tweet us at @acquiredfm.

David: Or hit us up in the Slack group as always.

Ben: As always.

David: All right. Ben, should we get into it?

Ben: Let’s do it.

David: Let’s do it. Waze. I would presume most of our listener base is familiar with Waze but for those who aren’t, it is a social navigation app much like Google Maps or MapQuest, going way back, or Apple Maps. We’ll get into that in a minute. But you drive with friends.

Ben: Yeah. So Waze’s magical insight is that there’s a whole bunch of data being collected on the road by other drivers all the time that can indicate things passively like oh, there’s high traffic there because people are going really slow. Now, Google has been doing that for a long time. They introduced that in 2009 based on data being fed back from Android. But what Waze does is it both plugs you in with a social network based on Facebook or importing your contacts and you can, while you’re driving, report things like red light cameras, like police officers, like traffic accidents and you kind of get a real-time map when you’re driving on the incidents on the road.

David: This is really cool because before Waze, there’s kind of like all of navigation and mapping was this like top-down thing where like TomTom or Garmin, like they had their data set that was canonical. Even Google was collecting it from Android phones, but before that, they were just buying it from these other companies. But the key insight in Waze was like people are driving around with this stuff like they should be sending data back about what’s going on in real time.

So, yeah, cool history about how this started. So Waze is actually an Israeli company, and this is our first acquisition that we’re covering out of Israel. It was started in 2006 by five cofounders. I don’t know if I’m saying this right, Ehud Shabtai was the main founder and CTO. He was joined by Amir and Gili Shinar, Uri Levin, and Arie Gillon. And who’d had been given an old GPS system – well, new at the time but now old to our view GPS system – by a friend. You know, those things that, like, my dad still has one of these that are like the portable things like a Garmin type thing.

Ben: Yeah, like in once a year or something you can download all the new map tiles.

David: Yeah, and you can plug it into your cigarette lighter car and suction cup it to your windshield. So he had been given one of these in 2006 and he thought it was super cool and he decided to write some software for it that would allow people to share information about where speed cameras were located on the streets in Israel, and it started to take off. But the company that made the GPS device that he had didn’t like it and so they sent him a cease and desist letter.

Ben: Whoa.

David: I believe we read that. They said they’d be willing to, you know, integrate the software but he had to stop doing it. So rather than just giving them the software, he said, “Well, screw you. I’m going to take your mapping data out of this and I’m just going to create my own mapping data and I’m going to crowdsource it and build the user base socially. So he started a project called Free Map Israel. And the aim was just that, to replace the sort of top down map data set that this company had put in their GPS unit with a crowdsourced living and social data set and it started to take off.

A couple of years later in 2008, things are going well and they changed the name of the project and the company to Waze. They changed the terms of the map data from being open and being usable by anyone to being owned by Waze. So Waze now owns and can commercialize all of the mapping data that its users are generating. So that was in 2008. Then in March of 2008, they raised their Series A, the first capital they raised, they raised $12 million led by Blue Run Ventures which is a US venture firm; and Magma Venture Partners and Vertex Venture Capital, I believe, who are really venture firms.

It’s interesting later, you know, this comes to play after the acquisition. Noam Bardin who joined later in 2009 as the CEO of the company, he writes a blog post and he said, “One of Waze’s mistakes was the valuation of its Series A which significantly diluted the founders. Perhaps, had we held control of the company, as the Founders of Facebook, Google, Oracle or Microsoft had, Waze might still be an independent company today.” This was after the acquisition he wrote in the blog post on LinkedIn.

Ben: Oh wow.

David: Yeah. So, the company continues to grow after they raised the Series A mostly in Israel and then they start to add other countries as well. In December of 2010, by that point they’ve reached 2 million users and things are growing pretty well. They have over 250 million users and things are growing pretty well. They have over 250 million kilometers logged in the app which is huge, again, compared to data that other mapping companies are using which is not live real data. This is a huge amount of mileage that’s on real city streets and routes that are getting uploaded to Waze.

So at that point, they raised a $25 million Series B from the same investors plus Qualcomm. That was at a $95 million valuation. This was all reported in a Wall Street Journal article after the acquisition. At that point, they opened up their first office in the US in Palo Alto which is really cool. I remember when I started at business school at Stanford and seeing the Waze office just like on the street in Palo Alto, like, “Oh man! There’s Waze. That’s super cool.” It was a little storefront.

Ben: I had that same feeling. I remember when I moved out to California for a summer for an internship walking up and down Castro Street and Mountain View and just seeing all the different startups. The one that actually sticks out in my mind was Meebo. I remember it was like that web-based chat software that I’d use a lot and it’s, like, really strange when you see a logo in real life that you’re used to seeing digitally like a physical representation on a building. You’re like, “Whoa, it’s right there.”

David: Yeah, this is one of those really strange things that when you live in Silicon Valley, you get used to really quickly and don’t think about, but when you first move there or you visit, it’s totally mind jarring. You see these storefronts and they’re actually storefronts in Palo Alto and Mountain View. Sometimes even in San Francisco, that will be next to retail shops and they’re like Waze.

Ben: Yeah.

David: So they raised the Series B, they had about 2 million users. That’s December of 2010. Fast forward not quite a year to October of 2011 and here the intrigue starts to begin. October 2011, they raised their Series C. So less than a year later, they raised $30 million at about a $200 million valuation from Kleiner Perkins and Horizons Ventures. They announced that they have 7 million users at that point. So, October 2011.

At the end of 2011, beginning of 2012, they announced they have 10 million users. So in just a couple of months they had 3 million users. Halfway through 2012 in July, they announced that they have 20 million users, so now doubled from 10 to 20 in 6 months. And then later on by the end of 2012, they get to 34 million users.

But a really important thing happens in the life of this company and like I said, where the intrigue begins, in the summer of 2012, at WWDC, it’s amazing like how much Apple and WWDC ends up playing a role in our podcast here.

Ben: Is this the Forstall…?

David: Oh yeah. Scott Forstall’s last hurrah, last stand. I was actually at –

Ben: Wait, wait, say what it is.

David: Well, so yeah, I’m burying the lead here. Apple announces iOS 6 at WWDC 2012 and it, one of the marquee features is they’re launching Apple Maps. So they’re ripping Google Maps out of the iPhone. So until then, all previous versions of iOS had had the native built-in Maps software, was Google Maps.

Ben: That was built by Apple but with Google’s data.

David: Data.

Ben: Google’s map tiles.

David: Yeah.

Ben: I think it was something like the contract expired and it was such that Apple didn’t want to renew the contract with the Google because they were starting to kind of part ways and get into a little bit of a war between the two companies. And Apple had to ship maps early because they couldn’t use Google’s data anymore and they didn’t want to re-up and they knew that re-upping would come with a really nasty price tag for them and a lock-in to send Google a bunch of data that they didn’t want to. I think Google is also requiring that people sign in with their Google accounts, which Apple didn’t want to do for privacy concerns even all the way back then. So, Apple kind of obviously rushed maps to market because there was really no other choice.

David: I think there’s even more context setting that needs to happen here which is that as we were doing the research for this episode, it just struck me how fast the technology world moves. This was only four years ago but it feels like a lifetime ago. I had completely forgotten all this stuff. At this time, the mobile platform “wars” were in full swing. Apple and Google are going at each other’s throats and everybody in the tech industry is like, “Who is going to win mobile? Is it going to be iOS? Is it going to be Android?” and the tide swinging one way or the other. People think that this is going to be a “winner take all” market at this point in time.

The other thing that happened is Tim Cook had recently taken over as CEO of Apple. Steve Jobs had passed away. Tim and Apple, they were figuring out what was going to be the path forward. It was becoming clear that there was no way that they were ever going to catch up to or overtake Android on actual user numbers. But the world hadn’t come to the conclusion yet which now what we just accept as a given is that nobody won the platform war, like iOS and Android co-exist peacefully.

Ben: Yeah, there’s this everybody builds for both mostly and Apple kind of has the more valuable customers and Android has most of the customers. That’s just the way the world works now.

David: And there are all sorts of tools now to make it easier to build for both. But that was not the world back then and so, this is the stage Waze had been operating for four years at this point, and it had been growing the user base nicely and riding the wave of mobile. But all of a sudden they are at the center of this huge conflict between these two behemoths.

So in WWDC, Apple announces Apple Maps and this has been years in the making. But Ben, as you were saying, they had to rush the product to market when they actually shipped iOS 6 in the fall and it becomes super clear, like there was a ton of hype for this product. This was like the 10 pole feature of iOS 6. It becomes clear within a week that it is hugely broken and there are all these reports of people getting sent to the wrong addresses, causing all sorts of problems and accidents, and it is a disaster for Apple when this happened.

Ben: The story that Apple is trying to tell is it’s two-sided. One is that we really messed this up and we apologize. Tim Cook comes out with that public letter.

David: Writes a letter, posted it on Apple.com apologizing. This has never happened before in the history of Apple. People are saying, “This would never happen under Steve.”

Ben: Right. But on the other side, Apple’s hedging and they’re saying well, it takes a lot of time for the data to come in for it to get better. Apple Maps is only going to improve, which is true,

David: Which is true.

Ben: It’s gotten dramatically better and that’s the exact same story they had with Siri. Going back to the Steve Jobs comment, it’s funny. This feels like actually a tremendously Steve Jobs move because Steve is famous for saying he’s going to go thermonuclear on Android andwhen he gets into a tiff, they get into a tiff and like even if it has some fallout like we saw here, I think that that’s a very Steve move. Actually Scott Forstall was largely responsible for this and he was Steve Jobs’ protégé.

David: Yeah. So closing the loop on the Apple intrigue here, this ultimately ends up in Scott Forstall getting fired.

Ben: Scott refused to write the letter.

David: Refused to write, refused to sign it. Only Tim Cook signed it even though Scott had publicly introduced the Maps product. It was clear it was his product. Before Steve died and Tim became CEO, the public talked about like, “Hey, is Scott Forstall the next CEO of Apple?” This guy, he’s not just like some Apple exec. He was Steve Jobs’ protégé.

Ben: Yeah. It’s amazing that in this letter that Tim Cook writes, he lists some alternatives for people that are dissatisfied with Apple Maps and says it’s going to get better.

David: Alternative products.

Ben: But lists Waze as one of the products that people should go and try out instead of Apple Maps.

David: In the letter. Which is, again, this is like uncharted territory for Apple at this point. Again, because with the backdrop of they are locked in this feature war with Android and another one of the reasons why that people speculate about why Apple and Google couldn’t come to terms to keep Google Maps within the native iPhone software is that Google had recently shipped turn-by-turn navigation in Google Maps for Android, but it wasn’t available on Apple. People were speculating that Google was withholding that ability which is hugely compelling. You got to remember, again, more in context this is like TomTom and Garmin and all these guys had navigation apps in the App Store at the time and they cost 100 bucks.

Ben: I think they were patented like Apple, for whatever reason, I remember maybe I was wrong about this but I remember the reason being that Google Maps for the iPhone didn’t have turn by turn is because those companies owned the patent to that.

David: Could have been. Maybe Apple is concerned about that.

Ben: Maybe licensed to Google or something.

David: But it was bizarre like the official Maps app on iOS, you only just got a list of directions. It wouldn’t talk to you and say like “turn right in 600 feet or whatever.” You had to scroll through the list as you were driving or walking or whatever. It was terrible now looking back on it. But if you wanted turn by turn directions, (A) you got crappy products with crappy data from companies like TomTom and whatnot. But you had to pay 50 or 100 bucks for that just for the app. Can you imagine paying 100 bucks for an app now?

Ben: Right. So the stage is set.

David: The stage is set. So in the middle of all this, Waze is free and Waze provides pretty good mapping data and application. So it was October 2012 by the time the dust settles. Apple has fired Scott Forstall. Then rumors start swirling that Apple is looking at acquiring Waze.

Ben: Which was actually never true that I believe it was, who denied it, Apple…

David: Well, Apple denies everything.

Ben: Anyway, Apple denied publicly.

David: Apple denied publicly but you got to imagine that in the wake of this that they’re looking around saying, “Oh my gosh, what are we going to do, like, we just have this egg on our face and here’s this pretty app that is pretty good in the store and has a really interesting data model. Maybe we should buy it.” The rumors were that they were talking about a $500 million acquisition with Waze. How far that went, we don’t know. But it doesn’t come together.

At the same time in December of 2012, so a couple months later, Google launches a standalone Maps app, the Google Maps app on iOS which many of us, myself included, now use and love. Does include turn by turn directions, but it’s just a regular app in the App Store.

Ben: And it was great. It was this incredible… actually I know that it was a 5-person team that did the native code actually in the Kirkland office here in Seattle.

David: Oh, cool. I didn’t know that.

Ben: Yeah. I think the back end was all down in the Valley but the actual iOS app, the objectives, it was written up here.