Google buys Waze mapping app

Google Inc. confirmed Tuesday that it has closed the deal to purchase Waze, the Israeli user-sourced traffic and navigation app, ending months of speculation about rival bids for the start-up from Google, Apple and Facebook.

Financial details were not released, but the New York Times reported that a source familiar with the deal said Google paid $1.03 billion US for the app.

If that purchase price is accurate, it would make Waze the fourth most expensive acquisition among the more than 240 deals that Google has completed in its nearly 15-year history, the Associated Press reported. The only bigger purchases are Motorola Mobility Holdings for $12.4 billion last year, DoubleClick for $3.2 billion in 2008 and YouTube for $1.76 billion in 2006.

"The Waze product development team will remain in Israel and operate separately for now," Google said in a blog post Tuesday. "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."

In its own blog post, Waze said nothing would change at the company.

"We will maintain our community, brand, service and organization – the community hierarchy, responsibilities and processes will remain the same," CEO Noam Bardin said in the post.

Bardin said Waze opted to be bought by Google rather than launching its own public offering because "an IPO often shifts attention to bankers, lawyers and the happiness of Wall Street, and we decided we'd rather spend our time with you, the Waze community."

Part social network, part GPS

Waze, which reportedly has close to 50 million users, is part social network, part GPS. It allows drivers to share real-time traffic information, such as the location of police radar, toll roads and accidents; what road conditions are like; where the traffic jams are; and which gas stations have the cheapest fuel.

The free mobile app includes its own maps, which are edited and updated regularly by users, and syncs up with Facebook to allow drivers to track which of their friends are also on the road and and to organize meet-ups.

Earlier this year, Waze released data about its performance in 2012. It said 36 million users in 110 countries used the app, clocking close to 10 billion kilometres and submitting a total of 90 million user reports. About 12 per cent of Waze users are in the U.S.

Waze's mapping software, which works on both Apple and Android devices, has been praised by some in the tech industry as being superior to some of the other mapping services out there, such as Mapquest, Google Maps and Apple Maps, which was using Waze data when its own map service was struggling.

Thanks to its reliance on crowdsourcing, Waze is able to update its maps and add new roads in real time. By collecting information on where drivers are, which direction they're travelling in and how fast, it's able to provide precise traffic information and also to sell location-based advertising that directs drivers to particular businesses and services.

Microsoft owns 10%

The company was founded in 2009 when Israeli software engineer Ehud Shabtai, who had created an open-source mapping project called Freemap three years earlier, teamed up with two other Israeli entrepreneurs and computer specialists.

The company, which is based mainly in Israel but has offices in Palo Alto, Calif., is funded by several venture capital firms, including Magma Venture Partners, Vertex Venture Capital, and Kleiner Perkins, as well as large investors like Microsoft , which owns 10 per cent of the company. It is reported to have raised at least $67 million in venture capital.

"The really big winners at Waze are those venture capital funds that invested in the company in the past three years," a report in the Israeli business publication Globes said Monday. "If we assume a price tag of $1.1 billion, then those funds recouped 12-13 times their investment."

Forbes reported earlier this year that while Waze had secured advertising from large companies like Taco Bell and At&T, it was still far from being profitable.

Advertising in the app could get a significant boost were Waze to be integrated into Google's AdSense system of targeted ads although it was unclear Monday whether Google planned to fully absorb Waze into its own mapping service or keep it as a separate product.

Some speculated that Google's motivation in making the acquisition was to keep Waze out of the hands of rivals that have their own mapping apps that could benefit from Waze's data.