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

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.

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.

“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 reportedlyspending $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.

“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.

Beyond Concorde: The next generation of supersonic flight

For more than three decades, Concorde represented the pinnacle of business travel -- the ultimate status symbol for the jetset executive.

Considered a marvel of aviation technology, the distinctive droop-nosed aircraft traveled at twice the speed of sound, flying from London to New York in about three and a half hours -- half the time of commercial airliners.

But even before an Air France Concorde crashed in 2000, killing all 100 passengers and nine crew members on board, the luster was beginning to wane.

Battling high operating costs and low passenger numbers, Air France and British Airways grounded their small, aging fleet a mere three years later.

But the dream of supersonic flight has not disappeared. Aviation manufacturers such as Boeing, Lockheed Martin and Aerion are working on supersonic technology -- with the latter predicting it could have a supersonic business jet in service as early as 2020.

Industry expert Joe Lissenden, the director of aerospace and defense consulting in the Americas for IHS Jane's, says it's likely that a next-generation supersonic commercial aircraft will emerge.

High demand from passengers, historic profitability on the routes and significant technological improvements have combined to make supersonic flight all the more viable, he said.

For Lissenden, the one challenge that remains is fuel cost. "Faster flights consume fuel faster which makes the flight more expensive," he said. "But this is a premium route, and premium prices will be charged."

Crucial to the efforts to restore supersonic aircraft to the skies is the work of national aerospace programs such as NASA and Japan's JAXA. Peter Coen is the supersonics research project manager for NASA's fundamental aeronautics program.

While the agency is not working on a specific supersonic aircraft, he said, "we are working on technologies we feel represent barriers to bringing back successful supersonic aircraft."

Those barriers include high atmosphere emissions, noise produced when taking off and landing, and the sonic boom -- the sound associated with the shockwaves created when objects travel faster than the speed of sound, which has prevented supersonic aircraft from flying overland routes.

Coen said his division was concentrated on addressing the sonic boom issue first, because "if you don't have overland supersonic flight, there's never going to be a market for the supersonic aircraft."

NASA has been collaborating with Boeing and Lockheed Martin on systems-level design studies, with each manufacturer producing models that have been subjected to wind tunnel testing to gauge their effectiveness.

Coen said phase one testing had successfully validated the basic design techniques. Reshaping the aircraft, the designs -- Boeing's two-jet configuration with engines mounted above the wing, and Lockheed Martin's tri-jet configuration, with two engines below the wing and a third mounted in the tail -- had been proven to significantly reduce the sonic boom to a "thump," dropping the noise from Concorde levels to close to what is considered the level of acceptability.

Coen said he expected to see a next-generation "son of Concorde" in the marketplace by around 2030, while a supersonic business jet "could happen sooner."

"The boom is the barrier and if we can get past that, I think we'll see people giving supersonic flight a lot more serious consideration," he said.

The Japan Aerospace Exploration Agency (JAXA) also hopes to develop a supersonic passenger aircraft that is quiet, economical and environmentally friendly, and expects to achieved it some time this century.

Spokesman Masahisa Honda said that while the agency currently had no aircraft in specific development, along current projections it predicted a supersonic business jet to enter the market some time after 2015.

One of the frontrunners to do so is the Aerion SBJ, an 8-12 passenger business jet. "It will herald a return to supersonic civil flight without Concorde's environmental and economic drawbacks," said Aerion spokesman Adam Konowe.

He said development of a joint venture with aircraft manufacturers to produce the SBJ had been slowed by the recession, but once a deal was struck he anticipated a six-year development program to bring the aircraft to market. "We believe the SBJ will be certified, and enter service around the end of the decade -- 2020," he said.

But not everyone is convinced that a return to supersonic passenger flight is just around the corner. Chris Seymour, head of market analysis with aviation expertsAscend, was skeptical that there would be much progress before at least 2030.

"I think there's so many issues to be considered that I certainly can't see it happening in the next 20 years," he said.

Seymour believes that although technological barriers will likely be overcome, the key factor in whether it will become a reality is whether a market exists that is prepared to pay a premium for the ultimate status symbol in business travel -- particularly in an air-travel market that is focused on low prices.

"Will you have enough passengers willing to pay higher fares to fly more quickly?" He said. "If you look at Concorde, that wasn't the case. It came along at a time when the 747 also came in, which carried more people for lower fares. That's where the market was."

Peter Warth, director of Complete Aviation Solutions, also believes that a return to supersonic flight is further off than some are making out.

"There seems to be multiple technological and commercial obstacles that will need to be cleared," he said.

But he conceded: "I'm sure that when the original plans for Concorde, the A380 and the 787 Dreamliner were announced, the same questions about whether it could be achieved were asked. But they eventually delivered. I think time will tell."