Growth Matters: Drivers Power Real-Time Road Maps

Years ago, Ehud Shabtai, a software engineer, was given a handheld device that came pre-installed with navigation software. Thrilled with the possibilities, Ehud took it for a test drive and became quickly disappointed. The problem: The navigation software knew the roads well enough, but it wasn't able to let him know, for example, if a certain road was under construction and not passable.

Shabtai figured there had to be a better way. He had the technical skills needed to solve this problem and started to build the first traffic platform that combined GPS technology with open source software. His idea: To create a system that would be continuously updated by drivers themselves, giving everyone all the relevant and up-to-date information they need to decide which roads to drive on. No more turning on to closed streets or getting stuck in traffic.

Road Maps With Advertising

The result was a mobile application that gives users a free way to get turn-by-turn navigation while also using that user data to build out its own maps. The software, which officially got its start in 2006, got enthusiastic reviews from a community of drivers in Tel Aviv who tested it. Ehud, seeing an opportunity, got together with two other entrepreneurs and together they founded Waze.

Today, the company is run by CEO Noam Bardin who says that Waze's vision is to create the world's first live driving map, providing users with the real-time road intelligence.

Now, Waze is gaining steam. According to Bardin, in the first year after the company launched in 2008, it had 250,000 users in Israel representing 20% of the country's smart phones. It was also one of the top-selling applications of Apple's App Store. In August 2009, Waze launched in the U.S. and the App Store here now has 100,000 users. By November 2009, Waze had expanded to 85 countries.

Waze generates revenues by selling its data and through advertising. "We sell our map and road condition data to companies such as trucking and freight companies," explains Bardin. "We also make money by selling advertising from companies interested in reaching our users based on their location." Best of all: The service is free to consumers.

Google Lurks

Of course, the company is still small and it is competing against some much bigger players such as Navteq, TeleAtlas and Google (GOOG). But Bardin doesn't seem too concerned. Reason: Bardin says that Navteq gets its data by paying fleets of trucks to drive roads and collect data that it then loads into its database -- an expensive and slow process. Google, however, is a more ominous competitor. The company pays navigators for information and is building out its system by turning to communities -- similar to Waze's strategy. "We think that we have advantages over these competitors," says Bardin. "We are – lower cost and we provide real-time data."

Waze's growth this far is impressive. The company seems to have a solid business plan and if the market for initial public offerings comes back, Waze could have some terrific opportunities ahead. On the other hand, maybe Google will acquire it.

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