Waze Raises $25M to Turn Your Smartphone into a Traffic-Avoidance Tool

12/7/10Follow @wroush

There are plenty of GPS-based smartphone apps these days that can give you turn-by-turn directions as you commute to work or drive to Grandma’s for the holidays. But there aren’t many that can tell you to get off at the next exit because an app user 10 minutes ahead of you got stuck in a traffic jam. In fact, there’s only one: Waze.

The four-year-old startup behind the app, which relocated its headquarters this summer from Tel Aviv, Israel, to Palo Alto, CA, calls the Waze system a “social mobile” application. Not only is the map data you see on Waze collected by users themselves, but if enough users have the free iPhone, Android, BlackBerry, Windows Mobile, or Symbian app running on their smartphones as they drive, Waze can assemble a live traffic map of a metropolitan region and send users advice about the quickest paths. Eventually, it might also be able to serve them highly targeted advertisements and discount offers based on their current locations or their customary routes.

“Our goal is to shave five minutes off your commute every day,” says CEO Noam Bardin. With 2.2 million people using Waze worldwide for an average of 300 minutes per month per user, the goal isn’t an unreasonable one. “Just like Yelp has become part of going out to eat and Groupon has become part of shopping, you’ll turn on Waze because we will give you the best route,” he predicts.

Waze on the iPhoneToday Waze announced that it has collected an impressive $25 million in Series B financing. (It’s the second big “up round” we’ve reported today—San Francisco-based Zendesk nabbed $19 million.) Blue Run Ventures, which also pitched in for Waze’s $12 million Series A round in 2008, led the new round for Waze, which was joined by existing investors Magma Venture Partners and Vertex Venture Capital. The big addition to Waze’s lineup of backers is strategic investor Qualcomm Ventures, a unit of the San Diego-based maker of communications chips for cell phones.

Waze passed the 1.5-million-user mark in September—only 20 months after the app debuted in Israel, and about 10 months after its U.S. launch, Bardin says. That was the event that attracted the attention of investors willing to put big bucks into Waze’s further expansion. “In the location segment, 1.5 million is the threshold—up to that point it’s just noise,” says Bardin, who previously co-founded Deltathree (NASDAQ: DDDC), a voice-over-Internet provider that went public in 1999. “So we got a tremendous amount of interest.”

Waze was “looking for strategic investors who could bring unique assets, and Qualcomm is a great example of that,” Bardin adds. The San Diego company is deeply involved in location-related hardware and services; it manufactured the GPS chips in half a billion handsets worldwide, to name just one example.

The new funds will allow the 40-employee startup to accelerate hiring both in Palo Alto and Tel Aviv. The company needs engineers to help it plan for the day—potentially in the near future, given the rate of smartphone adoption—when it will have millions more users. “There is a big infrastructure investment to support what we’re doing,” Bardin says. It’s one thing to juggle real-time GPS stream updates from the tens of thousands of people who may be using Waze at any given moment, he says. But once the app is installed on 10, 20, or 50 million phones, the company will face distributed-computing problems of a whole different scale. “There are some big technical steps that have to happen for things to happen in real time,” says Bardin.

From the beginning, Waze has built its road maps by collecting GPS data from app users. Co-founder and chief technology officer Ehud Shabtai was the founder of the Freemap project in Israel, which depended on user-generated maps and an open-source car navigation system called RoadMap. “The whole concept was to create this free, turn-by-turn app where users can all participate, keeping the data as fresh as possible,” says Bardin. “That can only happen when large amounts of people share a small amount of information”—namely, their current position and speed. If you’re crawling along Highway 101, the app assumes that you’re stuck in a traffic jam, and alerts the Wazers (the company calls them “Wazers”) coming up behind you.

Over time, Waze has added more social features to the app, including the ability to submit updates and map corrections manually and chat with other users. (The app only lets you enter text when your car isn’t moving.) It’s also added game features—for example, it populates its maps with “road goodies,” icons situated at specific locations that turn into points when you drive to that location. At Halloween, for example, pumpkin-shaped icons and ghosts yielded 2 points and 10 points, respectively, toward a user’s overall Waze score.

The road goodies aren’t all about fun: they’re also helping to train Waze users for the day when the platform will take on an advertising role. “We’ve been collecting an enormous amount of extremely valuable location data, and in the last couple of months we have been looking at [using that for] location-based advertising,” says Bardin. “Users are interested in location-based ads if they’re done in an engaging, non-intrusive way. And if we can let an advertiser spend, say, 75 cents, to get a user into a store where the average purchase is $45, that becomes very interesting for the advertiser.”

Waze has competition in the social mapping arena from OpenStreetMap.org, Skobbler, and other organizations—and obviously, it’s too early to write off traditional navigation players like Garmin and TomTom, as well as newer players like Google and Microsoft. But Waze’s $25 million in new financing could give it a big boost, in part because the company can now afford to go head-to-head with the likes of Google, Microsoft, and Nokia, for the best engineers, Bardin says.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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  • David L

    When I first downloaded Waze there were not enough users in Seattle for it to be useful; I’ll give it another try now.

    However, Google Maps also uses crowdsourced GPS data to interpolate traffic, and in my experience it is extremely accurate.

    I also take issue with paternalistic features like preventing text entry while the car is moving. I regularly nav from the passengers seat, hand my phone to my fiance to nav while I’m driving, or nav while I’m riding the bus to see what traffic is like. If there isn’t a way to disable that feature, I will be quickly uninstalling.