July 11, 2023 will be ten years since traffic navigation app Waze signed the deal that changed the face of Israeli high-tech – the sale of Waze to Google. Last week came the announcement from Google’s management about imminent layoffs, spoiling the celebrations for next week’s anniversary.
The parent company last week announced that it planned closing down Waze’s independent ads system and replacing it with Google’s own ad system. Consequently dozens of people among Waze’s 500 employees will be laid off including a small number at the app’s development center in Israel. A further announcement is believed to be expected in two weeks, and Google employees are biting their nails until it is issued. Do the latest layoffs herald a new and tense era between Google management and Waze?
The $1.15 billion sale of Waze to Google was at the time considered one of the most impressive-ever exits in Israel’s tech industry. It seemed like a dream. Each of the 100 employees who had helped to found the company received more than $1 million while the entrepreneurs received tens of millions of dollars and the investors saw returns of hundreds of percent. It also seemed like a great deal for Google. The search engine giant sought to benefit from real-time traffic updates from streets and highways worldwide and earn profits from ads tailored to the location of millions of vehicles.
The founders insisted on autonomy and then left
One of the conditions that Waze founders insisted on was that the app would remain an autonomous business unit within Google and would continue to operate from Israel. Noam Bardin and his partners in founding the company – Ehud Shabtai, Amir Shinar and Uri Levine – sought to retain control for themselves.
In practice, Waze operates with such a decentralized corporate culture that it can appear chaotic. It was important for the Israeli founders to preserve the culture of a small and growing startup, with highly motivated employees and with a product supported by communities of volunteers around the world, who participated in updating and correcting the maps. Google, for its part, requested full sharing of all traffic data in real time, as well as data about users. However, over the years, the founders and veteran managers began to leave the company for various reasons, which weakened Google’s commitment to the Israeli company. Former president Uri Levin never even started working at Google and became a serial investor in tech companies. CTO Ehud Shabtai and VP R&D Amir Shinar retired from the company six years ago and are partners in the health food restaurant Wellana on Tel Aviv’s Dizengoff Street, and former CEO Noam Bardin left the company in controversial circumstances in 2020, after friction that arose over the corporate culture at Google. Since then, he has been involved in the development of digital journalism products such as the Post news website and the micropayments service for Paygo Media for reading online articles.
Waze has avoided layoffs until today
People familiar with the employment situation at Waze claim that if the founders had not left the company, it would have been much more difficult for Google to make changes. But Google has taken advantage of the global tech crisis and the wave of layoffs to cut down Waze’s activities and its powers. Last December, about a month before the big wave of layoffs at Google, which affected 12,000 employees, Noam Bardin’s replacement, Neha Parikh, left her position after a little over a year as CEO. The Israeli company was merged into Google Geo with Google’s map products division and in practice was transferred to its management, together with products like Google Maps, Google Earth and Street View that display satellite photos.
Nevertheless, the wave of layoffs at Google did not seem to have affected Waze, which even increased its workforce, according to LinkedIn data, by 4%. But now the current cuts do not bode well for the company’s future. According to Google, it has no intention of harming its “favorite app,” which is used by about 150 million people worldwide every day. At the same time, Waze has been unable to convince Google that its ad system is superior to that of the parent company, which has led to the latest move.
In fact, Waze’s ad network has been criticized for some time for not being effective enough. With the sale to Google, Waze dreamed of generating hundreds of millions of dollars in revenue from displaying ads for drivers while waiting at an intersection or in traffic and directing drivers to selected businesses. In the past, the Israeli app even signed an ad agreement worth millions of dollars with US multinational fast food restaurant chain Taco Bell. Although the fact is there is no way of comparing the effectiveness of Waze and Google’s ad systems.
This is not the only Waze dream that has been dashed. Ambitions for a shared travel system (carpool) were unrealized, as was a similar initiative started by the Israeli Intel-owned rival Moovit. Both discovered that not many drivers are willing to drive strangers, take risks and delay their journeys for a small fee.
On top of all this, there is the “continuing cultural friction between Google and the Waze team,” as Bardin himself put it. The founder left Waze after he complained that an overly indulgent work culture at Google encourages employees to spend many hours in leisure pursuits, without motivation to invest in work. Bardin also lamented the culture of political correctness at the tech giant, and insisted that Google was not promoting the Waze app sufficiently in stores and that Waze was being hurt by internal competition between the organizations.
So does Waze regret the choice of selling to Google? It’s hard to tell, but Bardin himself tried to answer this question last week in a post he wrote. After describing how media leaks about the sale were criticized by Facebook, which had been the leading candidate for the acquisition, Bardin wrote: “At the time, the Facebook deal was supposed to close for $25 per share. If we had closed with them, the price of the deal could have been 10 times greater than the amount Google ultimately paid. (Facebook had offered a billion dollars in shares). Nevertheless, I felt that Google was a more suitable place – we had a better click with the engineering team, they gave us independence to grow from 10 million monthly users to 150 million, and in retrospect, after we learned about the damage that Facebook did to democracies in the world, I would not have been able to spend the four years there that was required of me.”
Published by Globes, Israel business news – en.globes.co.il – on July 3, 2023.
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