Waze 

Imagine free turn-by-turn directions—complete with live traffic updates from your fellow drivers—right on your smart phone. Meet Waze, a free GPS application available for Android, the iPhone, Symbian, and select Windows Mobile smart phones that provides driver-generated maps, real-time traffic, and reports created by other Waze users. The company first appeared in Israel, where there are currently about 250,000 Waze users. The app arrived in the U.S. during the summer of 2009, and launched internationally in November 2009.

“We are building a live road network that includes a base map and user-generated changes to it that happen in real time,” explained CEO Noam Bardin. The interface is sleek and a breeze to use, and you can find points of interest through Google local search. During out testing in Manhattan, we saw that there was heavy traffic on 11th Ave. with an average speed of 8 mph; that data was added by Waze’s community of users. The experience is a bit like a game, too. As you drive and mark new roads, you gain points and increase your rank. You can also share road conditions via Twitter and check into places via the popular location-based foursquare app.

Why the Competition Should Care

 Waze’s business model is to sell the information it collects from its user base and undercut competitors such as Tele Atlas and Inrix Traffic with a different data set, providing real-time information at a price suited for advertisement-based models. “The world where you can charge $2 to $3 per subscriber for a map is gone,” Bardin declared. “You need to be driven by the community.” By using its method of crowd sourcing data, the company has been able to build a map and collect traffic data at a fraction of the traditional cost.

Since Waze is a free application, users may be willing to use its turn-by-turn directions over other services such as TeleNav GPS Navigator, which requires a $9.99 monthly fee. Waze’s tests in Israel show that it’s possible to create accurate maps with user-generated data, and it has already spread its services globally into Asia and Europe. “Real-world, real-time data is a key parameter,” Bardin noted, explaining that Google’s maps aren’t updated frequently enough for daily driving, and won’t tell you about temporary road closings or other conditions that live users can.

Because Waze is well funded, the company believes it has time to get its application and business model off the ground. In the U.S., it uses the free Tiger Map, which gives Waze a head start in creating accurate maps before users even begin to populate the roads.

“The jury is still very much out on whether Waze will manage to become a real threat to either digital map providers or real-time traffic services,” said Dominique Bonte, practice director of telematics and navigation for ABI Research. “Waze relies heavily on a sufficient amount of customers to create a critical mass, and while it may pretend it doesn’t need that many users to build the databases, it does. It has struggled to create a critical mass in the U.S.”

Waze isn’t the first to rely on this crowd sourcing technique to create real-time data. Dash Navigation failed at the same technique in 2008 and left the hardware market altogether, although Bardin argues that its hardware and strict traffic focus are why Dash didn't make a dent. Inrix and Google also use crowd sourcing to boost their points of interest and traffic accuracy, but Bardin says they’ve ignored the wisdom the crowd has to offer. Waze’s true potential comes in its price tag (or lack thereof). Since it's available across many smart phone platforms, it could very well pick up where Dash left off.

Established: 2008
Location: Palo Alto, Calif., and Israel
No. of Employees: 36
Funding: BlueRun Venture (U.S.), Magma (Israel), Vertex Venture Capital (Israel)