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Waze sale signals new growth for Israeli high tech

Josef Federman and Max J. Rosenthal (via AP/ SMH) | June 12, 2013
Google Inc.'s $1.03 billion purchase of Israeli navigation software maker Waze marks an important milestone for the country that affectionately calls itself "Start-Up Nation."

"When Israel is also involved in building the major applications for consumers, it means other disciplines of creativity are entering the game," he said. Today, Israeli start-ups employ not only engineers, but also game designers, animators, graphic artists and writers.

One criticism of Israeli technology companies is that entrepreneurs have frequently looked to cash out quickly by selling their technology to larger companies. The result, say critics, is a big payout for company founders that creates few jobs and little broader economic benefit. The push into the consumer sector could bring a wider range of jobs to Israel and help foster more sustainable businesses.

Israeli media has reported that Waze's deal with Facebook fell apart because of Waze's insistence that it keep its R&D operations in Israel. The Haaretz daily said Google agreed to leave Waze's operations in Israel for three years.

Israeli tech investor Yossi Vardi said such arrangements are a common feature to prevent companies from losing talent while relocating. Vardi is a dean of the Israeli technology world who, among other things, helped launch ICQ, a forerunner to today's instant messaging services.

Vardi said that Waze's app embodied the kind of creativity increasingly seen in the evolving Israeli tech scene.

"It's very sticky, very addictive," he said. "I cannot leave home without opening Waze."

But while the app has quickly attracted users around the world, Vardi said, the company's ability to monetize that user base has lagged behind. He predicted that the sale to Google would give Waze greater ability to earn money from its service. In turn, Waze should generate new innovations for Google in navigation software, allowing it to retain its lead over rivals like Apple.

"I'm sure this is going to be a very important property for Google," Vardi said. "It's just the beginning of this space."


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