Waze at Demo: Building a $1 Billion Company and How Google Will Kill It

Rob Enderle

I’m at Demo Fall 2013 this week, and it is a fascinating event. There are few places where you can get more information about new products, how to build tech startups, and how both to do and not to do demonstrations. I can see all that at Demo and I look forward to this show every year.

One of the more interesting presentations was by Di-Ann Eisnor, who heads U.S. operations for Waze, a company that Google recently bought for $1 billion. As she spoke about how they built this truly amazing product and company, in the back of my head (because I used to spend a lot of time writing post mortems on failed acquisitions) I was checking off the boxes of what Google would likely do to kill it. This wasn’t really a knock on Google. I likely would have done this if any company but Dell, Intel or EMC had bought the company because these three companies, particularly Dell, have developed an acquisition process that is focused on preserving the asset acquired. Most firms instead focus on integrating the acquired company into the corporation. This last is generally an asset killer but particularly when you have a very unique power team like the one that created Waze.


Now I can’t assume you know what Waze is. It’s a company and also a mapping application designed for commuters that runs on iOS and Android. If you commute to work, it is the one app that I think, once you discovered it, you likely couldn’t live without. It is based on a huge international social network of drivers who provide real-time information on traffic and news related to your commute. My wife uses this app regularly and the network accurately locates speed traps, accidents (and the lane they are in), granular congestion points, and pretty much anything that you’d want to know to route around problems and get to work or back home again as quickly as possible. It regularly outperforms my other connected GPS systems more accurately and more completely, identifying those things you need to know on your commute. The users appear to be both engaged (providing information) and loyal (staying with the app). The only real downside is that this class of app doesn’t integrate well with in-car systems. And using it could get you a ticket in many states that have hands-free driving laws. This is something I hope the auto industry will eventually fix.

Growing to $1 Billion

What makes Waze somewhat unique is that the executive team is largely made up of ex-CEOs and the firm heavily leverages its customers to build and assure the viability of the product. Folks like this like to be big fish in small ponds and don’t like bureaucracy or to be told what they can or can’t do. Fundamentally, they function best in a small company. When Di-Ann talked about the big turning point for the company, she showcased the firm’s vulnerability.

Waze, as every firm should now be, was very data focused and it noticed that the customer retention stats were starting to look troubling. It was still attracting new customers at an impressive rate but the customer base erosion was starting to overtake this number. They stopped all development and pulled the company together, pouring over the information from the engaged core customers, and then concluded that they had gotten off track. While the firm was largely living off a monthly product refresh, the decision was made to delay the next refresh and completely reword the user interface, a process that typically takes a ton of testing and is rushed, so it can do more damage than good. They took the time they needed to do it right, and the end result was a massive increase in customer acquisition and retention, leading to the acquisition by Google.

How Google Will Likely Kill Waze

Generally, a firm like Google kills acquisitions like Waze by doing three things. It will try to integrate the firm, taking people who like having power and status and reducing both dramatically. Given that these people have tons of cash from the acquisition, they tend to leave. Second, as noted above, Waze turned around by focusing on the problem and doing whatever was necessary to fix it. Companies of Google’s scale tend to focus on who caused the problem, which not only keeps problems from being identified in a timely manner, it tends to force out of the company the very talent that is needed to correct it. Finally, large companies tend to implement cookie-cutter management programs. Folks like those that created Waze are largely successful because they are unique; trying to fit them into generic programs should force them to depart or, at the very least, cripple their performance.

Dell stands out as a company that does acquisitions with a focus on analyzing what the acquired company uniquely did to become successful; it then puts resources on assuring that strength, whatever that is, isn’t broken. This is a lesson most companies, including Google, haven’t really learned. That is why I think it is likely that Google will kill Waze.

Wrapping Up: Lessons Learned

Waze showcased that success comes from having a clear idea of what you are trying to accomplish, building advocacy, focusing on those advocates, and using them as a precious resource to assure the firm is providing clear value. They also showcased the need for analytics to first identify and then understand growth problems so they can be corrected in a timely manner. And finally, they showcased the amazing things a team that is given the freedom to move can do to ensure success. But, in the end, they raised huge questions with regard to Google’s (or most anyone’s) ability to take a talent-driven company into a large corporate framework without killing it.

It appears clear that they are already being pressured to put more emphasis on Android than iOS. As the merger ages, I expect the very people needed to assure Waze’s superiority will leave, taking much of the value of the asset with them. If Google can keep that from happening, Waze may become one of its most valuable assets. It truly is an amazing app. If they don’t make it work, it’ll be another huge waste of money.

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Add Comment      Leave a comment on this blog post
Oct 19, 2013 12:13 PM TomMariner TomMariner  says:
This short article should be required reading, both by "business development" teams at giant companies and by clever businesses who want to monetize or need a jump in scale. The phrase "Waze turned around by focusing on the problem and doing whatever was necessary to fix it. Companies of Google’s scale tend to focus on who caused the problem." is the core issue. Worse, the big companies measure and hand out bonuses based on the individual organization within the company. Since the CEO is busy keeping Wall Street happy with "the proper" numbers, NOBODY is watching what the whole company is supposed to do -- produce great products their customers want and get it to them at a reasonable price. It takes genuine talent and courage to do it the Dell way. And that is a rare commodity in today's big firms. Reply
Oct 19, 2013 10:55 PM cloudxix cloudxix  says:
The patterns of hive-mind behavior described in this article are common and familiar. I worked for a web-payment-processing app development company that ousted its visionary founder in a petty board fight. Once he was out of the picture, key staffers began departing. The company began losing focus and market share. Now it's a sinking ship, awaiting acquisition so that the engineers of the founder's ouster can cash in and depart. Meanwhile a lot of good people are getting pushed overboard. Deconstructive capitalism benefits the few at the expense of the many. Reply

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