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Acquired Episode 17: Waze

Acquired Episode 17: Waze

Wed, 03 Aug 2016 22:57

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We have a model where I think money from venture investors would give it to engineers. That's how the business model works. Except for that, now that we're part of plan. Yeah, we're part of Google everything's changed. Who got the truth? Is it you, is it you, is it you? Who got the truth now? Who? Is it you, is it you, is it you? Send me down, say it straight. Another story on the way. Who got the truth? Welcome to episode 17 of acquired. The podcast where we talk about technology acquisitions. I'm Ben Gilbert. I'm David Rosenthal. And we are your hosts. Today, we're going to be talking about Google's acquisition of Waze. But first, we talked about in our last episode, we are going to be doing a community showcase. And this week, it's one of our listeners, Brian Sanders. He and his team are building something called NextCast. NextCast is a next generation podcasting client that has a lot of interactivity baked into it. So they look at the existing kind of flat one-way medium of podcasting as it is today. And Brian and his team are looking at ways to make it more of a two-way street. So you can have a relationship with the podcaster and click links and watch videos and things like that. The app's not totally built yet, but they're a customer development process and kind of their pitching for funding and things like that is being covered in a podcast called Building NextCast. So check them out at if you're interested. It's really cool that we launched Community Spotlight and we did an episode about podcasts. And it's like they were listening to the episode. This is perfect. Yeah, it's awesome. So if anybody out there is building a social navigation app, please ping us. Yeah, if you would like to be on our next listener showcase and you're working on something that you want to tell people about, shoot us an email at acquiredfm at or tweet us at acquiredfm. Or hit us up in the Slack group as always. Our presenting sponsor for this episode is not a sponsor but another podcast that we love and want to recommend called the Founders podcast. We have seen dozens of tweets that say something like my favorite podcast is acquired and Founders so we knew there's a natural fit. We know the host of Founders. Well, David Senra, hi David. Hey, Ben. Hey, David. Thank you for joining us. Thank you for having me. I like how they group us together and then they say it's like the best curriculum for Founders and Executives. It really is. We use your show for research a lot. I listened to your episode of the story of Achaomarita before we did our Sony episodes this incredible primer. He's actually a good example of why people listen to Founders until acquired because all of history's greatest entrepreneurs and investors they had deep historical knowledge about the work that came before them. So like the founder of Sony, who did he influence? Steve Jobs talked about him over and over again if you do the research to him. But I think this is one of the reasons why people love both of our shows and there's such good compliments. On acquired, we focus on company histories. You tell the histories of the individual people. You're the people version of acquired and where the company version of Founders. Listeners, the other fun thing to note is David will hit a topic from a bunch of different angles. So I just listened to an episode on Edwin Land from a biography that David did. David, it was the third fourth time you've done Polaroid. I've read five biographies of Edwin Land and I think I've made eight episodes of them because in my opinion, the greatest entrepreneur to ever do it, my favorite entrepreneur personally is Steve Jobs. And if you go back and listen to like a 20-year-old Steve Jobs, he's talking about Edwin Land's My Hero. So the reason I did that is because I want to find out like I have My Hero's who were their heroes. And the beauty of this is the people may die but the ideas never do. And so Edwin Land had passed away way before the apex of Apple. But Steve was still able to use those ideas and now he's gone and we can use those ideas. And so I think what Acquire is doing what Founders trying to do as well is find the best ideas in history and push them down to generations. Make sure they're not lost to history. I love that. Well, listeners, go check out the Founders podcast after this episode. You can search for it in any podcast player. Lots of companies that David covers that we have yet to dive into here on Acquired. So for more indulgence on companies and Founders, go check it out. All right, Ben, should we get into it? Let's do it. Let's do it. Ways. I would presume most of our listener base is familiar with ways but for those who aren't, it is a social navigation app. Much like Google Maps or MapQuest going way back. Or Apple Maps. We'll get into that in a minute. But you drive with friends. Yeah. And so Ways' magical insight is that there's a whole bunch of data being collected on the road by other drivers all the time that can indicate things passively. Like, oh, there's a traffic. There's high traffic there because people are going really slow. Now, Google's been doing that for a long time. They introduced that in 2009 based on data being fed back from Android. But what Ways does is it both plugs you in with a social network based on Facebook or importing your contacts. And you can, while you're driving, report things like red light cameras, like police officers, like traffic accidents. And you kind of get a real-time map when you're driving of the incidents on the road. And this is really cool because before Ways, there was kind of like all of navigation in mapping was this like top-down thing where like, you know, Tom Tom or Garmin, like they had their data set that was like canonical. And then, you know, even Google was collecting it from Android phones. But before that, you know, they were just buying it from these other companies. But the key insight in Ways was like, hey, people are driving around with this stuff. Like, they should be sending data back about what's really going on in real time. So, yeah, cool history about how this started. So, Ways is actually an Israeli company. And this is our first acquisition that we're covering out of Israel. It was started in 2006 by five co-founders. Ahood, I don't know if I'm saying this right, ahood-shab-tai was the main founder and CTO. And he was joined by Amir and Gilee Shinar, Erie Levine and Arie Gilan. And Ahood had been given an old GPS system, well, new at the time, but now old to our view, GPS system by a friend. You know, those things that like, my dad still has one of these. That you like the portable things like a Garmin type thing? Yeah, like, and once a year or something, you can download all the new map tiles. Yeah, and you like, you know, plug it into your cigarette lighter in your car and like, you know, suction cup it to your, to your windshield. So, he'd been given one of these in 2006 and he thought it was super cool and he decided to write some software for it that would allow people to share information about where speed cameras were located in on the streets in Israel. And it started to take off, but the company that made the GPS device that he had didn't like it. And so, they sent him a season to assist letter. Whoa. And I believe, I believe we read that they said, they'd be willing to, you know, like, integrate the software, but like, he had to stop doing it. And so, rather than just giving them the software, he said, well, screw you, I'm going to take your mapping data out of this and I'm just going to create my own mapping data and I'm going to crowdsource it and have built this through the user base socially. So, he started a project called FreeMapIsrael and the aim was just that to replace this sort of like, top down map data set that this company had put in their GPS unit with a crowdsource, you know, living in social data set and it started to take off. Huh. A couple of years later, in 2008, things are going well and they changed the name of the project and the company to Waze. And they changed the terms of the map from the map data from being open and being usable by anyone to being owned by Waze. So, Waze now owns and can commercialize all of the mapping data that it's used as a generating. And so, that was in 2008 and then in March of 2008, they raised their series A, the first capital they raised. They raised $12 million, led by Blue Run Ventures, which is a US venture firm and Magma Venture Partners and Vertex Venture Capital. I believe who are Israeli venture firms. And it's interesting later, you know, this comes to play after the acquisition. Noem Bardan, who became joined later in 2009 as the CEO of the company, he wrote to blog posts and he said, one of Waze's mistakes was the valuation of its series A, which significantly deluded the founders. Perhaps had we held control of the company as the founders of Facebook, Google, Oracle, or Microsoft had, Waze might still be an independent company today. This was after the acquisition he wrote in a blog post on LinkedIn. Oh, wow. Yeah. So, the company continues to grow after they raised the series A, mostly in Israel and then they start to add other countries as well. And in December of 2010, by that point, they've reached two million users and things are growing pretty well. They have over 250 million kilometers logged in the app, which is huge. Again, compared to data that other mapping companies are using, which is not live real data, this is a huge amount of mileage that's on real city streets and routes that are getting uploaded to Waze. Yeah. So, at that point, they raised a $25 million series B from the same investors plus Qualcomm. And that was at a $95 million valuation. This was all reported in a Wall Street Journal article after the acquisition. And at that point, they opened up their first office in the US in Palo Alto, which is really cool. I remember when I started at Business School at Stanford and seeing the Waze Office just like on the street in Palo Alto, like, oh man, there's Waze. Like, that's super cool. There's a little storefront. I had that same feeling. I remember when I moved out to California for a summer for an internship, walking up and down Castro Street and Mountain View and just seeing all the different startups. The one that actually sticks out in my mind was Weep or Miibo. I remember it was like that web-based chat software that I had used a lot. And it's really strange when you see a logo in real life that you're used to seeing digitally, like a physical representation on a building. And you're like, whoa, it's right there. Yeah, this is one of those really strange things that when you live in Silicon Valley, you get used to really quickly and don't think about. But when you first move there or you visit, it is totally mind-jarring. Like, you see these storefronts. And they're actually like storefronts in Palo Alto and Mountain View. And sometimes even in San Francisco, they'll be next to retail shops and they're like, you know, Waze. Yeah. So they raised the Series B. They had about 2 million users. That's December of 2010. Fast forward, not quite a year to October of 2011. And here, the intrigue starts to begin. October of 2011, they raised their Series C. So less than a year later, they raised $30 million at about a $200 million valuation from Cliner Perkins and Horizons Ventures. And they announced that they have 7 million users at that point. So October 2011, at the end of 2011, beginning of 2012, they announced they have 10 million users. So in just a couple of months, they had 3 million users. Halfway through 2012 in July, they announced that they have 20 million users. So they've now doubled from 10 to 20 in six months. And then later on, by the end of 2012, they get to 34 million users. But a really important thing happens in the life of this company. And like I said, where the intrigue begins in the summer of 2012 at WWDC. It's amazing how much Apple and WWDC ends up playing a role in our podcast here. Is this the forest all? Oh, yeah. Scott Forestles, last stand. It's like Custer's last stand. I was actually at... Oh, let me see what it is. Well, so yeah, I'm burning the lead here. Apple announces iOS 6 at WWDC 2012. And in it, one of the marquee features is they're launching Apple Maps. And so they're ripping Google Maps out of the iPhone. And so until then all previous versions of iOS had had the native built-in Maps software was Google Maps. That was built by Apple, but with Google's data. And Google's map tiles. And I think it was something like the contract expired. And it was such that Apple didn't want to renew the contract with Google because they were starting to kind of part ways and get into a little bit of a war between the two companies. And Apple had to ship Maps early because they couldn't use Google's data anymore. And they didn't want to re-up. And they knew that re-uping would like come with a really nasty price tag for them. And a lock-in to send Google a bunch of data that they didn't want to. And I think Google is also requiring that people sign in with their Google accounts, which Apple didn't want to do for privacy concerns, even all the way back then. So Apple kind of like obviously rushed Maps to market because it was the only way. Well, I think there's even more context setting that needs to happen here, which is that like, as we were doing the research for this episode, it struck me like just how fast the technology world moves. Like this was only four years ago, but it feels like a lifetime ago. And I hadn't completely forgotten all this stuff. So at this time, the mobile platform wars, quote unquote, were in full swing. Apple and Google are going at each other's throats. And everybody in the tech industry is like, who's going to win mobile? Is it going to be iOS? Is it going to be Android? And the tide's swinging one way or the other. And people think that this is going to be a winner take all market at this point in time. Yeah. And the other thing that happened is Tim Cook had recently taken over a CEO of Apple, Steve Jobs, passed away. And the Apple was really in a tim and Apple. They were figuring out what was going to be the path forward. It was becoming clear that there was no way that they were ever going to overtake, or catch up to or overtake Android on actual user numbers. But the world hadn't come to the conclusion yet, which now we just accept as a given, is that nobody won the platform war. Like iOS and Android exist co-exist peacefully. Yeah, there's this everybody builds for both mostly. And Apple has the more valuable customers. And Android has most of the customers. And that's just the way the world works now. And there are all sorts of tools now to make it easier to build for both. But that was not the world back then. And so this is the stage, ways it had been operating for four years at this point. And it'd been growing the user base nicely and riding the wave of mobile. But all of a sudden, they are like at the center of this huge conflict between these two behemoths. So in at WWDC, Apple announces Apple Maps. And this has been years in the making, but as Ben as you were saying, they had to rush the product to market when they actually shipped iOS 6 in the fall. And it becomes super clear. There was a ton of hype for this product. This was the 10-pull feature of iOS 6. It becomes clear within a week that it is hugely broken. And there are all these reports of people getting sent to the wrong addresses, causing all sorts of problems and accidents. And it is a disaster for Apple when this happens. Yeah. And the story that Apple is trying to tell is, it's two-sided. One is that we really messed this up, and we apologize. And that's kind of, Tim Cook comes out with that public letter. Right. So writes a letter posted on, apologizing. This has never happened before in the history of Apple. People are saying, this is what never happened under Steve. Right. But on the other side, Apple's hedging, and they're saying, well, it takes a lot of time for the data to come in for it to get better. Apple maps is only going to improve, which is true. Which is true. Which is gotten dramatically better. And that's the exact same story they had with Siri. And going back to the Steve Jobs comment, it's funny. Steve, this feels like actually a tremendously Steve Jobs move, because Steve is famous for saying he's going to go thermonuclear on Android. And when he gets into a TIFF, they get into a TIFF. And even if it has some fallout, like we saw here, I think that that's a very Steve move. And that's actually Scott Forrestall was largely responsible for this. And he was at Steve Jobs' protege. Yeah. And so closing the loop on the Apple intrigue here, this ultimately ends up in Scott Forrestall getting fired. Scott refused to write the letter, Tim said. I'm going to do some research. He refused to sign it, only Tim Cook signed it, even though Scott publicly introduced the maps product. Like it was clear it's his product. Before Tim, before Steve died, and Tim became CEO, like the public talked about like, hey, Scott Forrestall, the next CEO of Apple. Right? This guy is not, he's not just like some Apple exec. He was like Steve Jobs' protege. Yeah. And it's amazing that in this letter that Tim Cook writes, he lists some alternatives for people that are dissatisfied with Apple maps and says it's going to get better. But actually, this is- Alternative products. This weighs as one of the products that people should go and try out instead of Apple maps. In the letter, which is, again, this is like unsharted territory for Apple at this point. Again, because with the backdrop of they are locked in this feature war with Android, and another one of the reasons why people speculate about why Apple and Google couldn't come to terms to keep Google maps within the native iPhone software is that Google had recently shipped turn-by-turn navigation in Google Maps for Android. But not, it wasn't available on Apple. And people were speculating that Google was withholding that ability, which is hugely compelling. You got to remember, again, this is more contextly. Tom Tom and Garmin and all these guys had navigation apps in the app store at the time. And they cost like 100 bucks. I think they were patented. Like Apple, for whatever reason, I remember, maybe I was wrong about this, but I remember the reason being that Google Maps for the iPhone didn't have turn-by-turn is because those companies owned the patent to that. Could have been- Maybe Apple was concerned about that. But it was bizarre. The official Maps app on iOS, you only just got a list of directions. It wouldn't talk to you and say, like, turn right and 600 feet or whatever. Like you had to scroll through the list as you were driving or walking or whatever. It was terrible now, like, looking back on it. But if you wanted turn-by-turn directions, A, you got crappy products with crappy data from companies like TomTom and whatnot. But you had to pay 50, 100 bucks for that, just for the app. Like, could you imagine paying 100 bucks for an app now? Right. Right. So the stage is set. I mean, it's set. So in the middle of all this, ways is free. And ways provides pretty good mapping data and application. So this was, I was kind of October 2012 by the time the dust settles. Apple's fired Scott Faristle. And then rumors start swirling that Apple is looking at acquiring ways. Which was actually never true. I think I believe it was who denied it. Apple. Well, Apple denies everything. OK. Anyway, Apple denied publicly. Apple, Apple denied publicly. But you got to imagine that, you know, in the wake of this, that they're looking around and saying, oh my gosh, what are we going to do? Well, like, we just have this egg on our face. And here's this free app that is pretty good in the store. And it has a really interesting data model. Like, maybe we should buy it. And the rumors were that they were talking about about a $500 million acquisition with ways. How far that went? We don't know. But it doesn't come together. At the same time, in December of 2012, so a couple months later, Google launches a standalone Maps app, the Google Maps app on iOS, which many of us myself included now use and love, does include turn-by-turn directions. But is just a regular app in the app store? And it was great. It was like this incredible. Actually, I know there was a 5% team that did the native code, and actually in the Kirkland office, here in Seattle. Oh, cool. Yeah. I didn't know that. Yeah, I think the backend was all down on the valley. But the actual iOS app, the Objective-C, was written up here. And then, and when it comes out, like, it gets huge praise. And it was like better than the Android app. And there's all these, yeah, that was a big blow up. There's all these articles written about Google's new design paradigm, because it was uniquely iOS, but still familiar for people that love the Google interface. And they found this amazing way to combine the two design languages. And there were pieces written. There was a fast company piece that was written about how Google's new Google had this design studio in New York. And they would go and work with all these individual business units. And it was like, I mean, I thought that it was really well-made. And I think the rest of the world did, too. It was so well received. And I think actually that moment looking back on it now is the beginning, the heralding of the end of the mobile platform wars. Now, I think we can look back on that and say, that was the moment when the world, at least Apple and Google both decided, hey, we can peacefully coexist here. Yeah. Yeah. And Google knew that they had a good product on their hands. And if they released it, and I believe you still have to, when they released it, you had to sign in with your Google account. So that was a path to getting a whole bunch of data that they wanted. And then Google realized they were getting all this data and all this monetization opportunity on iOS. And it actually was super valuable for them. So that was at the end of 2012 going into beginning of 2013. Another piece of context here is that Facebook is now emerging as the big, giant counterbalancing Google. And again, in the post, as the world is determining that Apple and Google can peacefully coexist. Like, Google's main enemy shifts from being Apple to being Facebook. Yeah. And it's funny that it was Apple. This is weird. D2R, Google's core competency is being the best search engine. And that turns out to be a tremendous ad platform. So 90 some percent of their revenue to this day still comes from search ads or search end display ads. And they shifted direction. It almost seems like Android was a little bit of a distraction to go to war. They needed Android for a variety of reasons. But it made them focus on Apple as the enemy since Apple was also producing this rival OS that came with great hardware. But really, Apple wasn't after Google's core business of search queries that led to the future of Apple. And nor was Google ever after Apple's core business of hardware sales. Like, Google doesn't make money on hardware sales for Android. No. But they really went to bat on trying to displace the iPhone. Yeah. And it's weird. Historically, Google and Apple had always had this great symbiotic relationship. Google does the services. Apple does the hardware. Yeah. Native software. And Eric Schmidt was on Apple's board until Steve Jobs kicked him off after they launched Android. And really, but you know, then at the end of 2012, when Google launches Google Maps on iOS, it's like the day Tom is reached. And since then, I wouldn't say it's back to the good old days, but like, Google and Apple both realized, like, hey, we're not each other's enemy here. Yeah. Yeah. Apple makes hardware and software that are excellent, sells the hardware. They have services that differentiate them. But ultimately, you can plug in Google Superior Services on any of those devices. And they have a great experience. And it's symbiotic. Yeah. But you can see why Google felt so strongly that they needed to control the input pipeline. It's the same reason that they make Chrome. It's the same reason they're distributing Chrome books. Anybody who's the front door to the user has the power to redirect that. Like Apple shipping all these services associated with Bing in Siri and maybe even the default search engine on iOS. It's still Google, but that's always back and forth. But yeah, you can totally see why Google's like, OK, we need to make sure that we don't like lose, you know, billions of people. The front door to the internet, which is where we make our advertising money, which is foreshadowing. Yeah, yeah. So Facebook goes public, you know, the right around the same time as WWDC in 2012, at the beginning of this maps drama, the real threat emerges to Google. And that's Facebook's IPO. Yeah, Google's, you know, Castle is where people are going to spend their ad dollars digitally. And that's linked to where people spend their time and where people's front door to the internet is. And it's like, oh man, that's Facebook increasingly. Yeah, Apple's not going to eat Google's lunch. They have no incentive to try and get that advertising pie. But like Facebook sure is, that's their core business. That's the real threat. Yep. So we've just gone through this wild ride. Apple was rumored to be circling around ways, thinking about a half a billion dollar-ish acquisition to fix their mapping issue, falls through. But then a couple months later in the spring of 2013, rumors start circulating that Facebook is not only interested in ways, but is going to buy ways, and going to buy ways for about a billion dollars. This was in the press for weeks. It was all the remind of the Twitch deal about a year later in that like, everybody just thought this was like a done deal that Facebook had bought ways. Yeah, and in my research trying to look and see, you know, how Google justified this acquisition how ways was doing as an independent business beforehand. So many of these articles that are all loosely titled, why is ways worth a billion dollars were written before the acquisition. Yeah, nobody even knew Google was in the mix at this point. This was about Facebook. Yeah, yeah. So the Facebook deal falls through. And we don't know, unfortunately, ways was not a public company. So we can't go through all the SEC filings and do our usual magic and to date, there haven't been any lawsuits for us to go through a discovery. So we may never know exactly what happened with Facebook. But in some of the comments that the way this team is made after the acquisition, one of the key sticking points apparently was that Facebook wanted to move the whole company to Menlo Park to California. And the team really wanted to stay in Israel. So a couple of weeks keep going by. And the world assumes Facebook has bought ways, but it hasn't, hasn't been announced yet. And then kind of out of the blue, June 2013, it's announced that Google is buying ways for right around a billion dollars, somewhere between a billion one and a billion three. Most of it was cash, but there were other stock and other considerations. And that the team is staying in Israel. The some of the Wazers who were in Palo Alto are joining Google in California, but the core team is staying in Israel. Yeah, and this, they had a pretty immature location-based advertising products right around this time. Do you know when they actually started having a business model other than Waz did? Yeah. I thought you were referring to Google had a pretty immature location-based advertising product at this point in time, which also might be an accurate statement. Yeah. This was, I believe, when did Marissa Mayer leave Google to take over Yahoo Topical as Verizon just bought Yahoo this week? Yeah. But Marissa had been in charge of Google of local and location-based advertising products at Google before leaving for Yahoo. So I don't remember. I think she had left for Yahoo at this point, but yeah. Anyway. What I was sort of getting at, this billion dollar evaluation has very, very little to do. Wherever Waz was in their monetization path, and they were doing things like they had sponsored gas stations, and they had some, you know, like, safe way and other location-based advertising on the map. But I mean, this was a, well, we'll get into acquisition category. Well, let's just get into acquisition category right now. I mean, this was not a business line acquisition. I will come down hard on that. What's your categorization been? I want you to go first, because I'm going to do some on Orthodox. Oh, I'm going to do something on Orthodox. That's why I turned on it. Turned the ball around. OK, I'll go first. All right. I'm doing it. So traditionally, on this show, we categorize either by people, technology, product, business line, or other. And I don't believe this falls into any of them, because this is a data acquisition. I agree. And David, you were funny. You were just bringing this up right before we talked about the show. I want to introduce for acquired going forward another category of asset. Yep. This is clearly an asset by what was that? That's exactly what I was going to say. It's like right here. All right. So apparently we are technically. Are we sharing notes or something? No. Are you cheating on the test bin? We actually started like five or six episodes ago. David and I realized that it wasn't very fun when we talked beforehand, and then we're of one mind when we got into the show. And then we would refer to things like we were talking before the show, which is less fun for you guys. So we were like, OK, we're going to stop talking before the show, except for a few things here and there to make sure we have all of our bases covered. And sure enough, here we both are again. Yeah. And it's like, this is so clearly what it is. Because if you run through all of our previous categories for acquisition, this was not a people acquisition. The ways founders were clearly very talented. But Google had plenty of people who were great at it. A billion dollars is not a talent acquisition. Yeah. Well, I mean, yeah. No, it's not. This was not a technology acquisition. The technology, as we were just saying, that was actually in the Google Maps asset, was arguably as good or better than ways at the time. Yeah, they didn't have active reporting, but they had the passive reporting of traffic and had been doing it forever. And I actually had in my notes from early research, why doesn't Google just do this themselves? Because this is exactly the kind of thing they're good at. Yep. It wasn't a product acquisition. Like, ways still exist. And lots of people use it and love it. But they didn't replace Google Maps with this. No. And it's, in fact, not even part of the Google suite. The Google finally now was bundling it as one of the OEM options when you get to choose all the Google services when you're making an Android phone. But it's still not a Google branded product. No, Google Maps is still clearly the flagship location based product. Definitely wasn't a business line. Now it just makes money. Definitely was another slash asset by. And the asset was, I think, a couple of things, in this case, which is really interesting. I think we talked about this a little bit with LinkedIn, but A, this was a data asset. Ways generates so much very, very valuable data for that would be valuable to lots of people, but especially to Google in terms of improving their core Maps product, in terms of their driverless car initiatives and everything they're doing with transportation, having real-time data and not just passive data being streamed back from the phone like they're doing with Google Maps, but things like where traffic stops are, like user reported accidents, controversially, but has always been part of ways, reporting where police offices are, officers are in speed traps, and red light cameras and things like that. But also, super clearly, as we've just been talking about with this whole drama leading into the acquisition, this had huge defensive value for Google. They did not want Facebook to have this. Yeah, and even more than the actual asset of the data is they bought this data gathering machine. And I think that's why we haven't seen them mess with it at all, is because it had a great growth trajectory, particularly after the Apple Maps debacle, it was growing at like 100,000 new users a day. It was insane. And that obviously a short lived, but they recognize that this thing is going to continue to feed us really great data and data about the real world, mapping data is something that is in need of being constantly updated. And people, they, like, ways has invented these great mechanics that people often complain about, because they say they're distracting while they're driving. But they've really created mechanics that people reliably feed really up to date information and high fidelity, both passively and actively. Yeah. And, you know, the super high value asset is nailing the creation of that machine and the user experience that compels people to continue to do that over and over again. Yep. Well, I don't know if I want to say I'm glad we're in agreement, but I think we should add this to our categories going forward, because this is so usually in other, it's like, oh, it's a one off, but like this is very clearly a category that we just haven't come across before. Yeah, I agree. Cool. So what would have happened otherwise? I feel like, you know, in a lot of ways, it's through what we were discussing in the history with the drama and all the different big tech companies circling around ways, you know, this company was going to get acquired by somebody. So I think that's what would have happened otherwise. Yeah. It's also interesting to think though, I mean, you know, this was 2013 again, not that long ago, reminding me again, how fast the technology world moves. I feel like Ferris Bueller here, you know. If you don't stop and look around once in a while, you might miss it. Nobody was thinking about driverless cars then. And today, like people think driverless cars are gonna be the second coming, and the, you know, every tech company and their mother is going after it. And what's interesting is that Israel is actually really, companies in Israel and talent in Israel are really well positioned in this, there's a company called Mobileye, which is a large public company now that makes a lot of the sensors that go into cars that are used for autonomous and semi-autonomous applications. Is it the military influence that? Well, everything in Israel is military influenced, but so this is what yes. But you know, it's interesting to think like, would a, is independent, is really based transportation and driving focused company, software company, combined with the hardware talent there, be a real player in the race for autonomous cars today. I don't know, I mean, you know, big asset to Google right now. Yeah, the hard part would be production. I mean, that's something that traditionally, American manufacturing has been very good at making, but you know, Japanese are probably forthcoming Chinese cars. Well, it's interesting too. I mean, it's just like, that market is so, still has so far to go to play out. Like, do you actually have to make the whole car yourself? Could you make kits to put into cars? Let lots of people are trying to do. You know, can you just be a pure software platform? Yeah, I think if I'm the car companies right now and realizing that there's gonna be this driverless future, I think you have to make the bet that people aren't gonna want to buy your cars in mass, but people might want to subscribe to your fleet. Yeah. And it would be like a Mercedes-Based Uber, like a self-driving Mercedes-Based Uber. And the question is, would people rather subscribe to a individual auto manufacturer's fleet or the things you can do for a lock-in there? Would people rather subscribe to a more generic fleet? Google or a Uber? You know, in terms of, you know, thinking about, themes we've talked about on this show a lot, you know, in terms of Bentomson's aggregation theory and owning the customer and the user experience, you know, his ways, his Google Maps, is that the user experience for driving now and like, then the cars at the back end? I don't know, maybe we should also spend a minute, I think it would be, because this is just pure speculation, as well as this next topic, but what if Facebook had bought these guys? Like, what does the world look like now? Facebook has basically no play in transportation. Yeah. Did you see, this isn't quite transportation, but Facebook's doing some like crazy cool drone stuff. Oh yeah, super cool. So Facebook's core competency is delivering ads to people and they've basically run out of people with internet. So to expand past their existing massively saturated user base, they're trying to get internet to more people. So there's a team, I think it's a London based engineering team that created, I believe it was a company they acquired. Yeah. But they created this like gigantic drone that can, is super lightweight and as like, can beam internet down and can fly for like a month at a time. And so it's like, it's interesting, like, while they're not in the transportation space, they are in sort of the large scale manufacturing space for completely different reasons. Yeah, super cool. This thing is awesome. Like, it is a giant drone that can stay in the air for months at a time and beam internet down and probably do satellite imagery applications as well. Super cool. Yeah, it is interesting. Why, why, you could see Facebook buying this just to more effectively deliver local ads. I mean, this feels like Facebook at this point is looking for, basically Facebook is buying digital social billboard space. And that's what Instagram is that I don't know if that's what WhatsApp is. That eventually is what Oculus is, right? They create these experiences and Facebook extends their core competency of, of, you know, being an advertising company into that, I think, it's wildly speculative. But basically, like, you know, ways fits into that category of digital social billboard space, where stuff comes up that is relevant to you or people want to show to you or your friends recommend. I think it makes sense in that context, and it just doesn't get used for the autonomous car stuff at all. Yep. It is interesting, like, to this point, until about two minutes ago, we started, we've been talking about ways in the context of the world when it was acquired. And it is interesting now to start thinking about it in the context of the world several years from now that's much more focused on requiring a super high fidelity data asset for autonomous vehicles. Yep. Yep. Which is, you know, clearly Google, they'd already announced that they were working on self-driving cars as part of Google X at that point when they acquired ways. But very few other people were thinking about this at that point in time. How much did that play into this acquisition or not at the time? Hard to say a bit of it. But it's clearly, like, for them as a defensive move versus everybody else that's trying to get into it. Now, I mean, like, Facebook might have bought about what if Tesla had bought, you know, where it's right, right, right, right? Or what if Apple had bought ways as they were trying to? And Apple is now as, you know, widely reported working on self-driving cars. Yeah, did you just see they put Bob Mansfield in front of that? I saw that. In charge of it. Bob Mansfield is like their senior VP of hardware. And then, like, didn't agree with management or something when Scott first always still there and then moved to like head of special projects. And seemed like he was like half retiring. But now he's like really back in full forest with project Titan or the Apple, I think that's a codename for the Apple self-driving car thing. Yep. Interesting. All right. Should we move on to tech themes? Yeah. Not that we haven't been in there. Yeah. That's cool, man. Well, I've got, so I've got two here actually. And one, I'll just do quickly, which is, you know, we've mostly covered in this past section. But, you know, it's sort of the value of a data asset. And, but specifically, the bent I wanted to talk about it is like, it's when you have the potential for a very valuable data asset, you can use that as like a way to upend the business model in the industry that you're playing in and just give something away for free. So in this case, like turn by and turn navigation apps, you know, cost 50 to $100. Yeah. But ways can just give it away for free because they're going to get their value out of getting the data. Right. And they don't have to pay to acquire it. And they don't have to, yeah, right. And they don't have to pay. And I think we've seen this in various ways in other acquisitions, both that we've covered on the show and ones that we haven't yet. Like I'm thinking about Instagram, right? Like Instagram was a social network, right? But there was also this app called Hipposomatic that was out before Instagram that was basically just the same thing but it cost three bucks. And it gave you a cool photo filter for your photos. And Instagram came out and made it free. And like lots of people, I'm sure, tried Instagram because they're like, oh cool. I wanted to use Hipposomatic but I didn't want to pay three bucks. You know. And you know, same with LinkedIn. Like if you wanted access to people's resumes, you had to pay recruiters and like go through databases and what I'm linked in was like resumes are free. You know. Skype did the same thing with phone calls. What's app did the same thing with text messages? So I think it's a. That's a really interesting way of looking at that that I really thought up before. It's like all of these companies found a way to make something free that was previously expensive and then could up in that business model. And I think a lot of the initial users that came onto these platforms were probably just like Cheepos who were like, oh yeah. I want to think about using Hipposomatic but I really don't want to pay three bucks, you know. Yeah. Which is like everyone, right? Like as much I do that. You do that exactly. Like we're all Cheepos in various ways. And but that's the thing about like how you can get these winner take all markets and what you need to tip the market in your favor is you need to like I love the Jeff Bezos quote at the code conference which was this year which was one of our carve outs a while back. You know, he has this thing he says, I think it was either Carol or Walt was asking him about Prime and he's like, I want it Amazon Prime to get to the point where it would be irresponsible not to be a Prime member because you're getting so much value out of it. And like that's what this is here is like, it would be irresponsible to pay for Hipposomatic because you get more value out of Instagram and it's free. Right. Which especially with network effects, of course, you get more value out of it. Everyone's using it because it's free. Exactly. Network effects, they're a beautiful thing. Yeah. All right, I'll, I'm going to do my two now. That was just one of yours, right? You've another one coming. Yeah, but it's fast so. All right, cool. I'm going to do both my nowcs are related. One is bringing measurable online advertising into the real world. Google and Facebook both have ad units around this now of trying to try to attribute when you see ads online and when you go to physical retail stores and understanding where those places are, tracking you either via GPS or sensors when you're in the store, trying to bridge transactions in the store and really get some good measurement around the holistic view of view in the real world and you online. And you know, ways totally does this. You see a digital ad, you tap on it, you navigate to go there and like there's, people don't even think twice about the privacy because like the main purpose of ways is knowing where you are. So you hand that data right over. You say, I want to go to this place, you navigate there, they might have paid for that ad and then, or it might be a place that you're kind of organically trying to go to and then ways knows that you for sure went there. Which makes it a pretty valuable ad unit and kind of ahead of their time. I think people were talking about doing this for a long time, but the idea of putting it into an app where you very explicitly have said, please track me. Is it pretty interesting? Yeah. Yeah. And then this kind of falls out of my second piece, which is, or my second tech theme, which is banner ads totally failed on mobile. Like display ads were a thing on websites and people tried to put banner ads on mobile, but there's such a little screen real estate that even the display ad people on mobile have mostly fallen back to just putting a big freaking desktop square in the middle of articles. Remember when this would be a fun episode to do at some point, but when Google bought AdMob and Apple bought, it was a quadruo wireless. So everybody thought mobile display was gonna be such a thing. Yeah, I mean, there's like that slide every single year in Mary Meeker's deck that says that the mobile ad opportunity is still huge because the amount of minute spent on mobile versus on desktop way outpaces the actual ad spend on mobile versus desktop. And that's because like, this is my tech theme. We're just now seeing the emergence of effective native advertising on mobile. And as it turns out, it's not a banner ad, it's not a square, it's not a intersearchal, it's none of those things. It's not Instagram. Snapchat. Yeah, and it's Pokemon, right? Like it's figuring out what the very specific tailored experience someone is in when they're immersed in this single full screen application. And like in the Pokemon case, it's my God, they're so obsessed with finding the weird, so obsessed with finding the poke stop or the gym. And like businesses can pay for the right to direct like people to go places in the real world. And that's gonna be, in my opinion, the way that mobile advertising succeeds is that it's native, it's very specific to the platform. And it took us freaking 10 years of mobile to figure out what the right way to advertise to people on that platform. It's such a classic case of like the mobile display ads being like the head fake that it was a faster horse, right? Like it just wasn't, it was the totally wrong way to think about it. And we see this over and over again in technology that like, and we especially see it like being in, in the startup world, like so many times people recognize an opportunity coming in a wave, but their mode of thinking is stuck in the old world, right? And like, you know, it's the faster horse thing. Like, you know, it's like, you know, you need to build the car, you know? And like Pokemon Go is the car, Snapchat is the car, Instagram is the car, AdMob was the horse, you know? Yeah. So $750 million horse, but. Hey, you know, you're good for, good for that and Omar, I'm really the CEO is at Sequoia now. So he's doing great. Everybody worked out for everybody. I'm gonna do my second one real quick. We've also talked about this before, but I think this is a really, I put this in here because there was a great quote in that same blog post I referenced earlier that we'll put in the show notes from Noam Bardan who was the CEO of Ways and still is from 2009 onward. And the theme is that like entrepreneurship is a global thing now. And like Silicon Valley is this incredibly special place and has its own network effect and is where the vast majority of startups are gonna come but like innovation is not a physical location-based thing anymore. And Noam puts this great in his blog post. He writes, you know, about how a Ways was an Israeli company and the importance of that. He says, growing up in Israel in the 80s and 90s, I lived in a radically different world than my American cousins. We had one channel of Black and White TV. Music and movies arrived 10 years later. There was no fast food or American brands and we lived very differently. And then he talks about how cable television started flattening the consumer experience. When that came out in the 90s and early 2000s, but then he says then the internet accelerated this change. As people globally used Windows PCs and explorers to surf websites, social and platforms have pounded at it again. And today most of the users have the same Facebook account or Gmail interface and use it very similarly. The final flattening of innovation in the world came from mobile. Anywhere you go in Israel, today you will see iPhones and Android phones, the same as in San Francisco, running the same consumer apps and delivering equal joy. On a family vacation with Ways Management, it was amazing watching our kids, both Israeli and American, naturally communicate and share apps without the need to speak the same language. This is like a sea change that's happening in innovation. And we're seeing it with stuff like apps like Musicley now that are getting big like it's based in Shenzhen. But it's a big social network in America. Yeah, I mean, there's still something to be said for density of networks, like just the people you encounter and the people you work around and the speed of which information gets exchanged there. Absolutely, but I think the nuance here though is something like Musicley, something like Ways, like it's in both places, like Musicley's in Shenzhen and it's in Silicon Valley. Ways was in Palo Alto and in Israel. Yeah, definitely the dual office thing. I would say like you still sort of need to have your finger on the pulse in the hub. Yep, absolutely. What we talked about this with Scott, right? The importance on the exact target episode. It was so important to Scott and to Indianapolis that they get the direct flight to San Francisco. Yeah, it's a great point. Okay, great, Nick. Well, let's create it. So it's interesting, there's probably, there's like two criteria to think through here. There's, we're three years out from this acquisition. So we have a little bit of perspective. We can see what they've done with it so far. But then you also have to take into account the speculative view looking forward, which is a lot around autonomous vehicles. And I think they've done a pretty, it's really hard to figure out what the size of the ad business within Ways is. I predict it is nowhere near close to paying back the purchase. This as a product. It would be shocked. This as a product is not gonna pay for itself. But the data asset has stayed really strong. People still use Ways all the time. Many Uber drivers are using it and preferring it to Google Maps. It's in developing countries. It's used way more often because the crowdsource data is way more accurate. So as those countries really start to come online, I mean, their default experiences Ways, it would be not great for Google if that was out of their hands. And I think that that combined with Google's autonomous vehicle future and the great data that it develops, that it creates for itself, for its use in its own app, and that feeds into Google Maps, I'm gonna go A-only because the A's that we've given out are just wildly successful on a ridiculously fast scale. Yeah, I mean, to me, it's almost like, in some ways this is a cut, I am gonna give it a grade, but how I really feel is, and I know this is a cop out in some ways, but Ways, quote unquote. Nope, nope, nope. Nope. It's too early to tell. Like even though this happened three years ago, and it's too early to tell because just like, like three years ago, and this whole Ways story, I feel like was really the closing chapter of the mobile platform, or is quote unquote, you know, what's happened since then, we're now at the emerging of the era of like machine learning is the really important thing in technology. Like we went from, you know, Google's being very open and saying this, you know, about themselves, but we went from a world, call it 10 years ago, where companies were, you know, internet first companies, we weren't software companies, we were internet companies, to, you know, from 10 to five years ago, the world shifted to mobile first companies. Companies aren't, you know, aren't just internet like they're mobile, and they're not just building desktop websites, but now like we're shifting to a machine learning based, you know, companies are ML first. Like Google is very explicit. We are an ML first company now, and you see that across all of our products with Google Brain, with Maps, with TensorFlow, and the first, I think, like huge native ML application that industry that's gonna happen is gonna be probably autonomous vehicles. So, already is. Well, yeah, it already is. I mean, Tesla's doing it. Like it was like, you know, this was the Trojan horse. So, how important ways, and the ways data becomes in that to Google? Like I said, I think the value is still in the future, but that said, like, for the defensive reasons we talked about and for the value that they've realized, even so far along that, yeah, I mean, I think it's an A-minus, because like you said, our bar is very high for the A's. Yeah, it's like, it's an A-minus with low confidence that it's gonna stay there, right? Like, the A is gonna be an A, or it's gonna not be an A-minus. Yeah, right. Yeah. And it's interesting, like, compare that to Cruise, which GM bought for a billion dollars, like right around the same amount of money. You know, arguably there's a lot more value in ways, thus far, that Google has realized than Cruise is still very much pre-product. So we'll see. Part of why I say though is that, like, it's too early to tell. Yeah. Okay, let's bring this one on home. So follow-ups, we got nothing for you this week, but maybe next time, maybe we'll talk about autonomous vehicles. Carve out. What you got, Ben? All right, so I've got a podcast for us this week. I've been, I listened to one episode of this because I got totally roped in actually a while ago to a podcast called Song Exploder by their first episode, which featured the Postal Service. And what the host does, Rishi K. Shereway, he sits down with an artist, a musical artist, does an interview and also gets them to provide the actual track, all the different tracks that make up that song. And he'll listen to each layer and play each layer individually and have a conversation with that artist about where did this individual sound come from and where did this instrument come from and who provided this and who did you collaborate with. And a lot of the times, they even come with early recordings and demos and songs that inspired that song. And he does a really great job of kind of isolating these individual pieces. So you go, oh, whoa, I can totally see that. And one of my favorite bands is Odessa. I saw them this weekend in Seattle, Capital Hill Block Party. Their episode is super, super cool. They talk about when they went over to Bainbridge Island to compose this song and that's super cool, but the best episode, in my opinion, and it's sort of dangerous to start with this one because it says the bar high is an interview with Weezer where the systematic approach to songwriting by this dude is absolutely amazing. And he has like spreadsheets full of lyrics that come out of his journaling, that he highlights, that he then puts in there and tags by the number of syllables and the onbeat and the offbeat and then combining all these different ones after he writes a riff. It is like, I'm not doing it justice. You gotta listen to this. It's the Weezer episode of Song Exploder. It's so good. Dude, that's awesome. I've heard about this podcast, but in my opinion, check it out. But I really need to know, that sounds really cool. It's like, they're doing two songs, what we do to M&A deals. They are. And the production is so, so high quality. It's like a total treat to listen to each one and it's gotten me into bands I didn't like before and it's gotten me into songs where now when I hear some of these songs, after I hear it get exploded for 20 minutes before, it's like that song that comes on that's like one of my favorite songs if it was an episode. That's awesome. So, my carve out for the week is an oldie but goodie that was sent to me recently by a really good friend. And I'm so glad he sent it to me because I'd watch, it's a TED talk. And it's Simon Sinek's start with why TED talk. It's one of the, one of the top 10 TED talks and it's interestingly, it's a TEDx talk done at TEDx Puget Sound here in, I believe it was in Seattle in 2009. And it's just such a cool concept and it's called Start With Why and then he ended up writing a book about this. But in sort of more raw version of the TED talk, he talks about it as the golden circle and it's, you know, there are three levels of communication about a company or a product or a person or a firm. There's the what you do, there's how you do it and there's the why you do it. And 99% of companies or firms or products or people say, Hi, I'm David. I'm a venture capitalist at Major on Adventure Group in Seattle, Washington. And we do seed and series A deals, Invest in Seed and Series A, Stage Technology Company is largely in the Pacific Northwest. And we'd love to talk to great companies, right? So it's like people start with what? Then they do how? And then maybe they do a little bit of why. But if you actually want to inspire people and reach people and do something that has a much higher chance of success, you need to start, you to reverse the order and start with why. Say, I'm David Rosenthal. I believe that all great companies in the Pacific Northwest deserve a chance to have an experience with their venture capital firm that's every bit as high quality as the best companies in Silicon Valley get. Yeah, that was a lot more than that. Do you want my money, right? Like, you know, then that like, it just comes across like you're just by reversing about like talk about why you're doing something and what you believe in. It's gonna be so much more powerful than starting with the what. And interestingly, Apple is the company that he uses as the canonical example here. We think differently at Apple. We design beautiful, we have beautiful, intelligently designed products and those products happen to be phones and computers. Not, we make computers. Of course. And of course, yeah. Not, we make computers and phones, we design them beautifully and we believe in thinking differently. Yeah, yeah, that wouldn't fit on the poster. It would not. All right, if you aren't subscribed on iTunes and you want to hear more, you can subscribe from your favorite podcast client. And if you feel so inclined, we would love a review on iTunes or tell your friends, share us on Twitter. And we'll see you next time. We'll see you next time. Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Who?