Israeli Startup Onavo Will Be Facebook's First R&D Center in Israel

The social media giant will pay $150m-$200m for the Israeli mobile networking startup, according to industry sources.

Onavo, the Israeli startup that Facebook has agreed to acquire, will remain in Israel and become the social media giant's first-ever research and development center in the country, Onavo sources said on Monday.

Onavo, which builds mobile applications that help mobile users reduce data costs, announced on its website Monday that it would be acquired by Facebook. Industry sources said the price was somewhere between $150 million and $200 million, 

Under the agreement, Onavo‘s operations in Ramat Gan and its 30 employees will remain in Israel to become Facebook’s first-ever research and development center in the country.

Onavo’s products will retain a separate identity, much like photo-editing program Instagram and the cloud app platform Parse did after they were bought by Facebook,  the world’s largest social media company. By contrast, when Facebook acquired its first two Israeli startups, Snaptu and Face.co , it transferred the employees to its Menlo Park, California, headquarters.

“We’re excited to join their team, and hope to play a critical role in reaching one of Internet.org’s most significant goals – using data more efficiently, so that more people around the world can connect and share,” Guy Rosen, Onavo’s CEO, and Roi Tiger, its chief technology officer, said in a blog post on the company’s website headlined “We are joining the Facebook Team.” Internet.org is a global initiative by Facebook and others to make the Internet accessible to the 5 billion people around the world who lack it. 

“When the transaction closes, we plan to continue running the Onavo mobile utility apps as a standalone brand,” the company said.

Since Onavo was formed three years ago, it has raised $13 million from investors that include the Hong Kong billionaire Li Ka-shing’s Horizons Ventures, the U.S. venture capital funds Sequoia Capital and Motorola Mobility Ventures, and the Israeli venture capital fund Magma Venture Partners. Horizons and Magma also backed Waze, the navigation app acquired by Google earlier this year for $1 billion. Onavo has 10 other employees working as its official headquarters in Palo Alto, California.

Onavo’s line of applications help mobile users reduce their data costs by linking iPhones and other devices to the company’s cloud-based compression service and sending the apps they are using back to the device in a lighter form.

Its first product, Onavo Extend, launched in 2011, lets users keep track of megabyte-guzzling apps and compresses the data, lowering usage by up to 80%. It was particularly useful to people who want to keep roaming costs down when they travel. Indeed, the idea behind Onavo was conceived when Rosen’s brother was hit with an enormous cell phone bill after a trip to Barcelona.

Rosen and Tiger developed their expertise serving in the Israeli Defense Forces unit responsible for collecting signals intelligence.

The applications, which have been installed by millions of users, can be downloaded for free, but Onavo’s strategy is to eventually start charging a monthly fee once users recognize the benefits and become reliant on the service.

In February, the company unveiled Onavo Insights, a market intelligence service that shows usage patterns of smartphone applications, designed for companies that deal in mobile content, such as game and application developers and online advertising companies. It is built on a database of information collected from users who install an app on their devices that reports their app usage. Rosen said that while other companies can provide information about the number of app downloads, Onava’s data show how many people are actually using an application.

Onavo Insights offers corporate customers information on U.S. market penetration of smartphones, ranking of app usage, retention rate and engagement. The free service provides data on iPhone apps in the United States, while a paid service has information about Apple’s iOS and Android apps in dozens of countries.

Onavo also offers premium modules, geared toward advertisers and mobile software developers, that provide real user engagement data on competing applications, effectiveness indices for cellular campaigns and detailed data on users of cellular devices.

The average cost of a subscription to the Onavo Insights service is roughly $100,000 annually.

Meir Pinto