Waze was founded in Israel in 2008 and first raised $25 million of funding in 2010 followed by a further $30 million in 2011 / Waze

Traffic and navigation app works by connecting drivers to one another

Google is said to be nearing a deal worth $1.3bn (£840m) to buy Waze, a traffic and navigation app that harnesses GPS data and feedback from a community of tens of thousands of users to generate driving routes.

Earlier, the search engine company was reported to be among a group of Silicon Valley giants, including Facebook, who were vying for Israel-based Waze.

Now, it is said to putting the finishing touches on a deal to bolster its maps business, which is already a leader in the field. Waze’s capabilities would enhance Goolge’s  position in the growing market for location-based services, where users, as they migrate to mobile devices, share data about their exact whereabouts. Buying the business would also help Google block Facebook from challenging it in the navigation and maps business.

Unlike traditional navigation apps, which rely on maps to generate routes for users, Waze works by connecting drivers to one another. According to its website, once a user types in an address and begins driving with the app activated on his or her mobile device, the system passively collects GPS data to see how they are progressing down the route. That allows the system to generate better routes for other users.

In addition to harnessing GPS data, Waze also allows its users to take a more active role in refining the system: they can send in reports of bottlenecks or accidents in order to alert the wider community of Waze users. On its website, the Israeli company says it also “home to an active community of online map editors” who further contribute to keeping its database up to date.

Google yesterday declined to comment on the speculation regarding a possible to buy the business.

Earlier, Waze’s talks with Facebook fell apart when it insisted on keeping its research and development operations in Israel, according to the Israeli newspaper Haaretz. The paper also said that Facebook had offered to pay about $1bn in a cash-and-share deal, in contrast to Google’s offer, which is reported to be entirely in cash. On the research and development front, Google is said to have provided assurances about the Israel-based operations.

Waze’s origins can be traced back to an open-sourced mapping project called Freemap, which was established by Ehud Shabtai, an Israeli software engineer, in 2006. In 2008, Mr Shabtai teamed up with two entrepreneurs, Uri Levine and Amir Shinar, to found Waze. Initially called Linqmap, the business has since won the backing of a number of local and international investors, including China’s Li Ka-shing, whose Horizon Ventures vehicle took part in a financing round in 2011. Another backer is Kleiner Perkins Caufield & Byers, one of Silicon Valley’s most powerful venture capital firms.