Facebook acquires Israeli app maker Onavo, and a Tel Aviv office

After losing out on acquiring Waze, Facebook has nabbed another Israeli start-up, paying between $100 million and $200 million for Onavo, according to sources in the hi-tech industry. Using Onavo’s megabyte-thrifty apps, Facebook will be able to move along its new effort to expand web connectivity all over the developing world.

Onavo, established in 2010, was born of a desire by users to save money on their mobile devices’ data plans. Before the popularization of unlimited data plans, users were charged a hefty amount if they surpassed the maximum amount of bandwidth they had paid for.

To the rescue came Onavo, which offered free software to compress the bits and bytes being uploaded and downloaded via the cell network. Similar to the compression offered by applications that download programs, music and video to desktop computers, Onavo applied its patented compression technology to videos and other byte-hogging data, and also showed users exactly how much data – and money – they saved using Onavo with apps like Facebook, Instagram and YouTube.

Onavo Extend, the app released to the iPhone App Store in 2011 and Google Play in 2012, “compresses your data so that you can do more with your mobile device on even the tightest data plan,” Onavo said at the time. With the app installed, the company said users could get “up to five times more web browsing, more photo sharing, Twitter, Facebook, and more.”

Onavo was a top download in the App Store when it was released and won numerous awards. It was even involved in a mini-scandal when it claimed that the App Store itself was a major drain on user’s data plans. The company found that the iTunes App Store account was “responsible for more than 13% of all iPhone data usage across America. Three quarters of that data comes from downloads, while 24% comes from search.” Any downloads, the company said, would best be done at home, using a wifi system, instead of on the mobile network.

By 2012, though, all-in-one plans — which provided a very substantial amount of communication capacity — became popular. Although hundreds of thousands of users who had not upgraded their plans could still benefit from Onavo, the app became less relevant; it has not been updated since 2012, although the company actively maintains and supports existing versions.

But with the Facebook purchase, Onavo gets a new lease on life, providing its technology to hundreds of millions, perhaps billions, in the developing world that Facebook would like to help connect to the Internet (and turn into Facebook users). In August, Facebook, along with other companies including Ericsson, MediaTek, Nokia, Opera, Qualcomm, and Samsung, started Internet.org, an effort to connect the two thirds of the world that does not have Internet access.

“There are huge barriers in developing countries to connecting and joining the knowledge economy. Internet.org brings together a global partnership that will work to overcome these challenges, “ Facebook CEO Mark Zuckerberg said, “including making internet access available to those who cannot currently afford it.”

Many cellphone owners in such places as India and Africa pay a high price for Internet access due to the poor connectivity in their areas. With Onavo, Facebook will be able to offer users in developing countries the ability to engage more actively on the Internet while keeping costs down, by compressing data to enable users to get more out of their data connections.

Onavo’s founders, Guy Rosen (CEO) and Roi Tiger (CTO), are on board with the plan.

“We’re excited to join their team,” the two wrote, “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. When the transaction closes, we plan to continue running the Onavo mobile utility apps as a standalone brand. As always, we remain committed to the privacy of people who use our application and that commitment will not change.”

Onavo — which has 40 employees worldwide, 30 of them in Israel — will remain in Israel, Rosen and Tiger added, with Onavo becoming Facebook’s first R&D center in Israel. “We are incredibly proud of the talented team we have assembled, and, recognizing this, Onavo’s Tel-Aviv office will remain open for business and will become Facebook’s new Israeli office,” the two said.

According to many sources, one of the main reasons Facebook lost out on buying Waze was its insistence on moving the company’s operations to existing Facebook facilities. Does the Onavo announcement represent a lesson learned for Facebook? Company officials wouldn’t say, but industry observers in Israel said that it did.

“Everybody in Silicon Valley has an Israeli office or R&D facility,” said one observer. “Sooner or later Facebook was going to have to open one too. It would look strange if they didn’t. The Onavo purchase is a good opportunity for them to do so.”