The Map Wars · Part 2

Early in 1984, a Stanford PhD named Barry Karlin got lost driving in the Bay Area. The paper map spread across his steering wheel made things worse. That evening he thought: wouldn't it be nice if someone sitting next to me in the car knew the way?

The thought became a company, and the company became an industry. It was called Navteq — the ancestor of today's HERE, and the most consequential name in forty years of digital mapping. Its story contains the original edition of every commercial law this industry has ever learned, including the most expensive one.

What an Illegal Left Turn Taught an Industry

Karlin partnered with Berkeley engineer Galen Collins. Collins built a prototype quickly — and in testing, the computer instructed Karlin to turn left at an intersection where left turns were prohibited.

From that bug, two men in their twenties derived the founding principle of an entire industry: streets and names are not enough. The database must encode turn restrictions, one-way streets, speed limits — every piece of "local detail." A map's product is not lines; it is attributes. Navteq's later creed — hundreds of field researchers driving every street and recording some 160 road attributes — and the "ground truth" DNA that HERE still advertises today, both trace back to one illegal left turn.

Then came the money hunt. Karlin spent a full year being rejected by virtually every venture firm west of the Mississippi. Everyone conceded the idea made sense in the long run; nobody dared underwrite it — the database was too expensive, GPS too primitive, and route-planning software carried the whiff of artificial intelligence. In the end, the president of Budget Rent A Car introduced him to Chicago database entrepreneur T. Russell Shields, who wrote a $500,000 seed check. In August 1985, Karlin & Collins, Inc. opened in Sunnyvale.

File away a coincidence: Etak — the ancestor of car-navigation hardware, founded across town — also started on $500,000 of seed money, from Atari founder Nolan Bushnell. The industry's two great bloodlines both began with half a million dollars and the same obsession: there should be someone in the car who knows the way.

The Kiosk, and the Invention of a Business Model

Mapping the Bay Area's six counties and hundred-plus cities took two years and $3–4 million: the Census Bureau's digital road network as the base, self-commissioned high-resolution aerial photography for registration, and hired drivers covering every road with Dictaphones, narrating everything they saw. GPS wasn't ready, so they built dead reckoning from a gyrocompass and a distance sensor.

The map was finished — and there was no market. Digital maps were too new; nobody knew what to buy them for. So the company built its own endpoint: DriverGuide, a $12,000 countertop kiosk placed in car-rental offices and hotel lobbies, printing driving directions at fifty cents a sheet, the company keeping a quarter. Eighty machines in a year.

By the early nineties, Karlin had understood two things: nobody would truly buy car navigation until the whole country was mapped; and every dollar spent on machines was better spent on the database. So the company pivoted — stop selling hardware, license the database, let others build the products.

Mark the moment: the business model the entire digital-map industry still runs on — data licensing — was invented inside the failure of a direction-printing kiosk. The industry's most valuable lesson cost eighty machines nobody remembers.

Losing $17 for Every $1 Earned

What follows is the original file on this industry's economics.

Philips began investing in 1989, intending to source data for its own car-navigation hardware. Karlin, unwilling to wait out a payoff with no visible date, sold his stake to Philips and left; Collins and most early employees left too. The man who stayed was Shields, the original seed investor, who became CEO and moved headquarters to Chicago in 1996.

The ledger is startling: 1994 — revenue $1.7 million, loss $41.1 million. 1995 — revenue $3.3 million, loss $56.9 million. Seventeen dollars lost for every dollar earned. Philips ultimately sank roughly $600 million into the company and abandoned its own navigation hardware plan, keeping only the ever-growing map. A 1996 IPO attempt was thrown back by the market.

In 2000, Philips recruited an unexpected CEO: Judson Green, a Disney veteran — CFO, then chief of the theme-park business, where he launched the cruise line, Animal Kingdom, and the Hong Kong park approval. Putting a theme-park man in charge of a map company had its own logic: both businesses pour a fortune into one-time infrastructure, then charge for every visit.

Green arrived just in time for the dot-com crash; the IPO was shelved again. But demand finally showed up: in-dash navigation scaled, internet mapping exploded, and revenue climbed from $51 million in 1999 to $272.6 million in 2003. In 2002 the company turned its first profit — seventeen years after founding.

That is the price of admission to the map industry: six hundred million dollars and seventeen years. It is also why, for forty years, this industry has never had more than two or three global players.

The Only Patron Who Ever Made Money

In February 2004 the company renamed itself NAVTEQ; in August it went public at $22 a share, raising $880 million. Philips cut its stake from 83.5% to 41.2%, collecting $783 million, and sold the remainder into the rising market over the following two years.

Fifteen years of patience finally had its answer. And note the identity: of all the strategic patrons who ever wrote big checks in this industry — Philips, Nokia, TomTom, the German OEM consortium — exactly one exited whole and in profit: the one who sold before the top of the cycle. Frame that rule.

A Perfect Bull Case, and Its Ending

At IPO, Navteq held roughly 75% of the market; its only serious rival was Tele Atlas. In 2003, just 3% of new cars in the United States carried navigation, under 10% in Europe. Monopoly share, penetration about to inflect, entry barriers priced at $600 million and seventeen years — no textbook could write a better bull case.

The logic all came true. Penetration took off; the stock climbed from $22 until, on October 1, 2007, Nokia bid $78 a share — $8.1 billion, the highest price ever paid in the history of the map industry, unbroken to this day and likely forever.

Then the logic kept coming true, and the money vanished anyway. In January 2010, Nokia made navigation free — using Navteq's asset to carpet-bomb the paid-navigation market that Navteq's own customers, the Garmins of the world, lived on: the supplier's new owner nuking the supplier's customer base, the most twisted scene in the industry's history. Windows Phone collapsed, write-downs cascaded, the Navteq brand was retired in 2011, renamed HERE in 2012, and sold to a German OEM consortium in 2015 for €2.8 billion. From $8.1 billion to €2.8 billion in eight years.

Being right about the market and buying the asset well are two different things. Every line of the 2004 bull case came true, and the buyer at the top still lost seventy percent. That lesson is worth more than any valuation model.

A Parabola

Line up forty years of price tags: a $500,000 seed (1985) — Philips' cumulative $600 million (1989–2000) — a ~$2 billion IPO valuation (2004) — Nokia's $8.1 billion (2007) — €2.8 billion (2015) — an asset awaiting disposal (2026).

A perfect parabola. The apex's timing was not chance: October 2007 was the first autumn after the iPhone — the eve of the paper map's problem being solved for good, by someone who would never again need to pay for a map. The asset was bought at its all-time high at the precise moment the problem it solved was about to be redefined.

With that, the family tree of this industry can be closed: Etak (a sailor's half million), Navteq (a lost doctor's half million), Tele Atlas (a PC in Ghent) — three origins, three dead names, three parabolas; and the assets all still alive: Etak's blood in Tele Atlas, Tele Atlas's blood in today's Orbis, Navteq's blood in HERE, waiting for its next host.

Navteq left the industry two lessons. The first, at its origin: detailed attributes are the product — everyone learned that one. The second, at its apex: the patron who exits before the parabola turns is the only winner — that one, HERE's current shareholders are still retaking.

Sources: International Directory of Company Histories (Vol. 69, St. James Press) NAVTEQ corporate history; Navteq corporate archives and IPO filings; Nokia's 2007 acquisition announcements; public records of HERE's corporate lineage.