The business model of Waze — Business Models Inc.
Beating traffic together
The world is urbanizing. Today, more people live in cities than ever before and this trend is increasing. Urbanization leads to more traffic in general and more cars on the roads. Cars are flooding the streets in cities everywhere, causing congestion and pollution on a daily basis. This means people are stuck in traffic on a daily basis as well, losing valuable time.
Waze is addressing this problem, using real-time data of its 115 million users to predict traffic flows and provide users the best route to their destinations.
FreeMap serving the community
Waze was founded by Uri Levine, Amir Shinar, and Ehud Shabtai. Originally the Israelian company was founded as FreeMap, a community project providing a free database to its users. In 2008, they changed the name to Waze. In less than 5 years, they were able to get 50 million users. Although Google was market leader in the navigation space with their own Google Maps, they decided to acquire Waze for $1.2 billion in 2013.
The best route possible
Waze is a community-driven GPS navigation app that is crowdsourcing the data from their millions of users to provide drivers with the best route possible. When users encounter delays in their route such as accidents, road closures, and police controls, they can inform other drivers through the app. Based on this real time data, the algorithm updates the map and driving directions for other drivers. Using data coming directly from other drivers is something that other navigation apps are not able to do.
Facilitating the ride
In addition, users can find gas stations, restaurants, and other interesting places via the app. Waze also integrates music players like Spotify so that users can listen to their favourite music, while taking the fastest and smoothest way to their destination.
While the app is completely free to use, Waze started thinking about ways to generate revenue. As Google acquired them, it was a logical step to use ads as a revenue stream. Local businesses can buy ads to bring drivers to their business.
Driving together is even better
In 2018, Waze started Waze Carpool, connecting drivers with people that need a ride. In comparison with all the other ride-sharing companies, Waze is not connecting professional drivers with one-off riders. Waze connects people to drive to work together and facilitates splitting the costs of gas and tolls, reducing the number of cars in the streets.
Better cities
Waze’s mission is to beat traffic together. Waze gets more valuable when more people use it. More users on the platform improves the quality of the data, predictions, and route directions. This data is also interesting for other parties, such as local governments. Waze for Cities is a value proposition that enable cities to manage their traffic and make better decisions related to infrastructure improvements. This is how better driving ultimately leads to smarter, and more sustainable cities.
What can we learn from this?
Waze is a perfect example of a company that is making extremely good use of the network effect. Every day, new users start using the app, which increases the data, and therefore the ability for Waze to predict traffic flows. So, every day you open the app to drive to your location, it will give a more accurate route with less time wasted than the route you took yesterday. With many businesses, the more you use the product or service, the worse it gets. However, Waze is improving its app day-by day by providing a more accurate route to your destination than yesterday. This makes it hard for people to leave the platform, and therefore, it can expand so fast and offer the same quality to their new users.
This case is part of our latest book Business Model Shifts.
Originally published at https://www.businessmodelsinc.com on April 7, 2020.
