Since 2005, Google has mapped 28 million miles of road in 194 countries. This cost them untold billions of dollars in cars, fuel, photographic equipment, and more in order to get the info they need to provide a comprehensive global mapping system.
Waze has 130 million users and gets all their info for free - making use of user reports and GPS data from smartphones to provide a map product far superior to everything else on the market.
This is how they make money.
Waze didn’t start as the global phenomenon it’s known as today - back in 2006, an Israeli developer named Ehud Shabtai founded a community project known as FreeMap Israel, which aimed to create (with the assistance of community users) a free digital mapping database of Israel compiled in the Hebrew language with ensured free content, updates, and distribution.
FreeMap Israel was successful. This led Shabtai to form a company called Waze to commercialize the initial project. By 2010, Waze had raised US$25 million in its second round of funding, and soon it became a mobile app loved by users around the world where it is now available in over 180 countries.
Waze users have a lot of power when compared to other map application users. They can report accidents, traffic jams, speed, and police traps, and, from the online map editor, can update roads, landmarks, house numbers, and more as they are driving.
Based on the information collected, Waze is then in a position to provide routing and real-time traffic updates. Waze can also identify the cheapest fuel station near a user or along their route, provided Waze has enabled fuel prices for that country. And there’s no need to pay for global mapping if they can simply use the user’s GPS data instead.
Pretty neat for a free app huh? But how does a company like Waze monetize its offering if they don’t charge for its app?
Since the app is free to use and based on user reports, there has to be a way to sustain the application while maintaining its current features.
Enter Waze’s version of AdSense - in November 2012, the company began to offer resellers and advertisers a web interface to advertise based on location, where a small icon appears when a phone is at a particular area, prompting the user to engage.
Through Waze, brands of coffee shops, restaurants, and grocery stores show their ads like new deals and discounts to the drivers depending on their nearby location and time. They can get many perks like targeting nearby drivers, tracking in real-time, and setting their own budget to spend on advertisements each month. Much like YouTube and other Google-based advertising, businesses can do direct outreach to drivers based on their location and make them special offers or entice them to purchase a product, like a cup of coffee for the road.
Now, advertising is a massive industry and online influencers are proof that there is a good return to be earned based on promoting products and services online. But with Waze, the impact is much more direct - targeted ads for you based on your driving habits - which is why so many companies jump at the opportunity to join their Adsense program.
The thing is this is the most obvious solution to making money, and it’s always good to diversify your streams of income - which is precisely what Waze did in a very smart way. After all, we’ve seen more people be turned off of online ads since the industry has become so saturated. That’s why Waze decided to go one step further in its journey to earn more income from its free-to-use application.
Apart from showing ads to users based on their location, Waze also makes monetized deals with television news stations across the US and a few select other countries. The TV stations make use of Waze to deliver more accurate reports when it comes to incidents on the road and oftentimes even display Waze data directly during broadcasts. As the world’s largest community-based traffic and navigation app, you can imagine that the real-time data shown by Waze can be key to traffic and other kinds of news reports.
So why not give them a web interface to broadcast traffic reports and alerts directly from the Waze application?
As an added bonus, you can also purchase special voices for your Waze app, from celebrities to sports stars and more. Why not have Arnold Schwarzenegger, Elvis or another beloved star guide your way home? This is just another way they have found to gamify spending on their app.
The real-time data capabilities of the Waze mobile application were ultimately of interest to another business - Google. They acquired Waze for $1.3 billion and made the record for the highest tech employee payout to have taken place in Israel thus far.
But Google already has its own map application, so why purchase another?
The answer is Waze, as a crowdsourced location platform, would give Google an additional, very mobile-based angle on this concept, letting users not just share places (i.e. sites) visited on the web, but places visited in real-time.
Most of the searches you do on mobile have to do with location, and Waze is one of the few companies out there that is bringing that kind of search together with actual map data and the added advantage of social listening and reporting. This social aspect is of particular importance to Google since it is the underlying driving force behind many of its larger applications and online offerings.
And while the deal was not without controversy, Google plans to combine the teams working on its Maps product and on Waze in order to build a super application that offers the best of both worlds but will maintain Waze as a separate app in the meantime.