Waze represents an “exemplar” platform business model in the navigation industry that mobilises location technology. The firm fully mediates the relationship between (a) drivers wanting navigation information, notably routes and live traffic information (they have the app on their phone) and (b) advertisers who want to access customers with contextual (location and time) based advertising. These two groups would not normally interact – they do so only through Waze’s platform. The platform takes the form of an app for mobile phones along with the supporting infrastructure. The app not only mobilizes mobile phone technology, but also GPS satellite location technology because it both pin-points the driver’s location and presents navigation routes shown on the mobile phone display.
The company was founded in Israel in 2009 and sold four years later to Google for US$1.15bn in June 2013, providing Google with crowd-sourced content for its Google Maps service. Waze raised US$12 million through a series A funding round in March 2008. It went on to raise a further $30 million in 2011, which took it to $67 million in private funding in total. Following the sale, Noam Bardin transitioned across to Google, whilst the other cofounder, Uri Levine is now running FeeX. At the time of its sale Waze had 50m users, a figure largely built using social media. At this point its revenue was said to be nominal but the annual revenue potential to Google exceeded $90m from location-based advertising. The sale shows how it is possible to defer value capture by instead focusing on building a large user base.
A large number of mapping apps are available but perhaps most interesting is crowdsourced mapping company Telenav-Scout, which focuses on personalised mapping to differentiate itself from Google Maps. Scout aspires to be more like Yelp and TripAdvisor, though even broader and more encompassing — with maps and navigation at the core. And like Apple, Nokia and Google Maps, Scout has deals with car manufacturers, and is putting its brand, data and functionality into cars.
The business model represented by Waze connects three groups of people – (1) drivers (consumers) needing navigation information “immediately”; (2) a community of drivers who use their mobile phones to capture live mapping information; and, (3) advertisers who can pay to have their businesses show up on maps when drivers are nearby. Drivers with the app installed on their phone totaled 50m in 2013 across nearly 200 countries.
Learn more about the Multi-sided Business Model
You identify two or more different customer groups; and after interacting with each you design and deliver your goods or services in a manner that connects the two parties.
Engagement — Value Creation Proposition
By giving drivers real time traffic information from a crowdsourced community of mobile phone users, the value proposition translates to an average daily time saving to a Waze user in Israel of 5 minutes, on their daily commute, as well as a reduction in stress. Waze offers more value than paper maps and printed directions, as well as being integrated into smartphones and cheaper (free) than standalone GPS navigation devices, which use much of the same technology. Because Waze calculates traffic flow in real time, drivers are notified of delays ahead in real time and are diverted along alternative and quicker routes. Contextual advertising relevant to driving time and location are targeted at the Waze community. Waze relies on its 50m million users to effectively act as traffic police, field operations and cartographers, flagging and recording updates on accidents, bottlenecks and traffic as they drive. It absorbs and aggregates these data (on speed, location, routes and so on) in real time, using algorithms to build and refine its own maps and to calculate the best possible routes (and re-routes) for its drivers. Because of the customer value, Waze users are keen to share their experience via social media, which has been a valuable network effect in building the community of users (for free), increasing the value of the business. With smartphones already in the users’ pockets, once Waze built the navigation app, it spread quickly at virtually zero marginal cost.
Delivery — Value Chain
When a customer launches Waze on their phone, they automatically see their location on the map and relevant information on traffic delays on their proposed route. Alternative routes are suggested to avoid incidents and congestion. Waze uses are also information contributors. By agreeing to give away location privacy, users provide much of their driving and location data. To crowd-source road conditions, users have two options, (1) They can actively input useful information such as nearby fuel stations, closed down roads, or car accidents, or (2) they can passively drive using the app, letting it collect intelligence as they drive. Both scenarios mean that Waze not only collects plenty of useful data for companies in the advertising business, but that it has the potential to collect very specific, correct location based data from willing customers.
Monetisation — Value Capture
Monetisation comes from fees paid by advertisers to be able to show drivers their businesses or related offers. Geo-located pins are placed on the maps to make drivers aware of, for example, fuel stations and coffee shops.
Disclaimer — Written by Stephan Newbury and edited by James Knuckles under the direction of Prof Charles Baden-Fuller, Cass Business School, this case is designed to illustrate a business model category. It leverages public sources and is written to further management understanding, and it is not meant to suggest individuals made either correct or incorrect decisions. © 2014