As Google painstakingly worked to map each and every road for users to obtain easy and reliable directions to any destination, other companies took advantage of this platform to build their own apps offering even greater utility. One such company was Waze, which has since been acquired by Google, which offered map-seekers even greater utility by providing a user-generated layer of data on top of Google Maps. This unique layer of data set Waze apart from other mapping solutions due to its real-time nature, massive coverage, and reliability.
Waze was definitely a tool that benefited and took advantage of indirect network effects to create value for its users. As more users joined the platform and added to the layer of user-generated data by reporting accidents and traffic delays, more users found the app to offer greater utility and opted to use it. As more users joined the platform, more users became available to provide Waze with information, and so the platform provided even more data and information to then compel more users to download it. Through this virtuous cycle, Waze built a large user-base which functioned as both the suppliers and consumers of its traffic information.
As I consider Waze’s success, I’m also critical and curious about how to build such productive networks of users. What allows companies to build such productive users where these indirect networks effects can actually be effective? In the case of Waze, I wonder what compelled users to actually contribute traffic information vs. be simple moochers and, while not contributing any information to the app, still reap the full benefits of the service? I’m sure these moochers existed, and I wonder as businesses build platforms with indirect network effects, how they avoid having moochers make up a significant percentage of their user base.
I’d venture to guess that platforms with direct network effects are less likely to suffer from such a challenge. The closer connection of users, where communication plays a more major role, may act to keep all users engaged and hold people more accountable to contributing.
In Waze’s case, what motivated people to actually contribute? I would not be at all surprised if platforms like Waze can suffer a bit from a “Tragedy of the Commons” mentality where most users imagine that a few enthusiasts will be the ones to provide the platform with information. In the case of Waze, what still would have motivated these few “enthusiasts” to contribute? At the end of the day, are there users who will take enough initiative to contribute just for their personal gain. Do they have the mentality that if they contribute, the platform gets better, and they will benefit, and that’s simply enough? I worry for platforms that create value through indirect network effects where more than just their presence is required to create value. Businesses need to work hard to keep their base of users engaged and motivated to contribute.