Waze, an app that tracks real time traffic and road conditions from drivers’ phones, uses huge amounts of data to better route people to their destinations.
Waze is a free app that creates value for its users by providing the most efficient driving directions – avoiding heavily congested areas or commonly slow streets. It does this by gathering real time data from any user who has the app open while they’re driving. Waze expanded beyond just driving directions, adding things like gas prices and police alerts (all voluntarily uploaded by app users), making the app even more compelling to use. In addition, Waze has a feature that allows you to track your friends when they’re on their way to meet you, which is both a convenient additional feature, and a sticky introduction of direct network effects.
Waze captures all of its value from its user base (after all, the entire app is only as good as the data provided by its users). Users begin as Waze Babies and earn points to become Waze Masters. Users can earn points in a number of different waze, including driving with the app on, reporting accidents, reporting police, editing maps, adding friends, reporting problems with the app, etc. As far as I know, Waze did not actually have a source of revenue before it was acquired by Google for $1B in 2013. It’s value was solely in the data provided by its users on the road. But to Google, that data was worth at least $1B – it allowed Google Maps to improve its directions, expanded the base of users, and ultimately limited the number of competitors in the map app space.
Going forward, Waze and Google will have to continue to innovate as Uber develops its own proprietary mapping services. Especially since Uber has far more and consistent data to rely on (Waze requires uses to turn on the app, whereas Uber gathers data from each trip automatically). Waze also has the advantage of being seen as a “social app,” so the network effects may carry it along further than a traditional map app would otherwise. However, I wonder how compelling the social aspect and the point system is, or if it was just a gimicky way to gamify the app but may not have staying power since the points don’t actually mean anything?