How Does Waze Make Money? The Waze Business Model In A Nutshell

  • Waze is a Google-owned subsidiary that provides community-driven satellite navigation software. Waze was created to improve on existing car navigation systems which provided route-finding services with no consideration for traffic congestion.
  • Waze makes most of its money through advertising with a variety of novel and innovative ad types. Advertisers must pay a fee of $0.002 per impression, with a minimum daily ad spend for both small and large businesses.
  • Waze also makes money via carpool service fees, brand referral fees, and revenue earned from the sale of Waze beacons.

Origin story

Waze is a Google-owned subsidiary that provides community-driven satellite navigation software. The company was originally founded by Israeli entrepreneurs Ehud Shabtai, Amir Shinar, and Uri Levine in 2006.

The idea for Waze came from Shabtai, a computer science graduate who had difficulty using a car navigation system gifted to him by a friend. The problem with these products at the time was that they incorporated an expensive GPS and built-in maps with no ability to forecast traffic congestion or other route delays. In other words, they only showed a driver where to go to reach their destination.

Shabtai wanted to address this problem with a rather unusual idea. He envisioned Waze to be a navigation system where each driver would construct the map as they traveled along the road. The app would then collect the location of all active users in the system via GPS so that others could find less crowded routes and balance traffic flow.

Waze was then unveiled to Israeli users in late 2008 and had amassed 80,000 users by May of the following year. The co-founders hired a new CEO, Noam Bardin, who then toured the United States to drum up support for the app’s eventual Blackberry release in 2009.

Since the success of the app relied on crowdsourced information, it needed to become available on as many platforms as possible. This included the newly released iPhone, but also Nokia cell phones and even Windows. The company also released a Pacman-esque game in the app with real prizes to increase user uptake.

In December 2011, Waze was available in the United Kingdom and the United States. The company announced a partnership with no fewer than twelve American broadcast stations which would incorporate Waze data in their traffic reports. Growth from here was exponential, no doubt helped by Apple’s failed attempt to launch a similar map platform. Sensing an opportunity, Google then acquired Waze for $1.1 billion in June 2013

With many people confined to their homes during the COVID-19 pandemic, the number of miles driven on the platform decreased by as much as 70%. Despite this, the company boasts around 140 million monthly active users around the world and is the second most popular map app behind Google Maps.

Waze revenue generation

Waze has a relatively diverse revenue generation strategy, making money from advertising, carpool service fees, brand referral fees, and the sale of its beacon hardware.

Without further ado, let’s delve into this strategy below.

Advertising

Most Waze revenue comes from brands that pay to advertise on the platform. There are four different ways this can occur:

  1. Pin ads – which tell the user that a brand’s store lies along their driving route.
  2. Search ads – which appear when a driver searches for services such as gas stations.
  3. Takeover ads – these are billboards only displayed when the car has come to a stop.
  4. Arrow ads – these ads tell the driver that a participating business is nearby.

Waze earns money on a cost-per-impression (CPI) basis, with each impression costing the advertiser $0.002. For smaller customers, advertising spend starts at $2 per day. Larger brands must spend at least $100 per day.

Waze Carpool

As the name suggests, Waze Carpool allows users to get paid by becoming carpool drivers.

Drivers keep 100% of the fare, which is normally determined by the distance traveled, the number of travelers in the carpool, and local gas prices.

However, the company charges a service fee in certain circumstances. This is a commission taken from the driver’s total payment.

Referral fees

Waze also partners with many brands and earns a referral fee when a Waze user purchases or subscribes to one of their products or services.

Unsurprisingly, many of these brands offer products that can be enjoyed whilst driving. Examples include Spotify, Pandora, Deezer, and YouTube Music.

Waze beacons

Waze beacons are installed in tunnels where the GPS signal is often lost. 

The beacon itself is a battery-operated device that sends a one-way signal to a user’s phone or tablet. This allows Waze to continue routing drivers and collect traffic data from underground roads.

Each beacon device costs $28.50, with the company suggesting 42 beacons be installed for every mile of underground road.

Read Next: Google Business Model.

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