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, incorporating 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.
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:
Pin ads tell the user that a brand’s store lies along their driving route.
Search ads appear when a driver searches for services such as gas stations.
Takeover ads – these are billboards only displayed when the car has come to a stop.
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.
Google (now Alphabet) primarily makes money through advertising. The Google search engine, while free, is monetized with paid advertising. In 2021 Google’s advertising generated over $209 billion (beyond Google Search, which comprises YouTube Ads and the Network Members Sites) compared to $257 billion in net sales. Advertising represented over 81% of net sales, followed by Google Cloud ($19 billion) and Google’s other revenue streams (Google Play, Pixel phones, and YouTube Premium).
A hidden revenuebusiness model is a pattern for revenue generation that keeps users out of the equation, so they don’t pay for the service or product offered. For instance, Google’s users don’t pay for the search engine. Instead, the revenue streams come from advertising money spent by businesses bidding on keywords.
Of Google’s (Alphabet) over $257 billion revenues for 2021, Google also generated $753 million from a group of startup bets, which Google considers potential moonshots (companies that might open up new industries). Those Google’s bets also generated a loss for the company of over $5.2 billion. In short, Google is using the money generated by search and betting it on other innovative industries.
Google (Alphabet) has a cross-functional (team-based) organizational structure known as a matrix structure with some degree of flatness. Over the years, as the company scaled and it became a tech giant, its organizational structure is morphing more into a centralized organization.
Google is an attention merchant that – in 2021 – generated $209 billion (over 81% of revenue) from ads (Google Search, YouTube Ads, and Network sites), followed by Google Play, Pixel phones, YouTube Premium (a $28 billion segment), and Google Cloud ($19 billion). Over $31.5 billion went toward R&D (12.3% of its revenues).
YouTube was acquired for almost $1.7 billion in 2006 by Google. It makes money through advertising and subscription revenues. YouTube advertising network is part of Google Ads, generating more than $28B in revenue by 2021. YouTube also makes money with its paid memberships and premium content.
The traffic acquisition cost represents the expenses incurred by an internet company, like Google, to gain qualified traffic – on its pages – for monetization. Over the years, Google has been able to reduce its traffic acquisition costs and, in any case, keep it stable. In 2021 Google spent 21.75% of its total advertising revenues (over $45.56 billion) to guarantee its traffic on several desktop and mobile devices across the web.
Netflix is a subscription-based business model making money with three simple plans: basic, standard, and premium, giving access to stream series, movies, and shows. Leveraging on a streaming platform, Netflix generated over $29.6 billion in 2021, with an operating income of over $6 billion and a net income of over $5 billion.
Spotify is a two-sided marketplace where artists and music fans engage. Spotify has a free ad-supported service and a paid membership. Founded in 2008 with the belief that music should be universally accessible, it generated €9.66 billion in 2021. Of these revenues, 87.5% or €8.46 billion came from premium memberships, while over 12.5% or €1.2 billion came from ad-supported members.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
