Waze is a free navigation application used exclusively on mobile devices. The company’s value proposition is that Waze saves you time on your commute. Users provide live updates on traffic, construction, and emergency services so that others can avoid delays. Users also provide real-time gas price information, allowing the best price in the area to be located. Waze has approximately 30 million users. It markets itself as a community of commuters who all share the same interest of finding the quickest way to and from work. The application is distributed for free via the App Store and Google Play.
Waze generates revenue via advertising sales. Businesses can pay to have a branded pin displayed at their location in the Waze map when a user is nearby that business’s location. Users can click on the branded pin to open a larger banner containing more information about that business. Pricing is flexible. The business bids on how much it wants to pay for every 1,000 views (CPM) of its branded pin. Minimum CPM bid price is $1.00. But businesses are incentivized to bid high because only the top three bidders in an area will have their pins displayed. When a company is entering its bid, Waze displays a recommended bid range that will guarantee pin visibility at different zoom levels. Each business sets a monthly budget based on its bid price and the number of impressions it expects. A business can spread its budget evenly across the month in order to create an even distribution of impressions with respect to time. Waze is currently testing promotions that pop up while a user is stopped at a red light. Pricing for these special promotions is not disclosed by Waze on its website.
Waze’s business model must show that it can generate more revenue by making its application free and gaining more users than by charging for its application and getting fewer users. The more users it has, the more CPMs it will sell. Waze’s B2B customers can track the volume of interaction Waze users have with their pins. This type of feedback can help businesses quantify the value of Waze on its sales. It is interesting that the minimum CPM bid price is set to $1.00. Could Waze get away with charging a higher price? How many customers would it lose? How much more revenue be generated?