FreightTech 25: Waze's contributors all work very cheap, and they've got a winning technology as a result

waze logo.jpg

In a lot of towns in New Jersey, they really hate Waze.

That's because the mapping, crowdsourcing app, far more than previous mapping services like Google Maps, tells drivers how to get to Hudson River crossings through local streets, avoiding the infamous backups leading to the George Washington Bridge and the Lincoln Tunnel. This writer can tell you from personal experience that he knew a little shortcut through the towns of Leonia and Fort Lee, New Jersey to the GW Bridge that was a secret. Thanks to Waze—#13 on the FreightTech 25 list—it isn't a secret anymore, and the towns have taken the steps--often unsuccessful in court challenges--to ban out-of-town residents from their roads during rush hours. The communities believe Waze is putting them there.

It's one thing to be a disruptive technology inside a particular sector. But it can be argued that Waze has even disrupted local communities.

Whereas earlier online maps were put together using what now might be thought of as a traditional approach. Even for a company like Google (NASDAQ: GOOGL) , it’s a fairly manual approach. It sometimes involves having employees take to the road to report back on what they found.

Waze, founded in Israel and still with just a few hundred employees, also relies on people on the road to supply information, but they’re not employees. It’s something like a Wikipedia for driving or mapping fanatics, and a piece in Popular Mechanics a few years ago talked about the crowdsourcing aspect of Waze through the experienced of Nick Zahn, who at the time of the piece was under 30 years old.

“According to Zahn, the things that pop up can include Waze users reporting that a one-way street is now two-way or even a surprise road closure,” the story said. “It's his job to update the map accordingly. Zahn's responsibilities are numerous enough that the 27-year-old also puts in time over the weekends and for about two hours each night as he and his wife watch TV.

Zahn has recently had to scale back because he is enrolled in graduate school, but he still puts in at least 16 hours a week working for Waze.” He conceded that number of hours is “way more than my wife would like.”

His pay for this: zero.  What’s interesting about the success of the crowdsourcing is that sort of contributing of information has been discussed in the blockchain world. A prime example might be auto repairs, where a mechanic would put information on a repair done on a car up on some sort of distributed ledger, and then the fact that a car received new brakes at 60,000 miles would be shared along the ledger. But how do you incentivize the mechanic to do that? The theory is that the ledger would have tokens attached to it, and the mechanic would earn a fraction of a token for being such a nice guy.

Contrast that with Waze. No tokens. No payments. Instead, thousands of people like Nick Zahn who are contributing news of where a police officer is hiding looking for speeders, where a road is shut down, where streets are flooded, and so on. In that sense it is like Wikipedia. The difference is that entire communities don’t hate Wikipedia.

A Harvard Business Review article described how the crowdsourcing system works: “Waze users drive with the Waze app open on their smartphones. The app collects GPS data, which is transmitted in real-time to Waze and an initial map is drawn. As more data is collected, the map is made more accurate. For example, speed, direction, number of cars, etc. can be used to determine if a road is a highway, one-way, or a side street, after which traffic patterns are identified.”

Waze disrupted the Google Maps model enough that Google bought the Israeli company back in 2013 for a little over $1 billion. But Google has kept it separate from its own Google Maps division, and reports are that there are no immediate plans to change that.

Total Waze ad revenue is hard to come by, but the auto dealer in this story says advertising on a local version of Waze boosted their sales by more than 50%.

That’s some decent money on the back of people like Nick Zahn.