Alphabet's (GOOGL) - Get Report Google is putting its reputation on the line with a new carpool service from the Israeli-developed traffic app it bought four years ago, Waze, that doesn't require a background check on drivers and doesn't pay drivers beyond the cost of gas money.
The app was founded in Israel in 2007 as a way to let users input traffic hazards or slowdowns. Google bought it in June 2013 for $966 million and released an additional Carpool version of the app in May 2016 in Silicon Valley before expanding to San Francisco. On June 6, the service was expanded to all of California.
"This is definitely a moonshot project for Google," Josh Fried, Head of Waze Carpool, told TheStreet.
Fried said he joined Waze from Google, where he served as head of business development for Google Shopping,two years ago because he was attracted to the big risk Google was taking on the project. The pipeline of Googlers into Waze is pretty big because Googlers tend to be "rebellious" and are attracted to working on a big risk/big reward project like Waze Carpool, Fried said.
Di-Ann Eisnor, director of growth for Waze, has been with the company for eight years and said the culture didn't change much when Google acquired it, but did note that its employee base has grown from 100 when it was acquired to 350 today. "Google likes ideas that are moonshots, or hard ideas that most people can't pull off," she said.
Waze Carpool drivers aren't full-time or professional drivers as seen with ride-sharing companies like Uber and Lyft. Instead, Waze Carpool drivers are people with normal day jobs that agree to pick up riders who are already along their commute and those riders pay a percentage of their gas cost, but no more than 54 cents per mile because that's the IRS's limit to differentiate between income and reimbursement for gas. Drivers are also limited to two rides a day. "Our algorithm won't let drivers make a profit," Fried explained. "It just helps cover the cost of gas."
"Our algorithm won't let drivers make a profit," Fried explained. "It just helps cover the cost of gas."
Waze Carpool doesn't allow drivers to earn a profit because it's not meant to be a job, just a way to help with congestion and gas money.
While some Waze Carpool drivers are attracted to the service because it helps them save a significant amount of gas money each month, drivers in big cities in California have something else in mind: access to the carpool lane, also known as the High Occupancy Vehicle (HOV) lane. When you have two or more occupants in your car, you can use the designated carpool lane and save an hour or more on your commute, Di-Ann pointed out. Others use Waze Carpool for the networking opportunities, particularly in Silicon Valley, or because they listened to all of their podcasts and just want some company.
For now, Google is fine not making money off of Waze Carpool so long as it eliminates cars from the road and helps reduce traffic, but it's also open to figuring out a way to monetize the service, Fried said. He points out that Gmail, launched in beta form in 2004, started out with free storage before learning how to monetize with ads. For example, Google isn't taking a commission from rides right now, but that could change, Fried noted. If the team can build the service up to a certain quality that would warrant a commission, then it might start taking a commission in the future, he explained. "If we figure out a way to make money, then we'll be happy," he said.
Editors' pick: Originally published June 23.
While Uber, Lyft and other ridesharing firms have made getting in cars with strangers seem more normal, it's still not a natural part of most peoples' daily commutes.
Uber and Lyft dealt with safety concerns by requiring drivers to undergo a background check, something that's notably missing from Waze Carpool's service. However, Fried said that because Waze Carpool rides must be arranged ahead of time, riders and drivers have time to get to know each other by looking through different accounts linked to the app, such as LinkedIn (LNKD) profiles and Facebook (FB) - Get Report profiles.
Users are also encouraged to have their work email verified by the app, and they can also message other users within the app or block other users. The team noted that it has received multiple requests for the option to request a driver of the same gender, an option that they are working on for an update.
"[Safety] isn't a concern for me because we give them the tools in advance to check each other out," Fried explained. "And as we hear of needs like with the gender option, we will react to them."
Google wasn't the first company to try to start a carpool service in California. In March 2016, Lyft rolled out Lyft Carpool to commuters in the San Francisco Bay Area where drivers could pick up riders along their normal commute and earn up to $10 to put toward gas. But by August of 2016, Lyft shut the service down because not enough drivers were signing up.
Lyft's problem was that it spent years building up a brand as an on-demand, ride-sharing service with professional drivers and then tried to suddenly shift to a carpool service that used everyday drivers on the way to their day job, Fried said. Waze Carpool is different because 80 million people already use the app each month to help them navigate on their commutes. "We think it will be much easier to convert Waze users into Waze drivers," he said.
Waze Carpool launched in all of California in June, less than a year after Lyft Carpool had to shut down due to a lack of drivers.
Waze Carpool also has a secret weapon: its Connected Citizens Program. Governments that join the program get real-time information about incidents and traffic congestion from Waze. In exchange, the governments give Waze real-time information about government-reported construction, crash and road closure data. Partners include Boston, Los Angeles, Barcelona, Sydney, Washington D.C. and Rio de Janeiro. The relationships Waze has made with cities through CCP allows for more seamless entrances into cities.
"I think the biggest difference is that all of our cities want us to come in," Eisnor said. Uber, on the other hand, has been kept out of a number of cities and regions, including all of Italy, Denmark, the state Oregan (except Portland), Austin, TX and others.
However, the Waze Carpool team is adamant that Uber is not truly a competitor because the ride-hailing giant has a different business model. Uber and even Uber's carpool feature uses professional drivers that get paid a profit while Waze Carpool relies on people with normal day jobs that don't get paid but want to help with congestion, meet new people or get help with gas money. "Uber is old school taxis with a smart twist, while Waze is old school carpooling with a smart twist," he explained.
The team isn't releasing numbers about the service yet but noted that they are "happy" with the figures so far. The service is currently only available in California and Israel, where the app originated. The team doesn't have plans to roll out Waze Carpool to other states or regions at the moment because they want to perfect the app first. "I need to see more than two weeks of data before we think about that," Fried said.
"This is our big bet," Eisnor reiterated. She hopes that in one year the company will be able to list some stunning statistics about what Waze Carpool has done for California. But for now, it's just a small prototype of a possible moonshot idea.
Google shares rose 1% to $986.13 in post-market trading on Friday.
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