Google Takes on Uber With New Ride-Share Service
Google is moving onto Uber Technologies Inc.’s turf with a ride-sharing service to help San Francisco commuters join carpools, a person familiar with the matter said, jumping into a booming but fiercely competitive market.
Google, a unit of Alphabet Inc., began a pilot program around its California headquarters in May that enables several thousand area workers at specific firms to use the Waze app to connect with fellow commuters. It plans to open the program to all San Francisco-area Waze users this fall, the person said. Waze, which Google acquired in 2013, offers real-time driving directions based on information from other drivers.
Unlike Uber and its crosstown San Francisco rival Lyft Inc., which each largely operate as on-demand taxi businesses, Waze wants to connect riders with drivers who are already headed in the same direction. The company has said it aims to make fares low enough to discourage drivers from operating as taxi drivers. Waze’s current pilot program charges riders at most 54 cents a mile—less than most Uber and Lyft rides—and, for now, Google doesn’t take a fee.
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The company says it doesn’t believe Waze drivers’ income is taxable because it considers payments through its service effectively as money for gas.
Google’s push into ride-sharing could portend a clash with Uber, a seven-year-old private firm valued at roughly $68 billion that largely invented the concept of summoning a car with a smartphone app.
Google and Uber were once allies—Google invested $258 million in Uber in 2013—but more recently have become rivals in some areas. Alphabet executive David Drummond said on Monday that he resigned from Uber’s board because of rising competition between the pair. Uber, which has long used Google’s mapping software for its ride-hailing service, recently began developing its own maps.
The two also are racing to develop driverless cars. Google has led the way with such technology, founding a project in 2009 that has now amassed more than 1.8 million miles of autonomous driving with its test cars. Uber earlier this month bought Ottomotto LLC, a six-month-old driverless-truck startup founded by Google veterans. Uber said it plans to start testing robotic taxis in Pittsburgh over the next several weeks, beating Google to a commercial test of self-driving technology.
Uber and Lyft declined to comment.
Waze is one part of Google’s larger ambitions to upend transportation. Google is considering testing its driverless cars in a ride-sharing service, people familiar with the matter said, and executives have identified that as a potential business model for its self-driving technology.
Waze’s path in new markets could mimic its development in Israel, where the company was founded, according to the person familiar with the matter. Google started testing a Waze carpool service there last year, and it quickly expanded. The service is now available at all hours in most parts of Israel.
In the San Francisco pilot, any local Waze user can sign up as a driver, but ridership is limited to roughly 25,000 San Francisco-area employees of several large firms, including Google, Wal-Mart Stores Inc. and Adobe Systems Inc. Riders are limited to two rides a day—intended to ferry them to and from work.
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Google’s Waze is moving into Uber and Lyft’s ride-sharing turf with plans to expand its own ride-sharing program in San Francisco. Photo: Getty Images
In the planned expansion, anyone with the Waze app in the San Francisco area could sign up to be a rider or driver, the person said. Though Google currently doesn’t collect a fee, the company is exploring different rates in Israel and San Francisco, the person familiar with the matter said.
Ben Schachter, an analyst at Macquarie Group Ltd., said a Waze ride-sharing service is a natural next step for Google, which has made clear its intentions to move into transportation. He warned that the company would need to navigate several potential pitfalls, including legal and safety questions.
“I don’t think they’ve had any significant experience in a lot of the issues that will surely arise around” starting a ride-sharing business, Mr. Schachter said.
Like Uber and Lyft, Waze’s drivers aren’t employees of the company, the person said. Unlike Uber, Google doesn’t plan to vet drivers for a Waze service, instead relying on user reviews to weed out problem drivers, the person said.
Waze, which operates as its own unit within Google, boasts 65 million active users, many of whom alert other users to police or traffic accidents—a hallmark of the app.
Robert Rickett, a 29-year-old nonprofit worker in Sacramento, Calif., said he uses Waze for navigation daily, particularly while driving for Lyft in the evenings. But he said he wouldn’t abandon Lyft for a Waze ride-hailing service, unless it offered him better opportunities as a driver.
Still, he noted Waze’s positive reputation among drivers is a big advantage—though he admitted he didn’t know Google owned the service.
“They have a lot of people who trust Waze,” he said while driving two Lyft passengers across the Bay Bridge into Oakland, Calif. “If they can capitalize on that, they could pull some market share.”