{"id":4117,"date":"2017-02-26T17:22:24","date_gmt":"2017-02-26T22:22:24","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/google-maps-doubles-down-on-network-effect-to-stave-off-formidable-competition\/"},"modified":"2017-02-26T17:24:54","modified_gmt":"2017-02-26T22:24:54","slug":"google-maps-doubles-down-on-network-effects-to-stave-off-formidable-competition","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/google-maps-doubles-down-on-network-effects-to-stave-off-formidable-competition\/","title":{"rendered":"Google Maps Doubles Down on Network Effects to Stave Off Formidable Competition"},"content":{"rendered":"

In October 2004, Google acquired Sydney-based Where 2 Technologies to create web application Google Maps (1). At the time, it may have seemed that Google Maps was purely a product\/service-centric tool\u2014after all it provided users with a way to map locations and navigate to their destinations. However, over the years, Google Maps has transformed into a platform boasting powerful network effects.<\/p>\n

 <\/p>\n

Network effects help Google Maps dominate<\/strong><\/p>\n

Google\u2019s effort to map the world has been nothing short of monumental. The continuous mapping effort (described in fascinating\u00a0detail here<\/a>), has required an incredible amount of human capital invested in driving 5+ million miles all over the world to track roads and take Street View pictures, as well as coding, and manually cleaning up data based on thousands of reports of problems that Google Maps users send in every day (2).<\/p>\n

However, today\u2019s Google Maps would not have been possible without powerful direct network effects acquired through the app\u2019s large user base. Google has utilized data collected from hundreds of millions of users over several years to improve its maps\u2019 functionality (3). Their product MapMaker allows users to edit maps, adding landmarks and data, and correcting errors (2). Even the aforementioned problem reports are a product of network effects\u2014without a large user base, there would be no problem reports, and without those problem reports, the product wouldn\u2019t improve!<\/p>\n

Google Maps has also benefited from indirect network effects between its user base and 3rd<\/sup> party customers. 3rd<\/sup> party customers include businesses advertising on Google Maps, as well as popular companies utilizing Google Maps\u2019 API as a core element in their own product (such as Uber, Lyft, Yelp, and Airbnb).<\/p>\n

 <\/p>\n

With competition lurking\u00a0around the corner, Google can’t afford to fall asleep at the wheel<\/strong><\/p>\n

Google\u2019s head start and seemingly massive barriers to entry haven\u2019t deterred competitors. In 2012, Apple released its own mapping app as a feature of the new iOS 6, replacing Google Maps on iPhones. Apple Maps\u2019 launch turned out to be disastrous due to major flaws in its functionality, bringing about widespread criticism to Apple.<\/p>\n

Waze, another competitor, primarily relied on user-generated data to map cities and provide real-time traffic data. Waze was acquired by Google in 2013 for over $1bn (4).<\/p>\n

And last year, Uber announced a $500m investment to map the world\u2019s roads (with autonomous vehicles in mind) (5).<\/p>\n

 <\/p>\n

Google\u00a0doubles down on network effects to navigate competitive threats<\/strong><\/p>\n

In order to quell competition and maintain their dominance in the market, Google has undertaken several steps to strengthen network effects of their own maps app, and weaken multi-homing effects to discourage users (and 3rd<\/sup> party customers) from turning to competitors.<\/p>\n

(A) Leverage user-generated data to improve product (direct network effects):<\/em><\/p>\n

As mentioned above, Google has relied on its user base to improve its product. Google searches (through web and app) guides customers to 1.5 billion destinations every year (6). Its recent acquisition of Waze, which primarily relies on user-generated data, further signals Google\u2019s intent on leveraging\u00a0direct network effects to\u00a0keep its product superior to its competitors.<\/p>\n

(B) Make platform more attractive to 3rd<\/sup> party customers (indirect network effects):<\/em><\/p>\n

Google recently announced the \u201cnext generation\u201d of local search ads (6). In the announcement, Google pointed out that ~90% of all global sales happen in stores (as opposed to online), and that location-related searches have been growing 50% faster than overall mobile searches (6). Accordingly, the new effort aims to make local businesses more visible on Google Maps users through new ad formats. These formats include Promoted Pins (shown below), in-store promotions, customizable business pages, and local inventory search (6).<\/p>\n

\"\"<\/a><\/p>\n

(C) Turn Google Maps into a social app (both direct and indirect network effects):<\/em><\/p>\n

Earlier this year, Google introduced its latest feature to Google Maps: Lists. Lists allows users to mark their favorite locations, organize them customizable lists, and share those lists with friends (see video below).\u00a0This has the potential of increasing user interaction on the app, thereby driving both direct (user side) and indirect (business and 3rd<\/sup> party side) network effects.<\/p>\n