GOOG Alphabet Inc

By Jack Nicas 

Google is planning to expand a carpool service on its Waze navigation app, setting the tech company on a collision course with companies such as Uber Technologies Inc. that have a head start in the ride-sharing industry.

Google is targeting launches of its Waze carpool service in several U.S. cities and Latin America over the next several months after testing in Israel and the San Francisco Bay Area met expectations, Waze chief Noam Bardin said.

The growth of Waze's carpool service puts Alphabet Inc.'s Google more directly in competition with Uber, the startup that pioneered the ride-sharing industry, growing to a juggernaut with a $68 billion valuation. Google and Uber were once allies, but they are becoming rivals in areas such as mapping and self-driving cars.

Waze is diving into the industry years late in part because the company sees new opportunity in tapping the millions of daily users of its navigation app as potential drivers. But launching such a carpool service would have been nearly impossible without Uber and its smaller rival, Lyft Inc., paving the way in making users comfortable with sharing rides with strangers.

"That idea of sharing a car with someone else has become much more accepted than it was five years ago," Mr. Bardin said.

Still, Waze's service differs from those of Uber and Lyft, which are effectively on-demand taxi services, with many drivers making it their main job. Waze instead wants to persuade regular drivers using its navigation app to pick up people who are heading in the same direction.

"Can we get the average person on his way to work to pick someone up and drop them off once in a while? That's the biggest challenge," Mr. Bardin said.

Jack Chin, the 44-year-old general manager of a San Francisco television station, said he has used Waze Carpool 21 times since December to improve his hour-plus commute to work, alternating between taking and giving rides.

"I wouldn't drive for Uber or Lyft. I have a regular job," he said as he drove a Wall Street Journal reporter across the Bay Bridge on a Waze Carpool ride Tuesday. "I do this to make the commute easier for myself and the person I pick up." He said the extra cash helps and he enjoys the conversation, though he already can use the carpool lane because his Honda Civic GX runs on natural gas.

For riders, a main selling point is price. The ride with Mr. Chin on Tuesday morning from downtown Oakland to downtown San Francisco cost $4.50. The same trip using Uber's and Lyft's cheapest ride-sharing options cost $10.57 and $12.40, respectively. A subway ride costs $3.45. But users must also request Waze Carpool rides hours in advance, and sometimes no drivers accept.

To prevent drivers from using the service as their main income source -- and to evade potential regulatory scrutiny -- riders pay drivers up to 54 cents a mile, the Internal Revenue Service's reimbursement rate for business travel with a personal car.

Waze doesn't currently take a cut of a driver's earnings, but it will likely start charging the rider an extra 15% for its share if the service is successful, Mr. Bardin said.

Google bought Waze, which started as a navigation app, for roughly $1 billion in 2013. The same year, Google invested $258 million in Uber and added one of its top executives, David Drummond, to its board. In August, Mr. Drummond stepped down from Uber's board because of the two companies' increasing competition.

Waze gained popularity for enabling users to flag traffic accidents or police activity to other users in the area. Waze has about 80 million active users and years of data on their travels, an advantage over Uber and Lyft.

Waze began encroaching on their territory by launching the carpool service in Tel Aviv in 2015 and late last year in and around San Francisco. About 150,000 Waze users have signed up to become drivers in the carpool program, but a fraction have actually given rides, Mr. Bardin said.

There is no guarantee riders and drivers will take to the service, and it might work better in some communities than others. The most frequent user, who is in Tel Aviv, recently surpassed 400 rides. Waze also faces competition in the carpool space from San Francisco startup Scoop Technologies Inc., which has offered a similar service in the Bay Area since 2015.

The Waze app that riders of the carpool service use has been downloaded about 530,000 times, with 80% of those downloads in Israel, according to mobile-app data firm Sensor Tower Inc.

Mr. Bardin said governments have embraced its carpool proposal as a way to reduce traffic, potentially allowing it to avoid the regulatory hurdles Uber and Lyft have encountered because government officials often view them as unregulated competition to taxis. Mr. Bardin said he recently met with the mayor of São Paulo, a city where Waze could soon add its carpool service, as it hopes to eventually expand globally.

Uber has faced its own difficulties in recent weeks with consumer backlash to Chief Executive Travis Kalanick's participation in President Donald Trump's economic advisory panel and a company investigation of alleged sexual harassment of its female employees.

Google's backing also gives Waze opportunities to augment its carpool service, such as Waymo, Alphabet's self-driving-car firm.

"If we were a startup, we couldn't afford to take these sorts of long-term bets. With Google, we can," Mr. Bardin said. "And maybe at the end of the day, instead of a neighbor picking you up, a robot picks you up."

Write to Jack Nicas at jack.nicas@wsj.com

(END) Dow Jones Newswires

February 22, 2017 16:16 ET (21:16 GMT)

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