GOOGLE MAPS: I’m sure you’ve all used Google Maps.
Whether it’s to get directions to a new restaurant or stalk someone’s house through street view,
we’re all familiar with the tremendous resource that is Google Maps. Ssomething that most of us
likely take for granted is that just like all of Google’s other products, Maps is completely
free to use for as long as you want. This sort of freemium model isn’t too surprising with search or
email where everything you need is virtual, but maps is a pretty grueling business that requires
a lot of physical resources. From the dozens of satellites and hundreds of street view cars that
constantly monitor and take pictures of the Earth to all the servers and supercomputers
required to complete millions hours of processing to seamlessly stitch together petabytes of data.
And let’s not forget about all the hours spent on blurring out license plates, faces, houses,
and other personally identifiable information. Clearly, there’s no question that Google Maps
takes a lot of resources to keep functional and up to date. And while its value proposition to
Google wasn’t too clear in the early days, Maps has grown to be one of Google’s most lucrative
businesses. In fact, Morgan Stanley estimates that Google Maps will pull in over $11 billion
in revenue in 2023 alone. For perspective, that’s about the same as TikTok. And if we
valued Google Maps the same way as Alphabet, Google Maps itself would be worth roughly
$62 billion. That’s about the same as Mercedes Benz and more than Volkswagen and PayPal. Heck,
that’s enough to be a top 250 company by itself. But how does Google even monetize Maps? They don’t
show video ads or search ads, and there doesn’t seem to be much opportunity to collect and sell
our data based on just our Google Maps usage. Well, it turns out that Google has come up with
some pretty creative ways to indirectly monetize Maps while staying surprisingly ethical. So,
here’s the insane rise of Google Maps and how Google Maps makes so much money.
AN UNDERWHELMING START: Taking a look back, the story of Google
Maps takes as back 20 years to 2003. Like many of Google’s products, Maps wasn’t something that
Google created in house, it was actually something that they bought from 4 men named Lars Rasmussen,
Jens Rasmussen, Noel Gordon, and Stephen Ma. Together, they had founded a startup called
Where 2 Technologies in Sydney Australia. The idea for the platform was pretty simple: create
a desktop map program. But it turns out that this was a lot easier said than down and pretty soon,
they needed a lot more resources leading them to meet up with Google in late 2004. Initially,
Google wasn’t actually convinced about Where 2 Technologies until the founders suggested the
idea of converting the desktop application into a web platform that could be accessed much more
easily. With that, Google would agree to take a flier on the company for an undisclosed amount
which was likely well below $50 million. Where 2 Technologies wasn’t the only map based company
that Google purchased in 2004 though. Around the same time, they would purchase two other
map companies called Keyhole and ZipDash. Like Where 2 Technologies, Keyhole was a
desktop application unlike Where 2 Technologies, Keyhole was more focused on the macro scale. Aka,
viewing the earth and various countries as opposed to specific streets and directions. I don’t think
you’d be surprised to hear that this is what would turn into Google Earth, and Google got this entire
company for just $35 million. But, in terms of value, nothing comes close to ZipDash. In fact,
ZipDash might be Google’s most bang for the buck acqusition of all time as they
were able to purchase the company for just $2 million. What did ZipDash do you ask? Well,
they specialized in using location data from mobile phones to create approximate real time
traffic data. This tech would be underappreciated and under used by Google for several years,
but once smartphones started taking off, all of that would completely change. But anyway,
going back to 2004, after all the acquisitions were done, Google would spend a few months
refining the technologies before finally launching Google Maps on February 18, 2005. Apparently,
Google Maps would get Slashdotted the night before its launch. If you also don’t what that means,
it basically means that Google Maps went viral on a forum the day before launch which led to
an explosive launch right out the gate but this traffic didn’t last. You see, for a lot of us,
myself included, 2005 probably sounds like the stone ages when it comes to the internet,
but it turns out that there were already some pretty great mapping solutions on the
market before Google Maps specifically Yahoo Maps and MapQuest. And while Google Maps was
superior to these offerings from day one, that by itself was by no means enough displace the
market leaders. For most people, Yahoo Maps and MapQuest already accomplished what they needed,
and they had no reason to use Google Maps instead. So, the general consensus for year 1 was that
Google Maps did just okay. It pulled in a decent amount of traffic but nothing too crazy. Google
could’ve easily just called it here and kept Maps a small side business, but they were determined
to make Maps much more than just that. And as such, they would scrap everything and start over.
A COMPLETE DO OVER: Given the underwhelming response,
Google would decide to do a complete rewrite of Google Maps. In turns out that while Google Maps
was better than MapQuest and Yahoo Maps, for modern standards, it was still rather slow,
so their number one goal with the rewrite was to maximize speed and optimize the user experience.
After about an year, they would get the platform to be nearly instantaneous, allowing them to make
much more ambitious moves starting with Satellite view. Google would stitch together all of the
imagery that they got from the Keyhole acquisition to create satellite view. Fun fact, satellite view
isn’t actually satellite view in most cases. It’s actually arial view taken from low flying planes.
The Google team was actually debating on whether to call it arial mode or satellite mode. But when
Sergey Brin made the decision to call it Bird Mode, the rest of the team would decide to unite
and defy Sergey by just calling it Satellite Mode. Apparently, Sergey would never comment on this
name change. But anyway, Satellite Mode would come out in late 2005 and this was immediately
a selling feature for Google Maps. Putting the actual utility Satellite Mode aside, most users
just liked messing around with it. Being able to see your house and city from a birds eye
perspective was super neat. You kind of felt like you were top secret spy or something. Google would
simply take this novelty to the next level in May 29, 2007 with the debut of Street View. Street
View was obviously an extremely ambitious project. Google was basically signing up to bankroll cars
driving around every single street in the entire world. It turned out to be really popular feature
though. Now, not only could you see your city from an arial perspective, but you could literally walk
through it as if you were actually there. But while satellite mode and street view definitely
made Google Maps unique and drove popularity, the number one trend that made Google Maps ubiquitous
was of course smartphones. In fact, smartphone based revenue accounts for nearly 90% of Google
Map’s revenue which is not that surprising. Android is the most popular operating system
in the world used by billions of people. And you know what comes preinstalled on Android devices?
It’s of course Google Maps. So, most Android users are naturally just gonna use Google Maps whether
it’s the best or not just like how everyone used to use Yahoo Maps and Mapquest. All of this has
allowed Google Maps to reach over 1 billion monthly active users. But, while they were
eventually able to get to a dominant position, it was by no means an easy road. While Google
was able to acquire the core 3 companies that make up Google Maps for less than a $100 million,
actually making Google Maps successful cost a lot more money. According to one professor, just the
upfront cars, cameras, computers, and manpower alone cost over $400 million. And Google never
stopped updating their imagery. If anything, they actually do it more and more often with time. So,
there’s no question that creating and maintaining Google Maps has cost Google billions of dollars
over the years which brings us to the question of the day: how did they make all of this worthwhile?
MONETIZATION: Google’s monetization strategy when it
comes to Maps breaksdown into 2 main categories. Given that Google is an advertising company at the
end of the day, I don’t think you’d be surprised to hear that the first category is ads, but it’s
actually done in a really tasteful helpful way. You know when you pan around Google Maps,
you see businesses like Walmart and Home Depot and Starbucks? Well, listing a business or location
on Google Maps is actually completely free and basically anyone can do it provided you have the
right documents and rights. If you wanna take this to the next level though with custom branding and
high visibility, you can pay Google a fee and basically make your listing a premium listing.
To be honest, this seems like a win win scenario. Users are able to find businesses more easily with
their logos and companies are able to increase their brand presence in a discrete non intrusive
way. But that’s only half the story. Google’s other mode of monetization is honestly far more
interesting which is through APIs. You know how when you go to the website of a restaurant or a
local bowling alley, you’ll sometimes see a small map showing you the location of the avenue? Well,
companies are able to do this thanks to Google APIs for which they have to pay. And that’s
more of a small use case. Imagine what happens when someone like Fedex, Uber, AirBnB, Zillow,
or DoorDash implements Google Maps. All I can say is that that would cost quite a bit of money,
and that’s just the most obvious implementation of Google Maps API. Likely the most commonly
used Google Maps API actually has nothing to do with Maps directly. You know how when
you start entering in a billing address or a shipping address, the address autofills? Well,
that’s thanks to Google Places API. Basically every company in the entire world who collects
address information uses Google Places or a direct competitor like Microsoft’s Azure Maps. If they
don’t, they’re probably stuck in the 1990s. On a per use basis, Google Places is relatively
cheap. It’s only about 3 cents per use but think about how many times you yourself might use this
every year. Maybe 10 times? That itself is 30 cents worth of revenue for Google. If 3 billion
people were to do this every year, that itself is $1 billion worth of revenue for Google from
just one API. I think you can start to see how all of this can add up to $11 billion when you
throw in hundreds of different APIs and uses cases. But even putting the financials aside,
thanks to Google Maps, Google has been able to map out the entire globe in pinpoint detail. This
means knowing the exact address and location of any and every commerical and residential property
in the entire world. And if that wasn’t enough, they know the exact location of billions of people
on this highly detailed map at any given point in time. If that isn’t an insane amount of power,
I don’t know what is. And that’s why even if Google Maps never even made a single dime,
Google would be the real winner when it comes to Google Maps. That fact that Google Maps pulls in
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