Waze’s monetization push is high-risk, high-reward

The popular navigation app Waze has introduced ads, as my colleague Ryan Kim reports, enabling retailers and other brands to insert themselves into maps along users’ routes. The company has secured some impressive advertising for its U.S. launch — Dunkin Donuts, Jamba Juice and Procter & Gamble are on board — and its base of 30 million users who spend an average of 440 minutes per month in the app is fertile ground for advertising revenues.

I’m a big fan of Waze, a free app that brilliantly crowdsources GPS information and other user data to give up-to-the-minute traffic information via a simple user interface. And the company has all the tools it needs to deliver useful and lucrative ads: It tracks users to determine where they’ve visited in the past, and the app knows not only where they are but also where they’re going. Waze wisely enables advertisers to present special offers through the app, delivering value to the consumer, and also hopes to develop systems that confirms when users spend money because of ad impressions, helping advertisers determine ROI.

There are dangers here, too, however. Waze must be careful not to clutter the screen with ads (it vows to present no more than three at a time), and it runs the risks of being perceived as tracking users too carefully or leveraging too much information from outside sources such as Facebook, which could be seen as an invasion of privacy.

Waze is clearly an innovative front-runner in the world of navigation apps, which means it’s in prime position to tap the very promising market of location-based ads. A lot of app publishers and advertisers will be watching closely to see how well Waze can strike a balance between monetizing targeted ads and keeping its users happy.