How does what3words make money?
by Clare Jones, Chief Commercial Officer at what3words
We don’t just want people to use our own apps, though. We want people to be able to use what3words addresses wherever they would use a traditional address — in a ride-hailing or mapping app, when ordering online, when navigating in their car. We therefore provide code to businesses so they can integrate what3words functionality into their own maps, apps and websites.
We make money by licensing our API to businesses.
Businesses can access what3words functionality through our Public API or our Enterprise Suite (which includes SDKs for offline use).
But what are we actually selling?
We charge businesses to license our code for turning what3words addresses into GPS coordinates.
This is not a new or unusual business model.
While we invented a simpler and more precise way to communicate location than street addresses, we did not invent the idea of selling address data. This is a multi-billion-dollar market today — and it’s growing.
Digital maps (those in your phone or your car or your computer) need GPS coordinates in order to provide routing or even just show you a pin at a particular location. Digital maps understand GPS coordinates, not strings of words. When you type in 98 Church Road, London into Google Maps, that string of text is being turned into GPS coordinates (latitude, longitude) so that the location can be shown on that digital map.
Turning a string of text into GPS coordinates (so it can be used with a map) is called geocoding.
Who buys and sells these geocodes?
If a business is moving people (e.g. a ride-hailing app) or things (e.g. a courier company) and inputting destination addresses into digital maps, they’re probably paying for a geocoding licence.
The consumer doesn’t pay to provide an address, but somewhere down the line, a business will need to turn that address into GPS coordinates to be able to use it with a digital map. These businesses buy geocodes.
Logistics companies buy geocoding services so they can feed addresses into their route optimisation software and design the most efficient routes for their drivers. Car companies pay for address data so when you enter an address in the head unit, they can provide navigation instructions for you. Ride-hailing apps buy address data so their drivers can follow directions from sat-navs or phones when driving you to your destination.
Let’s use an example.
Let’s say I book an Airbnb online. The host sends me a message providing their street address details so I can find their house. Neither the host, the Airbnb platform or I have paid to use that address — we’re simply sharing it, which doesn’t cost anyone anything.
When it comes to the day of my journey, I need to book my ride with Uber to take me there. So I grab the street address from the booking confirmation sent by the host.
When I open the Uber app, the first thing it asks me is: Where to?
Uber needs a destination from me in order to work out the best route to take me there. I give them that destination information by typing in the street address into their search bar.
So far, I’ve been given a street address, and I’ve used it — but no one has been paid. That comes next:
The Uber app has to turn this address into a GPS coordinate in order to use it for routing and cost estimation, and so the driver can get directions.
Companies like Uber don’t usually have a huge database of every address in the world, so instead they buy access to this information (which address corresponds to which GPS coordinate) using geocoding/addressing APIs. For example, they may use the Google API — they send a string of text (an address) out and receive GPS coordinates back.
The driver sees a pin on their map and simply follows navigation instructions to arrive there.
Billions of these transactions happen around the world every month — think about all the times you type (or speak!) an address into a search bar on a map, into your car head unit, or into an e-commerce checkout page online.
what3words sells geocodes just like every other address data provider. We charge businesses to turn what3words addresses into GPS coordinates. Like other businesses — e.g. Google — we charge a tiny amount per transaction (less than £0.005 per lookup).
If I typed 12 Elm Street, London into the destination bar of a ride-hailing app, the ride-hailing app would pay someone like Google to geocode it. If I typed in apple.dragonfly.spoon, they would pay what3words to geocode it.
We don’t charge to turn a coordinate into a what3words address; we only charge to turn a what3words address into a GPS coordinate.
We start charging businesses once they need thousands of geocodes a month — small business can use our API for free, but larger businesses pay us a licence fee to access high-volume geocoding. You can see our price list here.
The growing geocoding market
Although the geocoding market is worth multiple billions a year, demand for high-quality geocoding is increasing. Many journeys and deliveries that didn’t use digital maps 10 or 15 years ago are now using them because digital maps give live updates on traffic and do sophisticated route optimisation. And with autonomous vehicles, geocoding destinations perfectly will become more important than ever to make sure your delivery robot, drone or autonomous vehicle is sent to exactly the right place.
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An explanation of what geocoding is and its complexities by Gary Gale here in The Guardian.
A blog I love detailing the many complexities of dealing with traditional address data — Falsehoods Programmers Believe About Addresses.
A summary of a study on the issues with addresses globally can be found here
Accessing our API
Our API is free for individuals to access for non-commercial purposes, free to build and test with for developers, and free at low volumes for businesses to use. Check out our developer site here.
Seeing the API in action
Find out which of your favourite ride-hailing, navigation and delivery apps are already using what3words and see our API in action in a whole host of apps and maps, in our what3words-enabled product showcase.