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Is This Google's Big Move to Take On Uber Technologies?

By John Rosevear – Sep 6, 2016 at 4:04PM

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Some San Francisco-area users of Google's Waze app can now use it to share rides to and from work. It's the latest hint that Waze might be part of Google's plan to muscle into ride-hailing giant Uber's turf.

Google's self-driving car has been getting attention for years. Google may be gearing up to use the technology to challenge ride-hailing giant Uber. Image source: Alphabet.

Is Google gearing up for a clash with ride-haling giant Uber?

It might be, according to a Wall Street Journal report this past week. The Journal reported that Google has begun rolling out a service that offers an alternative to Uber's ride-hailing -- without the need for dedicated professional drivers. 

A pilot test using Waze to connect riders with drivers

Google, a unit of Alphabet (GOOG -1.38%) (GOOGL -1.45%), has been running a pilot program since May that allows some users of its Waze route-planning app to connect with fellow commuters to share rides. Right now, the pilot program is limited to employees at a few companies in Silicon Valley, but Google plans to open the program to all San Francisco-area users of the Waze app this fall, according to the report. 

While riders are paying fares, and drivers are being paid, the structure of the pilot program seems intended to discourage people from operating as full-time drivers, as they would with Uber or rival Lyft. The idea is that Waze will connect riders with drivers who are already headed in the same direction, making it simple for the driver to take them along. Riders are limited to two rides a day -- to work and back, ideally. 

Google's Waze app is the key to its move into ride-sharing. Image source: Alphabet.

Under the pilot program, riders pay no more than $0.54 cents a mile. It's probably no coincidence that that's the Internal Revenue Service's current standard mileage allowance rate. The idea seems to be to give drivers a small cash incentive to pick up passengers, without asking them to go far out of their way to do so. 

What does this program tell us about Google's likely plans? And what does it mean for Uber?  

This test won't hurt Uber, but it hints at more

At least at the moment, Waze-enabled ride-sharing doesn't seem likely to put a big dent in Uber, even if it's rolled out to all Waze users across the country. Waze (and this new service) are structured around commuting, rather than the taxi-like short urban hops that are Uber's bread and butter. 

But it's another signal that Google is feeling its way into the business of personal mobility. Google has been working for years on a self-driving system for cars, but more recently seemed to have ruled out the idea of manufacturing cars itself. That left the obvious question -- how would Google monetize its investment in self-driving technology? -- with a somewhat obvious answer: By horning in on Uber's turf, somehow.

This seems likely to be a move in that direction. Adding to the intrigue: Google Ventures was an early investor in Uber, but its board representative, Alphabet executive David Drummond, recently resigned from Uber's board. 

Will Google decide to build an automated service to rival Uber?

If automated ride-hailing services take off as some analysts predict, Google seems well positioned to end up as a dominant player -- if it decides to make the commitment to become one. 

That would put it in direct competition with Uber, a possibility that Uber CEO Travis Kalanick has seen coming for a while. He told Bloomberg last month that worries about Google emerging as a competitor (rather than an ally) were what drove his decision to invest in a separate self-driving research program

Who will prevail if the two end up battling? On the one hand, Google has Alphabet's massive corporate scale and resources, though it's not clear that Alphabet will be willing to spend on the scale that would be needed to buy (or build) and equip thousands of self-driving cars. 

On the other hand, Uber has a big head start on addressing the extremely complicated software problem of routing its cars most efficiently. That's perhaps its most valuable advantage. Will it be enough to hold off the Great Googly One? We'll know more once we see how Google's latest moves with Waze pan out.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Rosevear has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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