💼 A Buddy at the Pump (Business Feature #3)

🤔What It Is

GasBuddy is a technology company that helps users save money on gas every time they go to the pump

💸The Business

We are doing a switch up from our EV feature on Tuesday and INSTEAD writing to you about a gas savings company called GasBuddy.

GasBuddy helps you save money on gas via a variety of services, mainly their mobile app and credit card. You may have used GasBuddy during the 2021 Colonial Pipeline Cyber Attack that severely hampered gas availability up and down the East coast.

Even without a gas shortage, GasBuddy is still used by 11 million people on a monthly basis and helps their users find the cheapest gas prices and deals near them. Their main services include their Mobile App that provides both a list view and a map showing local gas prices:

Other features they offer include a credit card, a premium service, and other mobile app features that we will dive into later.

The prices you see on GasBuddy are crowdsourced, and the prices are shown with a timestamp beneath them, so you can get an idea if the prices could be outdated or not.

The impact numbers they boast on their website are quite impressive as well:

🧑‍💻The Model

GasBuddy is a freemium (free and paid) app:

Free Services

• Free to Download the App

• Gas Price Map and List (Shown Above)

• Car Tracking Savings – You can use the app to track your car and drives to develop plans to be more fuel efficient and save more on gas

Premium Services

• GasBuddy Credit Card - Works like a standard credit card so you could have fees and interest depending on your situation

•  GasBuddy Premium - $9.99 a month for additional savings, premium-only deals, and 24-hour roadside assistance

How else do they make money?

💰Revenue Streams

• Credit Card Service & GasBuddy Premium – We already spoke about these items, but GasBuddy Premium is a $10/month service. GasBuddy also makes money off their credit cards through merchant fees to the gas stations along with an interest payments or fees the user owes.

• Ads and Newsletter – In the screenshot of the app provided earlier in this newsletter, you’ll see banner ads across the screen. GasBuddy gets millions of views a month, so they probably get millions a year in ad revenue from the app alone. Additionally, GasBuddy has a newsletter with millions of subscribers, who are automatically subscribed when they create an account when downloading the app.

• Selling User Data – See this article that came out in 2017 where it was estimated that GasBuddy was selling data for $9.50 for every 1000 users. Since many users use GasBuddy to track their driving and fuel efficiency, GasBuddy has an abundance of data points on fuel consumption, travel, and gas prices that are all extremely valuable to data and marketing companies.

🔻Potential Expenses (Expected)

• Technology – The cost of running their app, website, services, etc

• Marketing – GasBuddy relies on typical marketing strategies now, but there are interesting growth hacks they leveraged early on in the company such as giving out $250 to their most active members every quarter, and buy redirect domains for local area gas process.

• Human Capital – Sales to larger partners for ads, technology team, other resources etc.

😎 Customer Appeal

Gas is expensive and is here to stay (for now). The average American spends up to $2400 a year on gas, and gas is, for the average American family, one of the largest monthly expenses. GasBuddy promotes up to $0.25/gallon of savings for each fill up, which can save a family hundreds of dollars over the course of a few years.

But, to be conservative, let’s assume that figure is closer to $0.05 or $0.10 cents per gallon. If you fill up your car with 12 gallons of gas 40 times a year (a little less than once a week), that puts you at about $25-$50 in savings on gas a year.

That doesn’t seem like a lot right? Well, sure, but if you use Gas Buddy’s credit card when buying gas, you earn points and savings that can be even greater than a typical credit card. Additionally, the app’s features make it a great tool for monitoring your gas consumption habits and finding ways to be more fuel efficient. For people that drive a lot or have multiple drivers in their family, GasBuddy is very attractive.

Lastly, the app is vital during a situation like the 2021 Colonial Pipeline cyberattack, where it helped millions of people find gas near them.

👍The Good Stuff

• Simple – The app is easy to use and clearly shows the cheapest gas near you.

• Tremendous User Base - Apps that rely on a large user base to supply the data/content (i.e. Reddit) are always extremely impressive. GasBuddy has that here with their 11 million monthly users.

• They have “The Hook” – GasBuddy’s free app attracts people who join just to see the cheapest gas near them. From there, they can upsell their users and leverage their information for ad campaigns, etc.

👎The Downfalls

• They sell data – We’ve talked about this earlier, but if you are someone who does not want to be tracked/have their data sold, GasBuddy is not the app for you.

• EVs are coming – As electric vehicles come in to play more and more, will GasBuddy be able to pivot to add electric charging stations/availability? Will be interesting to see.

• Traveling to the Gas is not Factored in– It does not appear that Gas Buddy factors in the travel distance when comparing gas prices. Let’s use an example:

  • Gas Stations A: $3.40/gal – 1 mile away

    • Fill up 10 gallons - $34 total cost

  • Gas Station B: $3.35/gal – 3 miles away

    • Fill up 10 gallons - $33.50 total cost

  • Overall difference – 50 cents

• Assuming you have a fuel efficiency of 20 miles/gallon. You would be using up 1/10 of a gallon traveling to the farther station, using up approximately another 34 cents of gas. So, your ACTUAL savings is 16 cents, not 50 cents, in this situation. It does not appear GasBuddy accounts for this difference.

🧠 The Op Ed

From a business perspective, GasBuddy is brilliant. The customer base is huge (nearly 40 million Americans pump their gas every day) and Gas prices are play a major factor in the budgets of many Americans. If someone can save 5/10 cents per gallon by downloading a free app, they will surely do it.

It would be interesting if something could be replicated for consumer goods and necessities, such as food prices, etc. The issue with that idea is the number of different goods and services. For GasBuddy, it is much easier to get crowdsourced data because they have one commodity to track: Gas.

The privacy concerns aforementioned are warranted, but what app doesn’t track and share user data? GasBuddy has seen its share of negative headlines because it is so useful in our opinion. You can also use the app to check out gas prices in the area, and then delete the app so it does not track your drive.

📚For the Road

• The end of gas-powered cars?

•  Why Despite EVs Coming Onto the Scene - Oil Companies Are Seeing Record Profits

• The Future of Gas Prices