OLX Business Model – New Craigslist?
Fabrice Grinda and Alec Oxenford created OLX, an online marketplace, in 2006. OLX was started in Argentina and it further expanded to more than 41 countries worldwide. OLX enjoys a strong presence in markets such as Pakistan, India, Portugal, Poland, Philippines, Brazil, Nigeria, and Kenya. It serves as an alternative to Craigslist in countries where Craigslist does not exist.
The Argentinian outfit received funding from various venture capitalists such as Bessemer Venture Partners, General Catalyst Partners, and Nexus Venture Partners. Initial funding help to develop and refine the online classifieds website. This continued until Naspers, A South African media group, bought a significant stake in OLX in 2010. By 2014, Naspers owned 95% of the shares of the company.
OLX has achieved great milestones since its inception in 2006. It has evolved over the years and has secured its footing in several markets. It has a strong presence in markets such as India, Portugal, and Brazil where it is the largest online classifieds website. It enjoys the distinction of being the largest online marketplace in India. Moreover, OLX is known for outperforming Google Trader. Google had to shut down this project after being overshadowed by OLX in the online classifieds domain.
The online marketplace has a strong following and sees more than 200 million visits every month. With over 25 million listings and 11 billion page views, it helped to secure more than 8.5 billion transactions per month in 2014 alone.
How does OLX operate?
The statistics show the significance of OLX as an online classifieds option. It offers online classifieds to its users, just like their American counterpart Craigslist. OLX has a very simple model of operation. It is an online marketplace where people can put up classifieds in respective categories.
The user can add details and images of their product or service. Contact information of the user is verified to avoid fake and spam listings. The listing is added in their respective category after the classified is approved.
OLX is an example of a marketplace model. Hence, a question arises. Is the marketplace model similar to the aggregator business model? Find the answer here.
While it may resemble Craigslist in a lot of ways, OLX has a different revenue model than Craigslist. We will talk more about the revenue model of OLX in later paragraphs. You can learn more about the Craigslist business model over here.
OLX is like any other marketplace. It is a platform that runs parallel for different customers. People who wish to sell things or offer services put up ads. These ads are incorporated in their respective categories. People who wish to buy things or receive services browse through the classifieds to find the advertisement that suffice their needs.
Sellers on OLX need to add images, title, and description regarding their goods. Moreover, they are also expected to add the price of their commodity. The buyer can browse the listings and get in touch with sellers. They can get negotiate with the seller and make the purchase.
OLX and its role
Unlike other online marketplaces such as Amazon or Recommerce, OLX does not take part in the deal between the buyer and the seller. It offers a platform for the buyer and the seller. It allows the seller to post listings and allows the buyer to browse them.
OLX has no part in the proceedings. The transaction and the other related activities are done between the buyer and seller.
What is the Business Model of OLX?
The OLX business model can be broken into parts. The revenue of OLX largely depends on advertisements. While you are at it, why not lean about the franchise business model as well? Hence, to increase the revenue of the website, OLX needs to take steps that are necessary to maximize the profits. So, here are the parts of the business model that help to bring in the money:
- The business model depends on scale and monthly visits to the classifieds
- The website serves as a platform for buyers and sellers to buy and sell
- OLX spends money in advertisements to increase their popularity among the users. This is done so that more traffic can be diverted on to the website and more listings can be added
- The traffic on the website is used to make money from advertisements, clicks and searches
How Does the OLX Business Model Make Money?
OLX has a very different revenue model than other online marketplaces. Businesses such as Amazon make a commission from every transaction. This is not true for OLX. OLX revenue model depends on advertisements, sponsored listings, sponsored links, and through Google Custom Search Engine.
Most of the revenue generated by OLX comes from Google AdSense. The monetization from Google Ads helps to keep the online classifieds free for their users. OLX works with different partners that are working with Google so that they can act as ad supplier and ad mediator.
These ads work closely with OLX to show on different web pages of the website. These ads are shown on different listings. OLX makes money for the views and clicks on the ads.
High web traffic to their website mean that OLX can make more money from the advertisements. Hence, that is why OLX pays for advertisements on other websites and TV for their own branding purposes.
Lastly, they monetize the inflow of web traffic through cost per click, cost per thousand impressions, and cost per view for video ads. These ads can be placed on the homepage of OLX or other products or listings.
Google Custom Search Engine is part of the OLX Business Model
OLX has a search bar on their website that helps to give results of search queries. This search bar is provided by Google. Every time this search bar is used, Google put out two or more results of their own on the top for each search query. OLX makes money for incorporating this feature in their website.
Feature Listings: A Part of the OLX Business Model
Over the period of time, a listing gets lost in the heap of new listings in the respective category. This means that the buyer will need to browse through lots of other listings to get to this particular listing. This minimizes the effectiveness of the listing.
To solve this issue, OLX has introduced an option to sellers. Sellers can now ‘feature’ their listings to make sure it appears on top of their category. Sellers pay a fee to feature their listings.