How Does Ola Make Money

How Does Ola Make MoneyAnalysis by Unicornomy.com

How does Ola Make Money

How does Ola Make Money was the question of choice many people had when Ola raised massive amounts of venture capital at its whim, Ola is that blue eyed boy of the Indian startup Eco-system that Zomato once was.  Lets move on to the Business Model of Ola now.

About Ola, Facts, Funding, Funders and Founders

ANI Technologies Pvt Ltd. is the name of the company under which Ola App operates.  It’s headquartered in Bengaluru, India. Ola is basically an “On-Demand” Taxi Hailing Service using which people with smartphones can book a chauffeur driven cab in a driven by owners or helps of the owners of the cars.  As of Last Fund Raise the company was valued at over 5 Billion USD.

One interesting thing to note is that Ola Cabs used to operate as a Fleet Cab Service Provider during its earlier days, it used to work like this : You call upon their call center, tell them the date and time of the trip and get a car at your door step, you had to pay in cash to the driver when the trip ended, then it pivoted to app based aggregation model seeing the meteoric rise of Android and Apple Devices.

Ola Funding: Appx 1.5 Billion USD. (as of December 2015).

Ola Founders : Founded in 2010 by Bhavish Aggarwal & Ankit Bhati

Ola Valuation: As of Dec’ 2015: Appx 5 Billion USD

How Does Ola Make Money

Revenue Model of Ola

Well as stated earlier, Ola has been through its own set of ups and downs, pivots and U-Turns with respect to (wrt) its Business and Revenue Model.  When they started out – They started out as a Taxi Rental Fleet Business (They owned the Fleet).  They had a call center which used to do bookings for customers who wanted cabs.  Pretty similar to Meru Cabs and others (Basically Radio Taxi but unbranded and available on an 8hr 80 km kind of billing).  But later on they pivoted into an app based cab aggregation service (similar to Uber) and the rest is history 🙂 .  Their revenue model is pretty similar to Uber’s with couple of additions to it.  Lets move on to it by first understanding How Ola Works.

How does Ola Work

Customers to Open Ola App > Ola auto detects your Location via Phone’s GPS > Shows Cabs of Various Categories (Mini, Prime, Sedan, State Transport Taxis & Ola Share etc) Nearby > Customer to Tap on a Category of Choice > Click Ride Now > Request is routed via Ola’s Servers and is prompted to the Ola Cab Driver’s Cell Phone (if he is logged into the Ola Driver App) > If the driver accepts the ride, you get confirmation message on screen with Driver Details > Driver details sent to you on message and email > Click to call the Driver and Co-ordinate > Complete the Ride > Payment Debited from your Ola Money Wallet.

Business Model of Ola

The most significant contributor to Ola Cabs Revenue Model will be “X% Commission from the total Fare of the Trip” e.g. Ranges from 15% to 20% depending on the city and type of vehicle.  Here is the list of various (current and discontinued) Revenue Lines the company has.

You May also be Interested in: Uber Business Model

Please Note: There are 2 Apps being used simultaneously while the trips are coordinated at Ola – One is used by the Cab Booking Consumer (i.e. You) and the other is used by the Request Completing Driver called User App and Driver App respectively Hereon.

Revenue Lines of Ola

  1. Fleet Management via Tele Sales   (Discontinued)
  2. Percentage Commission from Trips being served through its platform (Trip Based Commissions)
  3. Ola Money Wallet
  4. Ola Cafe (Food Delivery) (Discontinued)
  5. Ola Store (HyperLocal Grocery Delivery) (Discontinued)
  6. Corporate Tie Ups / Event Tie Ups
  7. Vehicle On-Boarding Fee
  8. In-Cab Advertisements
  9. Fleet Leasing (To Drivers)
  10. Car Type
  11. Peak Time Charges

Trip Based Commissions

Customers use Ola User App to book chauffeur driven cabs because either they don’t own a car or they do not want to use their own car for any reason.   When ever consumers click on ride now the screen lights up with Trip Request at the nearest possible driver logged into the Driver App via Ola Algorithm and if the driver rejects the request, it is instantaneously passed on to the next driver in the queue.  Which so ever driver accepts the request is presented with the location and details of the customer to be picked up.  Once the driver reaches the destination (after dropping off the customer) he has to mandatorily click on “End Trip” flashing on his device’s screen.  Once this is done, the customers payment is done via Ola Money Wallet (Pre-paid) or via Cash to the Driver.

P.S. The Customer can either click on Ride Now or Ride Later (pre-schedule cabs as per desired date and time).

The Trip fare is a combination of:

  • Travel Time (In Minutes) : Ola charges per Minute of Travel Time after an initial free X minutes
  • Distance Cost : Ola charges Per KM of Travel after an initial fixed fare Distance (varies as per the type of cab)
  • Waiting Time : In case you made the driver wait, additional waiting time charges are levied to you
  • Service Tax on the total trip fare

The Trip fare once charged to your ola money wallet is credited into the driver’s account under the head of the trip number given to you in your bill copy if paid via cash then equivalent amount of cash is deducted while making payment to driver for the conducted trips.

Ola deducts the Service Tax charged to consumer first, then its commission percentage, then applicable income tax on the balance amount and remits the rest of the amount to the drivers bank account at regular intervals (3-7 Days ).

  • Assuming Travel Cost Per Minute : 5 INR (Travel time 40 mins)
  • Assuming Travel Cost Per KM : 15 INR
  • Assuming Service Tax : 14.5%
  • Assuming Total Travel : 30 KM, (First 5 KM @ 100 INR)
  • Total Fare : 100+ 40*5 (Assumption 1) + 25*15 (Assumption 5 & 2) = 100+200+375 + = 675 + 14.5% of 675 (ST) = 675 + 98 = 773 INR
  • Ola’s Commission : 675 * 20% = 135 INR + 98 (ST – Payable to Govt)
  • Driver’s Payout : 773 – 135 – 98 = 540 INR Less 10% TDS (As per Income Tax Act) = 486 INR

This is the primary revenue line and the most simplistic answer to How does Ola Make Money.

Ola Money Wallet

Ola Money wallet is a virtual wallet kind of a service which can make payments at multiple vendor touch points including its own services of cab booking payments.  (Yes you guessed it right, it’s somewhat similar to PayTM Wallet or FreeCharge Wallet etc).

This will make payment via TDR (Transaction Discounting Rate) to those Merchants who will opt to accept payments via Ola Money Wallet.

Ola Money also contributes to How does Ola Make Money For a Better Understanding on how Payment Gateways or Wallets Work, Please refer to the below links:

Corporate Tie Ups / Event Tie Ups

How does Ola Make Money from Corporate Tie Ups is a question that often is asked by Newbies to the startup world or atleast those who don’t understand what on earth is Ola doing by hiring corporate sales managers when majority of its business is done from the app.

Well Ola Sales Managers actually meet admin heads of organizations and convince them to use Ola Cabs for their corporate in city travel requirements, No the admins don’t use the Ola App to book these rides, its done in a more traditional way of calling or doing it via an API via a dashboard.

Rates are slashed down because of the larger demand from these corporates but the volumes ensure sufficient cash flow to Ola from this business activity.

Vehicle On-Boarding Fee

Ola May charge a slight fixed fee for the driver to become a part of Ola’s aggregation model.

In-Cab Advertisements

Commuters may be offered Pamphlets or Live Streaming Ads from various advertisers.

Fleet Leasing (To Drivers)

Ola announced that it would buy cars and lease it out to drivers for a better loyalty of drivers towards the brand to ward off those drivers who used to be on both (Uber and Ola’s) network.  This may work like a fixed daily / weekly fee to run the vehicle and the trip revenue going to the driver or a mix of fixed fee + trip based commissions.

How does Ola Make Money from Car Type

Ola defines the type of Cars that it will call its Sedans, Compact Cars, SUVs etc.  The Fixed Per KM charges, Driver Waiting time and Per KM Travel charges along with initial charges vary with the type of car chosen at the time of booking.  At the time of writing this article the car types are Mini, Sedan, Prime, Share.

How does Ola Make Money from Peak Time Charges 

At certain times when demand for Cabs outruns that of the supply of the cabs in the nearby locations, Ola may push the per km and other rate slabs per type of cab higher so as to generate more revenue.  The rest of the calculations work in the exact same way as Trip Based Commissions (First Revenue Line Description).

The fare and other things go up in multiples like 1 to 4-5 anything.

Hope you now have the “Uber” understanding of How does Ola Make Money or Business Model of Ola and you are now well adept at answering How Ola Makes Money.  Please Leave your comments in comments section below to ask more questions around it, I will try to answer them as and when I have the answers to the same.  Also in case you would want a detailed description, talk to me using the contact tab.

Disclaimer: The understanding of the model of How does Ola Make Money is of the Author’s himself, neither the company or its affiliates have confirmed the same to the author and the descriptions, stats, facts and figures are either obtained through secondary web research or interrogation of the users / drivers or other resources on the web.  Please use your own discretion to use this info when required and by continuing to read you agree to indemnify the author from all liability arising out of using this info on your own.

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13 Comments

  1. This does not include incentives payout from ola to car owners. After incentive payout, ola is making loss out of funded money

    1. They adjust it from the total receipts. For e.g. if 500 is cash collected and 2000 is collected via wallet – then total ola commission is about 2500*20% = 500+75st+200 rs tds thus the driver gets 1225 rs from ola.

      1. How much customers will pay is it 500 Rs. If it. What about 2000 Rs where it’s come from? What’s the source of income to ola

  2. This is the most comprehensive explanation of the internal working of ola I have ever seen. Always wondered how the phone in the cars of the drivers is different from ours. It’s weird to see but most cab drivers when asked if they are happy with the job usually answer with a strong yes.

  3. While doing revenue calculations for a commission based service, do we calculate revenues only on the basis of the commission earned or on the whole money taken before deducing the commision?

  4. If the cab driver gets whole money as a net cash from the customers ,not even a single penny from the wallet. Then how can we say that cab drivers genuinely pay the commission to Ola. what Ola do to overcome this case?

    1. Ola has the RECORDS of how much commission does the driver need to pay to Ola… + The Driver will never risk not paying commission because Ola will suspend their account.. And ALL IN CASH – No chance.. Ola has done 68% of the transactions on Ola Money for Q1 2017…

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