Evaluating OLX Business Model & How does OLX make Money

Evaluating OLX Business Model & How does OLX make Money – UE Analysis

OLX Business Model
OLX Business Model

OLX (Used goods Marketplace – as it prefers to call itself) was incorporated OLX Inc. and was founded in 2006, operating in 45 countries, and is the largest online classified ads company in India, Brazil, Pakistan and Poland.

About OLX, Funders, Founders and Facts

OLX Founders:  Fabrice Grinda and Alec Oxenford founded the company for the world outside of the United States catering to a segment owned by Craigslist in the USA.

OLX Funding: Prior to being acquired OLX was funded by Bigwigs in VC space like Nexus Venture Partners, The Founders Fund, DN Capital, General Catalyst Partners, and Bessemer Venture Partners.  Total funding raised till date $30 million. South African media group Naspers (African Equivalent of Tiger Global), acquired a majority stake in OLX in 2010 & up to 95% of the company in 2014.

OLX Business Model

OLX Business Model is Advertising and that too majorly via Google Adsense.  That’s it! For those of you who don’t like spoon feeding on business model examples, please read better ones like the Pareto’s principle or improving the unit economics for instance 🙂 !

BTW this is the 50th post on UE, I didn’t realize it had been more than a year just to reach half century…

Let’s get back to BAU (Business as Usual)!

OLX makes money primarily via Advertising, now this can be in any form under the sun.  As of the date of writing this analysis, it had the following revenue lines.

  1. Google Adsense Monetizing (CPC, CPM, CPV)
  2. Google Custom Search Engine
  3. Sponsored Links (CPC)
  4. Featured Listings (B2C)
  5. Lead Sales (I think so)

Let’s look at these below in detail.

OLX Business Model via Google Adsense Monetizing

Google Adsense works in conjunction with the content being placed on the page.  OLX monetizes its high traffic by cost per click (CPC), cost per 1000 impressions (CPM) and cost per view (video ads) on its home page, product categories and subcategories page and final product page.

These are illustrated in the pics below, just follow the red / other colored boxes or patches on the images.

How OLX makes Money
How OLX makes Money

Above image shows the AdSense placement on the home page of OLX.

Business Model of OLX
Business Model of OLX

Above image shows the AdSense placement on the category pages.

OLX Business Model via Google CSE

When you perform any search on OLX from the search bar, the results obtained are using the custom search engine monetization function of AdSense.  Where the first 3 results are Google Ads (Adword Ads).  If you follow this blog religiously :), you will immediately recognize that YourStory also does a similar thing on their blog and TrueCaller does that on their website and app.  Read about that on YS Business Model.   The image is too big to show – please search on your own and scroll all the way down. 🙂

How does OLX make Money

How does OLX make Money
How does OLX make Money

As you must have guessed it by now, most of OLX’s money comes from Google AdSense monetization.   There are other revenue (smaller) lines as well which contribute to the top line and if focussed right, it can make more money then Google Adsense (because ultimately, any ad money spent directly on the target website is a hit to Google and FaceBook).

They monetize by Sponsored OBLs (OutBound Links) and Featured Listings.  And I think they may also be in the business of selling potential buyer leads like how practo does it for doctors.

How does OLX make Money from Sponsored Posts

These are links that are outbound in nature, meaning someone is paying OLX to display these relevant (contextual) ads embedded in the content so that these pages receive some amount of the mammoth traffic that OLX gets.

Please take a look at the below picture and focus on the slight bluish colored patch saying “Sponsored Link” – when you click on them, you are redirected to some other website.

P.S the red ones are Adsense product listing page placements.  The pink one at the bottom is the actual organic listing.

OLX
OLX

How does OLX make Money via Featured Products (Listings)

How does OLX make Money from the most common revenue line of an online C2C classifieds website?   Well, the publisher pays for the listing to come on top (just like Google Adwords).  This is an overlap of the lead sale model I guess (basically if no clicks on the featured posts, they might be doing something with the leads on the organic listings – I do not know for sure, this is an assumption).

The yellow colored patch shows the featured products in the above image titled OLX.

How does OLX Work

How does OLX Work
How does OLX Work

How does OLX work is the most surprising part of the analysis.  It does not operate as an intermediary between the buyer and the seller, it is the facilitator (there is a difference).  They don’t charge you for connecting the two, nor do they mark up, whatever happens, happens between the seller and the buyer.

This can be a potential revenue line in the future when people start transacting more online (direct pay via OLX just like how it happens at Flipkart or any other e-commerce store).

Disclaimer: OLX Business Model, How does OLX make Money are the interpretation of the author.  Please use the information at your own discretion.  Direct copying not allowed under DMCA.  Please ask for explicit written permission before copying content.

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