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How Does OLX Make Money? The OLX Business Model

OLX, or OnLine eXchange, is a Dutch domiciled online marketplace for buying and selling goods and services. Unlike similar online marketplaces, OLX does not charge money for facilitating the transaction between the buyer and the seller. Instead, the company focuses on acquiring as much traffic as possible to earn money through advertising revenue and premium listings.

History of OLX

OLX, or OnLine eXchange, is a Dutch domiciled online marketplace for buying and selling goods and services.

The platform was founded by Fabrice Grinda and Alec Oxenford to provide a Craigslist-style platform to users outside of the USA. Indeed, Grinda noticed that larger online marketplaces such as eBay and Craigslist had shown very little interest in establishing a presence in developing markets.

As a result, the co-founders began work on the platform to cater specifically to consumers in these markets. Integration with Facebook and Twitter was key, as was a platform that would be mobile-friendly. Perhaps most importantly, the service had to be free since many did not have access to credit or debit cards. 

The OLX platform launched in Argentina in 2006 and quickly spread to other parts of Latin America, Asia Pacific, Africa, and Eastern Europe. In 2010, OLX was acquired by South African internet and media giant Naspers.

Today, OLX continues to operate as a standalone platform. More than 300 million people in 30 countries use OLX each month to buy and sell cars, bikes, houses, household goods, and fashion items. 

OLX revenue generation

Unlike similar online marketplaces, OLX does not charge money for facilitating the transaction between the buyer and the seller.

Instead, the company focuses on acquiring as much traffic as possible to earn money through advertising revenue and premium listings.

With that said, let’s take a look at both revenue sources in more detail.

Advertising revenue

Advertising revenue comes via serving Google Adsense ads on the OLX platform. Revenue is based on cost per one thousand impressions (CPM), cost per view (CPV), or cost per click (CPC). 

Some countries also incorporate a Google custom search bar, otherwise known as a programmable search engine.

When an OLX customer searches for a product, they are shown a list of relevant ads and products. The company earns further Adsense revenue from this source.

OLX also sells banners and other advertisements that occupy high visibility areas on the platform. 

Featured Ads

Featured Ads is a premium OLX service allowing sellers to display listings in the first four places at the top of a product category page.

Aside from geographical location, pricing for this service is dependent on the product category and the number of days the seller wants an ad to run.

The Featured Ads service is particularly useful for sellers who wish to sell high-ticket items in popular categories. Without paying a small premium, listings for popular items are quickly pushed to the second or third page of search results.

Key takeaways

  • OLX is a Dutch-domiciled online marketplace for buyers and sellers of cars, houses, fashion items, and other household goods. It was created by Fabrice Grinda and Alec Oxenford to provide a free online marketplace for consumers in developing nations.
  • OLX prides itself on being a free platform for buyers and sellers. Instead, it generates revenue via Google Adsense in several ways.
  • OLX also earns revenue from sellers who want to pay to have their ads in high-visibility areas for longer.

Read Also: How Does eBay Make Money, How Does Amazon Make Money, How Does Lazada Make Money.

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Platform Business Model

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A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.

Marketplace Business Model

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A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.

Network Effects

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A network effect is a phenomenon in which as more people or users join a platform, the more the value of the service offered by the platform improves for those joining afterward.

Asymmetric Business Models

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In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.

Attention Merchant Business Model

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In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.

Wholesale Business Model

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The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.

Retail Business Model

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A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.

B2B2C

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Crowdsourcing Business Model

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Open-Core Business Model

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While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.

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Freemium Business Model

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The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.

Freeterprise Business Model

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Franchising Business Model

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