OLX Revenue Model

What Is OLX?

 OLX is without a doubt the most popular e-commerce site in the country at the moment, and also experiencing similar success in many other developing countries such as Nigeria and India .  India seems to be where OLX has been most successful. Surprisingly, OLX became so popular that it forced Google to shut down their similar online classifieds website (Google Trader).

OLX does not own or control any of the inventory that they list on their website. They simply act as mediator that connects the buyers with the sellers. The money transaction is completely handled by the end users; and OLX is not involved in any of the transaction. It makes money by having users visit their website, watch advertisements and also by paying them to promote the listings.

OLX STATS

·         Site: Olx.com, OLX - Buy and Sell for free anywhere in Kenya with OLX online Classifieds, Free classifieds in India, Classified ads in India, Online Classified Advertising – it varies according to each of the 40+ countries it operates in.

·         Site Age: 10 years since February 2006

·         Founded by: Alec Oxenford and Fabrice Grinda, now owned byNaspers.

·         Category: Shopping/Classifieds

·         Makes Money Through: Google AdSense banner ads, Sponsored links, and Featured Listing.

·         No. of AdSense Units: 2

OLX and many other similar online classified advertisement websites don’t involve the sale of the actual goods through the website. The website only provides a platform where sellers post their goods and services for free. Other popular e-commerce websites in the in the country which operate using the same business model as OLX include pigiame, nsoko, star classifieds etc. The problem with such a business model is that it greatly limits the income potential of these e-commerce sites since sellers rarely ever accept to pay for a listing. This is why the e-commerce sites operating in Africa and parts of Asia always offer free listing.

The undeveloped e-commerce environment in the developing world causes websites such as OLX to miss out on the listing charges that e-commerce giants such as Amazon and EBay thrive on. Surprisingly,Craigslist – which is the largest classified advertisement website in the USA – does not have any monetization strategy and it operates as a non-profit making website. So how do you make money from a website that offers free service – Ads. Promoters want those eyeballs irrespective of the source.

I decided to use OLX in this analysis instead of the local OLX - Buy and Sell for free anywhere in Kenya with OLX online Classifieds. It seems as if OLX - Buy and Sell for free anywhere in Kenya with OLX online Classifieds is still in its growth phase and they haven’t put in place as many revenue generating strategies as there are on the main site. I am certain they have not broken even considering all the adverts they have around, yet they only make money through sponsored listing. The adverts are going to increase in number gradually over the next few months, once the locals become more accustomed to using olx as a daily commerce driver.

HOW MUCH DOES OLX MAKE?

So how much does OLX make in a month? Olx makes money through three distinctively different advertisement methods:

1. GOOGLE ADSENSE BANNER ADS

OLX uses two Google ad units, one that is persistent throughout on the left side of the site and one right before the listings. It is pretty big, and I am certain that it generates lots of clicks. So, how much do they get from Google AdSense? To estimate the amount of money that can be made by a site through adsense this formula always gives a fair approximation.

No of Ad units x Total page impressions per month x 5$[CPM] / 1000

2. SPONSORED LISTINGS

Sponsored links are those links that you see before organic Google search results. They are always labeled as sponsored links. Google has also made it possible for listing sites to get sponsored links on their sites. The sponsored links appear before certain listings in the main site depending on the keywords targeted by the advertisers. Since the amount that each click earns depends on an auction in Google Adwords, then it would be very hard to make approximations or calculations.

3. FEATURED LISTING

A featured Ad on OLX allows your Ad to appear right before all the other advertisements within the same category. Usually Ads are placed in OLX depending on how recent the Ad has been placed or the search terms used by the buyer. Featured Ads will always appear on top of the list irrespective of these factors.

These are their charges per Ad:

Home Page Featured Ads cost $9.99 per week.

Top of the Listings and Search Results Featured Ads cost $2.99 per week.

The Ad placement depends on complex algorithms and it is therefore almost impossible to determine the number of featured Ads that are on the site at a given time.

I assume that due to the site’s popularity, there are thousands of featured Ads currently on the site and therefore earn quite a sum from these featured Ads since they don’t have to share their revenue with a third party as is the case in the first two options.

A listing site is one fantastic way of earning a passive online income. OLX obviously makes much more than my approximation across the world especially in India where it is very popular. OLX Kenya barely makes any profit, or maybe even none since it is still at its growth stage. I believe there is still a large opportunity for growth in the e-commerce sector in this region.