Originally published by Sramana Mitra on LinkedIn: Billion Dollar Unicorns: OfferUp Still Needs To Figure Out Revenue Model
I have always questioned sky-high valuations in the absence of a justifiable business model. One such company is local Peer-to-Peer commerce player OfferUp. Over the last five years, the company has achieved the Billion Dollar Unicorn status within the local P2P market, without even figuring out how to earn revenues.
OfferUp’s Offering
OfferUp was founded in 2011 when new fathers Nick Huzar and Arean van Veelen were trying to sell some of their old stuff. They soon realized that it wasn’t very easy to trade in used products locally. They came up with the idea of OfferUp with a vision to make local P2P commerce as easy as taking a photo. Within a few months, the company had launched its website and its iOS App. Since then, it hasn’t looked back.
Today, OfferUp’s users can browse through the locally available products without signing up for the service. To transact or communicate with the seller, they need to sign up for free with the site. For posting ads, the user just needs to take a photograph of the product they wish to sell and upload on the site with payment and other details. Ads without images are not allowed on the site. OfferUp also allows users to rate a transaction to help others in ascertaining answers to questions like if the item was described accurately, or was the transaction friendly?
To ensure safety for its users, OfferUp promotes TruYou – a feature that allows users to scan their ID which is then validated by OfferUp. Users can also sign up and validate their Facebook pages to instill more trust in themselves.
OfferUp v. Craigslist
Like its biggest competitor Craigslist, access to OfferUp’s listings is available for free. But unlike Craigslist, OfferUp currently does not have any monetization model. Craigslist earns revenues through paid ads that appear on its website. According to a study by AIM Group, Craigslist was estimated to have earned $381 million in revenues in 2015 and converted $300 million of that into profits. Meanwhile, OfferUp has enabled transactions of goods worth over $3 billion through its platform, but it hasn’t recorded any revenues so far. OfferUp’s biggest advantage over Craigslist lies in its adaptation to the mobile world. The Craigslist user interface is still very old-school and does not do well on mobile. But OfferUp has been designed with mobile devices in mind. Its app has been downloaded more than 12 million times. The company does not give statistics about usage.