Scaling the platform
OLX Group, which operates 18 buy-and-sell platforms as well as 4 car marketplaces in more than 40 countries worldwide, is the result of an evolution that began with newspapers and individual advertisements for localized markets (i.e. classifieds). Today, digitally-enabled ads have transcended both newspapers andlocal markets: Sellers and buyers can connect on a single platform from anywhere in the world. The disruption to the classified ad model has been so dramatic that most surviving newspapers no longer carry them.
The next step in this evolution is mobile, says Martin Scheepbouwer, the Chief Executive Officer of the OLX Group. “The mobile experience further broadens the digital impact, making it more global.” This will only add to OLX overall transaction volume, which is currently running at about 17 million items exchanged per month.
The impact is not limited to traditional newspapers. For producers, OLX Group platforms provide an easy and cost-effective way to bring their products to the attention of potentially limitless customers. And the commission producers pay is tiny compared to the mark-up that bricks-and-mortar retailers charge.
OLX is partly motivated by the possibility of reducing waste. “We envision a world in which every item sold will not just have one owner but two, three, four, or five if needed. This reduces the number of new goods that need to be produced and reduces waste,” Scheepbouwer says.
Buy and build
The company initially employed a ‘buy and build’ strategy to achieve growth, purchasing brands that specialized in a single category (cars for example) or those that were more open. Says Scheepbouwer: “There was no single founder. Over time, we’ve bought a series of smaller companies and melded them all together and then added a lot of organic growth. We took solutions from different places and applied them to the whole, and that’s how we got to where we are today.”
One of the key drivers of that initial growth was internet adoption, which was aided by improved technologies and faster connections. As the company increases its presence on mobile devices, the same factors of speed and quality come into play. Some markets are more advanced than others, which has been a hindrance to growth.
Another hindrance, historically, is related to demographics. OLX Group platforms are generally used by the middle class: that is, people with things to sell and money to buy. In countries where the middle class is dominant, such as users are abundant. But in developing markets, where the middle class remains small, OLX has been slower to gain traction. However, with the middle class growing rapidly in China and India, the long term looks bright for the OLX Group model.
A horizontal eco-system
For the most part, OLX Group platforms serve as middlemen between buyers and sellers. Some items, such as cars or property, require a more robust ecosystem, including people to process payments, host websites, or manage other operational functions. In these cases, partners are chosen based on their expertise in a particular market. Beyond expertise, the partner must have scalability.
“The key in everything we do is scalability, so we can’t work with partners who can’t scale,” says Scheepbouwer. In the case of car sales that require inspection, the inspection center would have to prove its ability to grow and add more locations when necessary before it becomes part of the OLX Group ecosystems.
Looking back, Scheepbouwer points to scalability as a key learning from the early days of the company. “We used to operate with local platforms. So, France would have a platform for France, and China for China, and Panama for Panama,” he says. “It was good enough for a long time. You would have a small local team everywhere to build a platform, but our platforms have become increasingly complex, driven by elevated user needs.”
To keep up, OLX needed to take the best of the internet’s giants—the personalization of Facebook, the speed of Amazon, etc. —and apply these characteristics to its own platforms. This put pressure on the product and technology teams. But given the competitive environment, there was little choice. “The only way to stay on top of your game is to build a very, very scalable organization, especially around the technologies,” says Scheepbouwer.
With an eye to facilitating scalability, OLX Group is in the process of consolidating a dozen local platforms into a few global ones. “We are moving away from local to global development with more sensible development with local instances,” he says.
Users not revenue
While revenue is an important measure of success (says Scheepbouwer: “We need to pay our bills.”) the more important number is users and, more specifically, the number of users who are satisfied enough with their experience that they are likely to return to one of the OLX Group platforms the next time they need to buy or sell. “It’s also about how long they stay on the platform and what kind of reviews they leave,” says Scheepbouwer. “If you have a growing number of happy customers, we’ll find a way to monetize them and make money.”
The challenges of governance
Because OLX Group platforms grant access to any user who wants to sell something, governance can be a challenge. The company needs to ensure that nothing illegal is sold and that other local laws are being followed. Additionally, the company monitors ads for offensive pictures or language. With so many ads to track, the company relies heavily on detection software. “The software we have is very sophisticated and gets better every day with the help of machine learning,” says Scheepbouwer. “It’s an area that’s particularly important to us because we not only want to comply with legislation and regulation but also want to have a clean and family-friendly platform for everyone.”
The nature of the platform and the number of users makes it the target of fraudsters. To counter this activity, OLX tries to educate users. If something is too good to be true, the company reminds people, it probably is. OLX Group also uses technology to identify certain words that have proven to be associated with fraudulent offerings and warns users where appropriate.
Local to global
The next several years will see further globalization for OLX Group. The company will also look to further develop product format extensions. That is to say, it will be looking for other elements to add to the ecosystem that can serve customers better and more frequently.
OLX Group will also look to commercialize and create sustainable businesses out of positions it currently holds in India, Turkey, and the U.S. (among other countries). “We need to find a way to convert volume relevance into value without destroying the momentum we have in these platforms,” says Scheepbouwer.
To accomplish this, the company will need to find the right people. Over the past five or six years, this has meant putting more emphasis on technology and product people, a trend Scheepbouwer expects to continue. At the same time, the company aims to become more diverse. “We want our workforce to mirror our customers,” he says. “Gender diversity, in particular, is high on the agenda.”