The OfferUp Business Model: How does OfferUp make money?
Are you wondering how does OfferUp make money and want to know more about the OfferUp business model? OfferUp is the largest mobile marketplace for local buyers and sellers in the United States.
OfferUp: Company Profile
Let’s dive into the company profile and revenue model of OfferUp.
What is OfferUp?
OfferUp is a Customer to Customer (C2C) online marketplace which was started as a mobile first app, available on both iOS app store and Google Play Store.
OfferUp allows customers to buy and sell products ranging from used furniture to cars with everything in between.
The OfferUp business model is making money by charging a service fee for shipped items as well as for charging promotional fees for products and select programs, while giving away the usage of the app and listing products for free.
- Founded – 2011
- Founders – Nick Huzar, Arean Van Veelen
- Headquarters – Bellevue, Washington
- Type – Private
- Industry – E-commerce
- Competitors – Craigslist | eBay | Facebook Marketplace | 5miles | ThredUp | Poshmark
How was OfferUp started?
OfferUp burst into the E-Commerce scene in 2011, primarily as a mobile first company and as a competitor to Craigslist and Facebook’s marketplace platform. The founders of OfferUp are Nick Huzar and Arean Van Veelen and the company is based out of Seattle, Washington.
Huzar had worked as Product Manager with Microsoft and T-Mobile and had co-founded Konnects, Inc, which was the first (SaaS) social media platform designed to assist traditional media companies to better engage and monetize their online audience.
He then was in a CEO role with Deal Springer, which allows anyone to share deals instantly right from their pocket. Deal Springer was designed to promote deals to local mobile devices, Facebook, Twitter, emails, search engines and scannable window stickers. Users could take a photo with their phone, upload it to the app, and automatically share it with other mobile devices in close range.
Veelen had worked in product and consultant roles at various companies before he joined as the CTO of Konnects, Inc and subsequently co-founded OfferUp.
The creation of OfferUp stemmed from Huzar’s experience with Deal Springer and from the personal needs of the founders as well.
The company founders wanted OfferUp to address the gap in existing classifieds platforms. They discovered a lack of mobile options in existing classifieds platforms while they were trying to sell their used items to create space for their newborns and decided to create OfferUp to address this gap.
How does OfferUp work?
Sellers can list items for sale and buyers can browse through listings on the app or search the products to find what they are looking for.
Once they find an item that they like, they can then interact with the seller over the app’s chat functionalities. They can ask clarifications about the product or negotiate the price.
After a price has been agreed upon, the buyers and sellers meet to buy or sell the products advertised on the platform. The buyer has two days to complete the purchasing process after the product has been successfully delivered.
After the transaction and after purchasing process is complete, the buyer can rate both the seller and the product and leave a review. The the seller can rate the buyer and they can leave a reviews. This increases the trust of the buyers and sellers on the platform and as a result makes OfferUp better for everyone on the marketplace.
How to post on OfferUp and make money
Posting on OfferUp is super simple. OfferUp is one of the best apps that you can use to get rid of your clutter and make money online or using the app on your mobile phone.
At this time when people are looking for ways to earn extra income from home, OfferUp is easy to use, legit way to make money on the side. Here are the things you need to do.
- Download the OfferUp app and create a profile on OfferUp with details such as Name, location, email, profile picture and phone number.
- Click on the Post option
- Take a couple of pictures of your item
- Enter a Title for your item and select the category and condition of the item.
- Enter a short description that succinctly describes the product.
- Name your price for the item and indicate whether it is negotiable or if you are firm on the price.
- Choose a delivery method for your item. Again, this depends on whether you are willing to pay for the service fees or if you prefer to make a sale locally.
How to make your listing stand out?
There are a number of ways you can make your listing stand out. You can offer discounts and deals, offer to bundle items for sale and offer buyers convenience and value added service.
When you post your item, take pictures of your item in good lighting. Pictures taken with good lighting are known to stand out among other pictures.
Use OfferUp’s bump feature to promote your item. Although you will be paying a little extra, you will get extra exposure to your offer and chances of making a sale go up significantly.
Share your listing on other social media to drive traffic to your listing. This will help offer up your offer in front of an even larger customer base.
Since its launch, OfferUp has had remarkable growth compared to eBay, another major eCommerce marketplace. OfferUp has had as many transactions in the first five years as much as eBay did in its first ten years.
The Average Daily Time Spent per User on the app increased from from 13 minutes in November 2014 to 25 minutes in June 2015, on par with Instagram and Snapchat and more than Twitter and Pinterest.
Currently, OfferUp has become one of the largest marketplaces for buyers and sellers. OfferUp is frequently named one of the best places to sell used stuff because the user interface is visually appealing and easy to use.
The app is intuitive and supports large pictures optimized for smartphones and supports infinite scroll, making it easy to browse items for sale.
This uncluttered user interface, reviews and verification system has differentiated OfferUp from its competitors and has made OfferUp app one of the top 50 most downloaded free apps on the App Store.
OfferUp’s Funding and Valuation
As of May 2020, OfferUp has raised $393.7 million in 8 venture capital funding rounds from investors such as Andreessen Horowitz, GGV Capital, Tiger Global Management, Warburg Pincus, T. Rowe Price, and Allen & Company and others. The latest $120 million funding was raised in May 2020, along with an agreement to acquire Letgo which has been a fast growing competitor.
OLX Group, a Netherland based firm led the latest investment round. OLX already had a stake in Letgo and after the acquisition it was agreed that it will have a 40% stake in the combined entity. Existing investors who have a stake in OfferUp, namely Warburg Pincus and Andreessen Horowitz also participated in the funding round.
OfferUp has declined to disclose its net worth. It was reported to be valued at $1.4B after the funding round in August 2018, according to PitchBook.
OfferUp has seen an explosive growth in the number of users since it started. In Aug 2019, the total number of app downloads was 80 million and there were 44 million users, both active and passive. Also, the transaction volume on OfferUp increased from $2.5B in 2015 to $14B in gross merchandise volume (GMV) in 2016.
OfferUp has 369 employees as of May 2020. OfferUp has acquired the US operations of Letgo and there will be some consolidation as a result.
With OfferUp acquiring Letgo’s US operations, the OfferUp and Letgo marketplaces have been combined.
The acquisition is specific to North America, so Letgo’s business outside of North America will be separately owned and operated as part of the OLX Group.
Letgo already had 100 million downloads worldwide, so there will be an increased user base for OfferUp.
However, Letgo will not be supported in Canada as OfferUp hasn’t expanded to Canada yet, so some of the user base in Canada will be lost as a result.
Additionally, listings such as jobs, services, rental listings, and gift cards that were supported on the Letgo app are not being supported by OfferUp, so there is a chance of losing users for those categories as well.
However, the founders are up beat about the acquisition, as OfferUp and Letgo are two very similar marketplaces and would bring about good synergies.
At the time of the acquisition, it was predicted that the combined active user base will be more than 20 million users.
OfferUp’s Unique Selling Proposition is its frictionless user experience, trust factor and community based selling and buying experience.
At the time OfferUp was launched, Craigslist was dominating the internet marketplace scene. Craigslist had a minimalistic interface and considerable safety concerns. Users had been murdered while meeting strangers on Craigslist and this received a lot of negative press for Craigslist.
Also, this was the time that users were moving over from desktops to mobile devices. The founders were fast to capitalize on this move, whereas Craiglist did not adapt as quickly.
OfferUp soon dominated Craigslist, which had a clunky and outdated interface by going the mobile first approach and creating a delightful app that allowed users to list a product they were selling in seconds.
Although the app was designed to buy and sell nationally, it is geared towards ecommerce in local marketplaces.
OfferUp positioned itself as a safer platform compared to Craigslist, by introducing TruYou, a program through which sellers and buyers opting into the program could increase their trustworthiness through the verification of a state ID, a phone number and a validated profile picture.
Additionally, users can block and report users exhibiting suspicious or harassing behavior, making the platform safer as a whole.
Is OfferUp Safe?
OfferUp is no different when it comes to scams just like Ebay, Craigslist, Facebook Marketplace are.
Scammers are ingenuous when it comes to devising new methods of scamming people and there are a number of Offer Up Scams that you should be aware of for your physical and financial safety.
OfferUp recommends paying by cash for in person transactions and to use the OfferUp payment within the app for shipping transactions.
OfferUp advises its buyers not to pay sellers by certified check, electronic gift card, or use payment apps like CashApp, Venmo, or Paypal or make a wire payment through services such as Western Union or MoneyGram. OfferUp also advises against accepting invoices from sellers for shipping, since all fees and transactions can be done through the app.
One of the common scams that sellers get pulled into is when buyers pays more than the list price and then ask the seller to ship the item to a different address, use a different carrier or use a different means of payment.
OfferUp cautions users not to click on links sent to them and disclose their user name and password. In general, it is advisable not to disclose any personal information such as email and phone number outside the OfferUp app, as this can lead to identity theft.
The other common forms of scams that you need to be aware of are “investment opportunity” or an “easy way to make money” scams where random people ask you to send money to profit from an attractive investment opportunity. If it sounds too good to be true, it probably is suspect.
It is best to be extra careful when you meet strangers you’ve connected with over the internet. OfferUp launched MeetUp in 2017 to address the safety concerns. OfferUp has partnered with businesses and police stations to create Community MeetUp Spots, which are brightly lit and have video cameras, to meet sellers to inspect products and complete transactions.
You can see the MeetUp Spots highlighted when you look up a location on the OfferUp app. The MeetUp program now has more than 1,900 locations across the U.S.
Through social validation and validation through traditional methods, OfferUp seeks to allay the safety concerns of its users. Let’s look at how does OfferUp make money.
How does OfferUp make money?
OfferUp’s Revenue model is interesting. Although the app is completely free for sellers and buyers to download and use, OfferUp has found some ways to monetize its large user base through its services. OfferUp’s primarily makes money through transaction fees and brings in revenue by charging for these services.
OfferUp’s Seller Fees
Sellers on OfferUp pay a small service fee when shipped items sell. OfferUp allows shipping to 48 states through the US Postal Service.
The seller fee is either a minimum of $1.99, or 12.9% of the item’s final sale price, excluding shipping costs.
This rate will be displayed when you’re listing your item and the exact amount will be displayed when you accept an offer.
The service or shipping fee is deducted from the final sale amount before the money is deposited to your account. Shipping costs are typically paid by the buyer, although the seller can pay for the shipping as well.
To be eligible for shipping:
- Sellers must use OfferUp’s provided label
- Items must weigh less than 20lbs and the box size must be no longer than 18 inches
- Items must be listed at a sale price between $1 and $750
- Event tickets cannot be shipped
- Items must be eligible for immediate shipping and cannot be drop-shipped (i.e., a seller cannot purchase items from another retailer and ship to a buyer).
If the transaction is completed by the buyers and sellers meeting in person, there are no service fees involved.
OfferUp’s Promotional Fees
OfferUp Promote: OfferUp allows sellers to purchase two options for promoting items that are listed for sale.
OfferUp’s Promote option allows sellers to pay a one time fee to promote the items for sale and display them at the featured positions within the first 50 items of search, browse and category results.
Promoted items are rotated among these spots so that the promoted items get views. The 1-day promotion is priced at $2.99, the 3-day promotion is priced at $7.99.
OfferUp Promote Plus: If sellers are interested in promoting the stuff they sell on a monthly basis, OfferUp has a monthly subscription called the Promote Plus, which is priced at $19.99 per month after the free 3-day trial period.
With Promote Plus, sellers always have the promotion available. Promote Plus comes in two levels: 1 item and 5 items.
Swapping is available for the Promote Plus items, which means you can swap the item that is promoted for some other item on sale.
OfferUp Verified Dealer Program
OfferUp has catapulted to become the trusted platform for used goods with more than 44 million users. A good number of car sales is done through the app.
It was estimated that OfferUp’s car sales accounted for nearly 10% of used car sales in the United States. The Verified Dealer Program caters to car dealers and was created by OfferUp to provide dealers with digital tools to sell cars locally.
OfferUp shares data that more than 30 percent of cars sold on OfferUp sell within two days and more than 50 percent sell within a week
OfferUp provides various advertising tools such as an AI-powered top lead indicator, a click-to-call button and automatic DMS (Dealer Management Software) for car dealerships. The pricing for the Verified dealer program is based on the size of the car dealership and the premium features the dealership uses.
These tools would help car dealerships generate leads among the digitally saavy audience and find the right buyers for their cars. Dealers would be able to realize the following benefits by enrolling in the Verified Dealer Program
- List their vehicles by connecting to their inventory feed
- Display a vehicle’s Carfax report
- Connect with car buyers via chat and Click-to-Call
- Generate Leads via the Top Lead Indicator
- Use advanced advertising solutions to enhance their exposure and sales
What is the OfferUp business and revenue model?
OfferUp makes money through the following business and revenue models:
- Subscription business model
- Commission based business model
- Advertising based business model
OfferUp and LetGo Merge
OfferUp with its amazing product design and key features has made transactions between buyers and sellers painless. The company has shown tremendous growth in the last few years.
With it’s acquisition of the North American operations of its key competitor Letgo, OfferUp is rapidly moving towards its vision for expanding the second hand economy with a positive impact on its customers and the environment.
Both OfferUp and Letgo have been admirable in their growth and tech innovation, and have been ranked in top positions in the Apple and Google app stores.
The acquisition is a giant leap for OfferUp in achieving its goals. Letgo has historically been strong in the midwest, where acquisition will create a strong presence for OfferUp.
OfferUp would bring its shipping expertise to Letgo. With the COVID-19 crisis still underway, this would provide to be very useful to Letgo’s user base.
However, metrics such as user growth, employee base and leadership for the combined entity remains to seen as the deal is finalized.
OfferUp, with its frequent product innovations, recent acquisition of Letgo and the high demand for used stuff is offering amazing opportunities to its customers.
Offerup has kept its word of creating a way for small businesses to offer products with ease and is changing the second-hand economy by bringing trust, convenience and value into daily lives of consumers looking for used goods.
Also, with the used items market growing at a fast pace in the United States and Canada, together Offerup and Letgo will provide much needed scale along with access to customer insights that could further growth.
OfferUp has an active seller community that loves the platform. Its success in the future will depend on how it differentiates itself from other online marketplaces such as Facebook marketplace, eBay, Craigslist, etc.
OfferUp has disrupted Craigslist and there’s no doubt that OfferUp will continue to dominate the mobile marketplace and change the way eCommerce for the second hand marketplace operates.
We hope this article has given you some clarity on how does OfferUp make money.
Frequently asked questions about OfferUp
Is OfferUp free?
You can post a listing on OfferUp for free. However, OfferUp charges for shipping and promotion.
What can you post on OfferUp?
OfferUp allows you to post in the following categories and much more
Tools and machinery
What listings are not allowed on OfferUp?
The following items are not allowed
Alcohol, drugs & tobacco
Adult & mature content
Counterfeit and replica items
Illegal items or encouraging illegal activity
Medical & healthcare items
How to delete your OfferUp account?
OfferUp has an option to deactivate your account, but not delete it. Contacting customer service about permanently deleting your account could help.
Other Business Models: Honey, Venmo, Carvana, DoorDash, Discord, Afterpay, Zoom, Zelle, Craigslist, Nerdwallet, Webull, Hinge, Bumble