OLX was one of the largest advertisers in Kenya between and , outspending most. Then suddenly, in February of , it announced it was winding down operations in the country. What happened? Why would a company spend almost 20 million dollars on customer education and brand awareness and then leave the market? More importantly, how was it making money to justify that investment? Did you ever get charged to use OLX?
This is the second of a series of posts on the different profit models in the eCommerce space. This post is on Classifieds. I had previously covered marketplaces here. I aim to give a simple framework that anyone can use to understand the online classified business model, especially regarding what activities bring in money and which ones result in expenses. The factors of success for an online classified is beyond the scope of this post.
However, I will use existing market players to highlight the strategic advantages of classifieds. As well as their relationship with the newspaper or media industry. Classifieds are advertisements placed on noticeboards and periodicals, such as newspapers and magazines, that sellers and buyers use to express willingness to sell or buy something.
They are commonly organized in categories, hence the name. In newspapers and magazines, classified ads provided an affordable and effective medium for parties to connect.
Classifieds are not limited to goods for sale. Advertisements of jobs, houses for rent, auctions, tenders and even personals looking for love advertisements are considered classifieds. Though less flashy than the more mainstream full, half or quarter page advertisements, classified revenue provided a great base from which media houses built their empires.
