How Does OfferUp Make Money?

Company: OfferUp
Founder(s): Nick Huzar; Arean Van Veelen
Initial release date: 2011
Headquarter: Bellevue, Washington
Number of Employees (Dec 2018): 266
Type: Private

Products & Services: E-commerce | Direct Buying and Selling Goods
Competitors:  eBay | Craiglist | Facebook Marketplace | Letgo

Did you know – In 2015, OfferUp was recognized as one of the Hottest Startup by Forbes

All about OfferUp

Let’s agree to this. We all know that the marketplace of digital commerce has become overly crowded for the past few years. But the question is, how did OfferUp mark its position? Through its simple and convenient mobile-friendly user interface.

If you want to buy/ sell any good, OfferUp is your best bet. The app has become one of the most prominent digital entity for buying and selling goods by using smartphones. It has surpassed many competitors like Letgo, Swapit, and Carrousel by converging their focus on mobile-driven technology.

The growth rate for OfferUp has remained incredibly dynamic so far. It has become really convenient for people to sell and buy stuff through it because of its simple step by step process and mobile-friendly interface.

The mystery about the OfferUp revenue model still prevails among common circles. The app apparently makes a visible profit making its net worth of approximately 1 billion dollars.

Here is some rare insight on how does OfferUp make money?  

Sales Volume in Comparison to Competitors

The e-commerce market is very competitive where numbers matter most. OfferUp even in its initial stages rapidly became popular among masses. The reason was, of course, the convenience in various ways.

Following are a few of them:

• The simple model among all the market place app
• Better portal in terms of contact between buyers and sellers

The reasons above played a vital role in increasing the customer base of OfferUp. Currently, it claims around 42 million users each year in the US, and the bar of popularity is increasing each day.

According to a market study, the amount of time people are spending on OfferUp is actually more than the calculated time of eBay in its early years. Not only has OfferUp beaten many giants in the field such as Craigslist and eBay in the race.

Many call OfferUp ‘the hip version of Craigslist.’ Broadly speaking, OfferUp is actually neck to neck with many social media apps in terms of engagement which increase the sales volume.

The engagement of the app is incredible, according to business insider, users spend an average of 25 minutes of their day on OfferUp, which is equal to the time people spend on Instagram and SnapChat.  

The secret of this massive success lies in the fact that OfferUp is image based, mobile only-market place. It makes the app more visual, quick, convenient and most importantly, fun to use.

OfferUp Safe Trade Spot

How does OfferUp make money?

The most common question asked is, how OfferUp makes money?  Because the app is different about its strategies and finances. If you observe the revenue model carefully, there are various revenue generation sources. Moreover, several mainstream investors are involved in the venture, adding to the value of the overall app.

1. Transaction fees

There are false beliefs that models like OfferUp fail to generate significant revenue, and there are no charges, which is a sheer misunderstanding. It is accurate that sellers can add in their listing for free, but they do pay the shipping expenditures or service fee.  As far as the transaction fees are concerned, OfferUp charges 7.9 percent of the payment of item which is sold.

2. Pay per use Services – Promote & Bump

To sell your item faster, OfferUp provides Pay-per-use services such as Promote & Bump. You can buy a promote or bump option to get your item seen by more people and promote your item on OfferUp.

• Promote gives your item premium featured position among top 50 items
• Bump feature automatically relists your item and moves it on top of the list.

3. Monthly Subscription to Promote Plus

 With Promote Plus, promote your items for any period of time.

If you have subscribed to Promote Plus, it means you always have a promotion available. You can utilize it by using it on any of your items to give it featured placement.

As soon as you want to promote something else or your item sells or, just move your promotion to a different item. It is a paid monthly subscription, and you can cancel at any time. This feature is an optional yet very effective way for OfferUp to generate revenue.

4. Service Fees for shipping

Sellers have to pay a nationwide service fee for the shipped items. There is a 9.9 % service fee of the final price of your item, excluding shipping costs. You can see the rate while listing your item.

You will see the exact amount when you accept an offer. The service fees will be deducted from the final sale price before the money is deposited to your account.

5. Investors Funding

OfferUp has expanded and strengthened its roots by backing up itself with a powerful pool of investors. Up till now, the company has collected almost $ 372 million by various investors.  

Some of which are Andreessen Horowitz, Warburg Pincus, GGV Capital, T. Rowe Price, Tiger Global, Coatue and Allen & Company.

Funding Rounds

There is a cut-throat competition between the digital marketplace ventures. Competing with its rivals to gather maximum funds in the long run, instead, it keeps renovating their app.

OfferUp has dominated multiple funding sessions throughout its existence, and that also very successfully. In November 2016, the company went through two rounds of D funding series in which it collected $130 million.  

Recently, OfferUp has targeted to collect additional $150 million from which it has already raised $ 39 million and later the remaining $ 111 million, making their total funding to $371.6 million, as per CrunchBase.

OfferUp’s Gradual Net Worth

In the short period of 8 years, OfferUp has become a valuable company that keeps raising the bar of net worth higher. According to the last calculation done by various experts, OfferUp’s total value is over $1.0 billion. The founder and co-founder, Nick Huzar and Arean van Veelen do not plan to stop here. They claim and aim to increase this amount further as time passes.

Conclusion

OfferUp revenue model may have been complex to understand, but it is definitely an effective one. The company is flourishing by all means increasing its net worth after every interval.

The overall revenue generation strategy and tactics have made OfferUp one of the highest valued private companies based in the Pacific Northwest.

Tell us what you think? Did you find this article interesting?                                                   
Share your thoughts and experiences in the comments section below.