With an amount of $12,000 and a ton of innovation and determination, OLX founders Sim Whatley and JC Butler managed to create a multibillion dollar website. Many have since followed in their footsteps, prompting people to question where such sites get the money.
OLX provides a platform in which anyone can buy and sell used commodities. Like many of its counterparts, the majority of OLX’s profit is generated by advertising.
Most of this advertisement is customized according to the user’s previous searches. For example: You’re a 20-something college graduate looking for a job on OLX, when a job ad from a different site on the side of the page catches your eye and prompts you to click on it.
Congratulations, you’ve just contributed to the millions OLX makes each year. Hence, as the site’s user base expands, its opportunity to make ad-generated profit expands as well.
That’s not the end of it. Websites like OLX also allow venders to promote their products. So, again, if a person is selling a phone and another is selling the same exact phone, both are offered the chance to make their products appear higher on the list in exchange for a petty sum of money.
Another easy example of such sites is Airbnb. Long story short, Airbnb is a medium which allows travellers to connect with hosts in foreign countries to whom they pay small amounts of money in exchange for rooms in their houses.
Airbnb’s popularity spirals from it being an inexpensive alternative to hotels. From the outside, it may seem as though all the money is being made by the host, yet upon closer inspection, it is found that guests pay Airbnb anywhere between 6% and 12% in service and booking fees. Hosts, on the other hand, pay a 3% fee for payment processing.
Hotel reservation sites also make a great deal of profit from their users. In addition to ads, a site like booking.com is also paid a commission by the hotels that users reserve in.
Booking.com reportedly charges hotels around 15% in commission of what the customer pays. Let’s assume that you’re looking for a hotel in Hamra. You stumble across Booking.com and decide to book a room for a $100 per night.
If you stay for one night, the site makes $15, but if you stay for ten nights, the site makes $150, and so on and so forth. The more expensive and luxurious the hotel, the higher the commission that such sites get.
Couchsurfers also presents similar services as Airbnb, but in addition offers users the possibility to join international events as well as find hosts. So, how did this NGO manage to become a million-dollar company?
Couchsurfers signed off on a deal to accept around seven million dollars in funding and with that moved from being an NGO to a for-profit corporation.
The bottom line is that, just because you’re not paying to use a site doesn’t mean that site isn’t making money off of you.