OfferUp: A Mobile Solution for the Mobile Era

When people think of buying and selling things online locally, most think automatically of Craigslist,
the classified ad marketplace that has dominated that business for the past two decades. But as the
rest of the world has gone mobile, Craigslist has not. In fact, the familiar but cluttered collection of
blue hyperlinks has changed very little over the years. Some critics suggest that Craigslist has taken
its monopoly for granted. One industry observer refers to Craigslist as “the cockroach of the internet
age—an ugly but effective e-commerce platform that . . . emerged unscathed from technology shifts
that crippled mightier contemporaries like Netscape and Yahoo.”

In the new landscape of digital disruption, one thing seems certain: What dominates today could be
under threat tomorrow. That tomorrow may already be here for Craigslist as numerous, more user-
friendly competitors have emerged to challenge the classified ad champ. Enter OfferUp—a relatively
new mobile app for buying and selling items that is taking the digital marketplace by storm. OfferUp
is not only challenging Craigslist as the go-to platform by which individuals and businesses sell goods
and services in local markets, it’s also starting to challenge the likes of eBay and even Amazon by
flexing its muscles beyond local market boundaries. Unexpectedly, OfferUp now rivals the most
popular social media apps in terms of time spent by users.

About a decade ago, as the mobile device revolution began to explode, Seattle resident Nick Huzar
was frustrated as he tried to unload unwanted household items in preparation for his soon-to-be-
born daughter’s nursery. He didn’t have time to post all these items on Craigslist, which required
multiple steps that pretty much required a desktop or laptop to complete. Instead, he went to
Goodwill, where he always found a line to drop donations. With a smartphone in his hand, he
recognized the potential for an online marketplace that made posting, monitoring, and browsing
items for sale in a local market as simple as social media interactions. That led to a partnership with
friend Arean van Veelen and the ultimate launch of OfferUp in 2011.

A Different Kind of Marketplace

The main thing that differentiates OfferUp from Craigslist and other traditional online marketplace
platforms is that it’s designed exclusively for mobile channels. For sellers, that means that posting an
item is as simple as posting a photo to Facebook—point, shoot, add a description, and click. Each
local ad defaults to a 30-mile radius, and standard ads are free. OfferUp’s goal is to have the process
take no more than 30 seconds. For sellers, it’s painless with little risk.

For shoppers, the interface is also very appealing, with a Pinterest-like vibe that is primarily visual.
The bottomless scroll entices users, luring them in to a virtual treasure hunt. People typically access
the OfferUp app looking for one thing but discover a trove of unexpected goodies. This element of
surprise has users spending an average of 25 minutes a day on OfferUp, the same as Snapchat and
Instagram. “It’s not like Amazon where it’s very intent-based—where you know what you want,”
says Huzar. “OfferUp is more discovery-based. You go in there and you kind of look around and you
find that thing you didn’t think you wanted that you end up buying.”

Beyond the Pinterest-like feel, OfferUp also boasts the strong sense of community that is normally
reserved for dedicated social media sites. The foundation of this community is trust and reputation.
Take the user profile and rating system for example. Users are not random, anonymous users but
community members. A user can create a profile and upload a photo. What’s more, users can take it
a step further and apply for TruYou verification, submitting a mobile phone number, a picture, and a
state-issued ID. Once verified, a Trubadge is displayed as part of the user’s profile.

Beyond TruYou, a user’s status can be enhanced through various achievements—positive reviews,
average response time, and trusted connections, to name a few. Users can also personalize their
background images and profile descriptions, just as they can on social media sites. And when it
comes to communicating, OfferUp includes a chat-like message function that lets users
communicate with each other without revealing personal contact information. If that isn’t enough,
OfferUp facilitates Community MeetUp Spots for users to make their exchanges. Partnering with
local businesses and police forces, Community MeetUp Spots provide well-lit, video-monitored
places that are safe for buyers and sellers to make exchanges—a stark contrast to Craigslist’s
traditional and laissez-faire approach.

All this does more than just help people feel connected or even develop social networks within
OfferUp. It eliminates some of Craiglist’s biggest security issues. For starters, because phone
numbers and email addresses are typically shared on Craigslist, users are commonly targeted by
scam artists. What’s more, meeting someone in person for a transaction has led to robberies,
assaults, and even murders. That’s right. Dozens of people have suffered death at the hands of the
person they were meeting to conduct a Craigslist transaction.

During its first five years, OfferUp focused on building its user base while putting little effort into
generating revenue, the typical strategy for online marketplaces. In fact, with 18 million downloads
and fifth-year transactions totaling more than $14 billion, OfferUp hadn’t made a dime for itself.
With very marketing expense and a growth rate that exceeded Craigslist and eBay in their early
years, OfferUp was able to raise money through investors—first in the tens and then in the hundreds
of millions of dollars.

From Mobile App to Mobile Marketer

But OfferUp eventually began addressing the issue of how to make money off all those users and
transactions. Like Craigslist, OfferUp developed naturally as a platform for consumerto-consumer
transactions as well as business-to-consumer and even business-to-business transactions. Although
there were various options for starting a revenue stream, OfferUp first focused on businesses. For
starters, it designed two optional premium features to facilitate targeting customers—Bump and
Feature. With Bump, a seller can put an item at the top of browsing and search results for new
items. Feature, on the other hand, allows sellers to promote items and makes them appear in special
promotional spots within the top 50 search, browse, and category results. Both of these features can
be purchased for runs of three, seven, or 14 days. While these features appeal primarily to business
sellers, they can be selected by anyone.

Recently, OfferUp made two big moves to increase its value to national brands and to increase the
company’s income base. First, it introduced paid advertising. Marketers can now target specific users
based on their network, browsing, and posting activities. So when a user searches for a home
theater system among the local offerings by individuals and businesses, for example, that shopper
will likely see ads for relevant offerings by online retailers such as eBay, Amazon, and Walmart as
well as by marketers such as Sony or Samsung that sell their products directly.

In its biggest move yet, OfferUp has expanded its marketplace beyond local boundaries by adding a
shipping option. When an item is sold through this new nationwide shipping feature, the seller is
charged a 7.9 percent fee—lower than eBay or Amazon. The buyer pays between $5 and $20 for
shipping, depending on the size of the product. This new transaction fee offers far more value to
companies and brands of all sizes and locations whilealso increasing the utility of the platform for
shoppers. For OfferUp, advertising and transaction fees represent substantial newrevenue streams
over the paid tools for promoting items for sale.

OfferUp’s strategies appear to be working. Craigslist reported 55 million unique visitors for the most
recent month, a huge audience but one that was down 10 percent from the year before. That
decline wasn’t all due to OfferUp. Rival LetGo offers a similar mobile marketplace and is doing just
about as much business as OfferUp in the United States. And while OfferUp plans to eventually take
its app international, LetGo is already doing business in multiple countries. LetGo has also raised
nearly double the amount of venture capital as OfferUp and is spending aggressively on advertising,
whereas OfferUp has relied more on word of mouth. In addition to LetGo, other new marketplace
apps are also vying for a piece of the online local marketplace pie. Even Facebook is getting into the
game. With its rapidly growing Marketplace as an avenue for local buying and selling, it need only
engage a fraction of its user base to make a large dent in the market.

While Huzar recognizes the competition posed by LetGo, Facebook, Craigslist, and others, he has a
different perspective than most. He believes that the business of online marketplaces— whether
local, national, or global—is not a zero-sum game. In his view, OfferUp doesn’t need to steal
business from Craigslist in order to thrive. Instead, along with LetGo and other entrants, OfferUp
needs to attract a new generation of mobile device users that never even considered Craigslist as a
shopping or selling platform. Huzar may be right. Although it’s nearly impossible to calculate the
sales volume that flows through Craigslist (the company leaves all money-changing to the buyers
and sellers), OfferUp and LetGo will combine for an estimated total of more than $40 billion worth of
goods and services sold in the United States this year. Compare that to eBay’s total global volume of
$61 billion last year or even Amazon’s North American sales of just over $100 billion. The new
entrants are having a substantial impact.

Ultimately, although OfferUp faces some stiff challenges ahead, its future looks bright. With its focus
on an easy-to-use interface made for today’s mobile users as well as a growing and safe community,
OfferUp will continue disrupt the world of digital marketplaces. Huzar takes the challenges seriously
but tries not to let it bother him too much. “I don’t lose much sleep at night over it,” referring to the
competition. Indeed, Huzar is counting on OfferUp being around in a decade when it’s time to buy
his daughter her first car.

Questions for Discussion:

1. As a mobile marketplace, how does OfferUp provide value to shoppers? Sellers?

2. Analyze OfferUp’s business model relative to the different forms of digital and online marketing
covered.
3. Describe the value of OfferUp to national brands and retailers as a channel for mobile marketing.
Does OfferUp also pose a threat these companies?
4. Compare the competitive relationship between OfferUp and LetGo to that of Uber and Lyft.
Based on this comparison, what does the future hold for OfferUp?
5. Do you agree with Nick Huzar that OfferUp can succeed without taking business away from
Craigslist? Explain.