OLX India vs Quickr: Who'll win the online classified market?

This fight goes back a decade but it's only now that the competition between OLX and Quikr is getting fierce. The rising Internet population, changing mindset of consumers, aggressive advertising and eager investors have added up to exponential growth in the online classifieds business in the last three-four years.

The classifieds market, which was largely divided between print classified and some online players, saw a tremendous shift after 2008 when both Quikr and OLX started to focus on the Indian market. The OLX website went live in 2006, but its CEO Amarjit Singh Batra decided to analyse the market for first few years before taking a plunge in 2009. Over the years, the classifieds market has become a battle of two. Players such as Sulekha or ClickIndia continue to exist but have fallen behind in mind space and in market share.

Both OLX and Quikr are flexing their muscles in a bid to gain traction by advertising heavily, especially on TV, using the funding they have raised from investors. "Marketing is about 75 per cent of the total cost. I can become profitable today but I have to reduce my marketing costs. I don't want to do it because if I increase my lead over others, then I can make more money in the future," says Pranay Chulet, founder and CEO of Bangalore-headquartered Quikr.

Both Quikr and OLX claim to be market leader; their fight for supremacy is borne out by the fact that online classifieds is considered a "winner-takes-all" market.

"Online classifieds work on the network effect principle. It strongly favours the winner. Because you are large, you get more buyers and hence, you get more sellers," says Chulet, who refuses to recognise OLX as competition. "We are a clear leader. Our direct competitor is 50 to 60 per cent of our size," he says. OLX, however, claims it is the leader in the consumer-to-consumer (C2C) segment with 80 per cent market share. Quikr follows a mix of business-to-consumer (B2C) and C2C model. A C2C model allows only actual consumers to post ads, whereas on the B2C platform, businesses can transact with consumers.

Globally, the same story is being played out. Take the instance of the South African media conglomerate Naspers, which owns stake in OLX India. In order to become a dominant player, it is merging its online classifieds businesses in various countries with top players. In Indonesia, for instance, it formed a joint venture with 701Search last year where Naspers owns a 64 per cent stake. It has also formed JVs in Brazil, Thailand and Bangladesh.

"The global trend has been that there is one clear market leader in every country. If you look at most western markets, they have one dominant classifieds player. OLX took a conscious call to focus on emerging markets and today we are the market leader in 25 emerging markets," says OLX's Batra.

So how big is the opportunity? According to a Deutsche Bank report, the size of India's online classifieds industry was at Rs 1,800 crore in 2013 and is expected to grow to Rs 4,500 crore by 2018, a CAGR of 20 per cent. OLX's 2014/15 survey - CRUST - on the used goods market shows that there are Rs 56,200 crore worth of used goods lying idle in just 16 cities. The market would be much bigger if the entire country is taken into account.

Also, if valuation is any measure to go by, the online classifieds industry seems to have arrived. After the recent round of $150-million funding by a group of investors, Quikr is now valued at $1 billion, or Rs 6,300 crore, a sharp jump from around $300 million valuation last September.

The classifieds market is divided into two parts: verticals and horizontals. Vertical companies specialise in specific segments like cars, real estate and matrimony while horizontal players (like Quikr and OLX) follow a marketplace model, much like the US-based Craigslist. From selling buffaloes, coins, gramophones to utility items such as used mobile phones, cars and furniture, people are using such websites to sell almost everything.

While both are vying in the same space, they have taken different approaches. Quikr kept its platform free for the first three years. When its monthly unique visitors crossed 10 million, it decided to monetise the platform. It charges users and businesses for premium listings, that is, placing their ads higher on Quikr search results. "We were able to do that because of a strong grip on the market," says Chulet. "What makes a company valuable is its ability to make money. We have been making money for a couple of years and they [OLX] have not started yet."

Globally, the business model of classifieds is based on premium listings, and display ads. Premium listings usually happen when large-ticket items - real estate, cars - are involved. Quikr takes Rs 300-Rs 400 for a listing. In comparison, a newspaper ad costs a little higher and has a shorter shelf life. Moreover, they lose out on all-India reach. "So, the cost benefit is strongly in favour of online listing. We still keep most of the website free. If I tell all users to pay us, fewer people will list with us and we don't want to do that," says Chulet. Quikr claims to have about one lakh small businesses paying for its service, and has over eight crore active listings on its website.

OLX, on the other hand, is completely free because it believes that the market is not mature enough to start monetising, and paid ads hamper user experience. Till 2012, OLX had paid listings as well but it stopped that service. However, it is not sustainable to run the website free for a long time because so much money has gone into building the business. OLX's Batra says he could look at introducing paid listings in the current financial year.

OLX says all the content is 100 per cent user generated with no involvement of brokers and merchants. OLX had about 3.6 million active ads as on May 1. Quickr allows both consumers and small businesses to use its platform.

Chulet says OLX's model is more suited for developed countries. He says that in developed economies, classified companies start with used goods, and over a period of time, people who are visiting the website start exploring other categories - real estate, services and jobs. Also, it is extremely difficult to avoid brokers. "The situation is somewhat different in China, Russia and India where [horizontal] classified companies have to develop C2C and B2C simultaneously. We cannot just focus on C2C and used goods because cars, real estate, jobs and education [classifieds] are big categories and some vertical player will come and capture that space," he says.

However, sceptics say that the vertical classified websites offer a much richer experience. Vertical classified companies, backed by global venture funds, have made strong inroads in recent years. Companies like Cardekho, Carwale, Cartrade, Naukri, Housing, 99acres and IndiaProperty have specialised products and features that are better targeted towards end users. "Quikr will never be able to compete with Naukri. They should have focused on micro jobs (maids, cooks, and chauffeurs) which involve person-to-person interactions," says Saurabh Pandey, former COO, OLX India. Quikr has GMV of a whopping $5 billion a month.

OLX says its focus on the C2C segment has led to a substantial rise in online traffic. Its page views per month have grown from 10 million in 2011 to about 1.8 billion in February this year. Last year in March, the number stood at about one billion. Quikr is also experiencing rise in both listings and page views, partly due to its missed-call service that it launched in 2012 with an aim to take product listings on call from users who don't have Internet access.

The service fuelled the rivalry further with one accusing the other of pumping up listing by calling its users. "Other classifieds sites [are] calling our users and copying our ad content. OLX never lists on behalf of its users unlike some other players. We want people to experience the benefits of classifieds, which cannot happen if you list on behalf of the user," says OLX's Batra.

Even as both players duke it out, they agree that cultural barriers associated with selling used goods have to go away for market to grow. Since 2012, both companies have spent extensively on ad campaigns, to change the mindset of Indians who mostly sell used goods to local scrap dealers. Sometimes, they even use same catchphrases to lure potential users. For instance, in early 2013, Quikr introduced a new tagline Bech Daal, which resonated with OLX's popular Bech De campaign.

The classifieds face-off is now shifting to mobile phones with OLX getting almost 85 per cent traffic from mobiles and even Quikr has stopped thinking about the desktop version. In fact, Quikr has gone a step ahead with the launch of instant messaging app Quikr NXT, which allows sellers to chat without having to field calls from prospective buyers.

Industry experts say these two companies have just barely scratched the surface of the market. "I believe the market is still 90 per cent virgin. Even after spending loads of money, online classified companies have just two-three per cent of the total Internet user base onboard," says Pandey. Given that the action in the classifieds space has just started, the war will surely get bigger in size and scale.