Business Model Of OLA. How OLA Makes Money?
In India, at present if we talk about cab services then 2 names will definitely pop up in everyone’s minds. Yes, you guessed it right i.e OLA and UBER. OLA is an Indian-based company whereas UBER is a USA-based company.
In this blog post let’s understand the starting story of OLA, business model, funding, acquisitions, how does OLA make money in detail.
Taxi or cab services were considered as high-end services a few years back and many people used to prefer either Auto or the Bus as it is a very cheap mode of transportation.
But when OLA entered this segment, you can say there has been a big revolution in the Indian market.
OLA gave different types of offers, discounts, schemes and brought many changes in the transportation market which entirely changed the mindset of the people and now even common or middle-class people can afford cab services.
Success Story Of OLA
OLA was started by 2 IIT graduates, Bhavish Aggarwal and Ankit Bhati in Dec 2010. The main guy behind the idea of OLA cabs is Bhavish Aggarwal. Bhavish who completed his graduation from IIT Bombay had started working in Microsoft India and then quit it after 2 years.
He got the idea to start the OLA cabs when he had booked a taxi to travel from Bangalore to Bandipur.
But the taxi driver stopped the cab in the middle of the road and started re-negotiating the price with Bhavish Aggarwal and when Bhavish rejected to pay him extra money the taxi driver just left Bhavish in the middle of the road and went off.
And this was the worst experience Bhavish had with the taxi and got to know that this was the kind of experience most people are having with taxi drivers.
That is when the idea of starting the OLA cabs popped in Bhavish’s mind to solve the problems of the people by bringing in extraordinary cab booking service.
Strategy Used For Need Generation
Bhavish knew that to continue the cab service business for a long term, first there is a requirement to create need generation with the people.
And to create the need you know one thing which works great all-time i.e provide at cheaper rates, give free or offer discounts etc and even if people don’t really need it they will go for it because of free or discounts. And that’s exactly what Bhavish did.
So for that purpose, Bhavish introduced refer and earn, get 200 off on the first ride, OLA ride at only 6km, OLA share etc kind of schemes.
He also made OLA cabs even cheaper than Auto. And that’s when people started slowly shifting towards OLA cabs.
And in the business model of OLA even the drivers play a major role. So for drivers, he started giving mind blowing incentives. There were drivers who were even earning more than 1Lakh per month!
Bhavish had planned everything in advance, he knew he would increase the OLA ride prices and as well decrease the incentives for the drivers in the future.
But at first he needed to build an audience and gain the trust of people and drivers which worked great according to his business plan. And that’s the OLA cabs success story!
OLA Business Model
The business model of OLA consists of 3 main elements.
- Customers
- OLA App
- Taxi Driver
So here is how the business model of OLA works. When the customer visits the OLA App, the OLA App will first grab the location details of the customer and then check the availability of the cabs at those nearby locations.
The OLA App then gets the location details of the cabs and shows it to the customer. Then when the customer books the cab, the OLA App will send the customer details as well as pick up and drop locations to the driver.
The driver will then confirm the booking and pick the customer from his location and drop the customer at his destination.
After the payment is made by the customer a few % of commission is taken by the OLA and the remaining amount will be credited to the driver.
So this is how the business model of OLA works and how OLA makes money with their business.
How Does OLA Make Money?
1. Trip Commission
OLA charges a certain amount of commission on every ride. The commission is around 20%.
For example, if the total fare of the ride is Rs.250 then this amount will be divided into 2 parts. One part is for OLA and another for the taxi driver.
If the commission charged by OLA is 20% then OLA will get Rs.50 and the remaining Rs.200 will go for the driver. This is one main way how OLA makes money. There are many other different ways how OLA earns money. Keep reading.
2. OLA Money
OLA money is like a digital wallet. It is similar to Paytm or MobiKwik e-wallets. But with OLA money, you can make payments not just for OLA ride fare but also can make payments in many other places as well such as dominos, CCD, pizza hut etc
3. OLA Select
OLA Select is a kind of membership program offered by OLA to their users. OLA will charge a certain amount of money from their users for a particular duration.
Some of the benefits of OLA select includes: no peak time price increase, no booking que and you’ll also get free wifi when you commute.
4. OLA Corporate
OLA corporate is a service just for corporate organizations who provides cab facility to their employees and the ride fare will be billed to the company’s registered account.
5. In-cab Advertisements
If you are availing OLA cab services frequently then you must have noticed advertisements inside the cabs.
For these kinds of advertisements, OLA will charge a certain amount of price according to the deal made with the advertising company.
6. OLA Prime Play
This is one new kind of service by OLA. To make use of this service customers must book only prime play cabs where you can enjoy music and videos on the go with help of tablets attached behind the seats.
The charge of these cabs are more compared to the normal one. So this is also one of the ways how OLA makes money.
7. OLA Credit Cards
This also has been recently launched by OLA where OLA offers cashbacks by using their credit cards and this is mainly used to promote the OLA money.
8. CAB Leasing
In CAB leasing OLA personally buys the car and hires the driver for it. OLA will charge a certain security amount from the driver and gives the car to the driver. On lease cab service, OLA charges additional commission from the driver.
9. FoodPanda Acquisition
By acquiring FoodPanda in 2017, OLA has even entered into the online food delivery segment. This is also one of the ways how OLA earns money.
The current valuation of OLA stands at $6.2Bn as the 4th largest unicorn in India. Currently OLA has its presence in 60 countries and more than 400 cities.
10. OLA Scooters
OLA has been working on OLA electric scooters for few years and is finally launched in July 2021.
Check the tweet from the CEO itself:
OLA electric scooter factory is spread across 500-acre land and the company says they are going to produce over 10 Million OLA electric scooters a year!
Currently, OLA electric scooters are spread across 400 cities with 100K+ charging points.
OLA has made over $327 Million investment to set up the electric scooter factory!
Notably, in 2020 OLA had acquired Etergo BV which is an electric 2 wheeler manufacturer from the Netherlands. OLA acquired Etergo with an aim to expand its electric mobility services.
OLA electric scooter is likely to get more traction as it’s already trending. OLA will be looking forward to make a lot of money from electric scooters in the coming years!
Read: How to signup for canva
Fleets Of OLA
To talk about the fleets of OLA, there are 11 different types of Cab services. Below is the list.
- Auto
- Bike
- Share
- Micro
- Mini
- Prime sedan
- Prime play
- Prime SUV
- Luxury
- E-Rick
- Kaali Peeli
Acquisitions By OLA
OLA has acquired a total of 6 Organizations since 2015.
1. Taxiforsure.com
OLA had acquired taxiforsure for $200M in 2015 which was OLA’s rival at that time which has now been shut down by OLA and no longer in use.
2. Geotagg
It was a startup that was focused on providing solutions in the field of transportation systems and was acquired by OLA in 2015.
3. Quarth
OLA acquired Quarth in 2016 which is a mobile payments company, in order for OLA to strengthen OLA money.
4. FoodPanda India
OLA acquired FoodPanda’s Indian business in 2016 to enter into the food delivery service and to give a tough competition to uber eats. Anyways, now FoodPanda India has been shut down and OLA started their own OLA foods business.
5. Ridlr
Ridlr is a transport App which helps the general public for daily commutes which makes your traveling hustle-free and cashless. Ridlr was acquired by OLA in 2018.
6.Pikup.ai
Pikup.ai which is a startup company based on artificial intelligence has been acquired by OLA in 2019 aiming to provide tech solutions for mobility.
7. Etergo BV
As already discussed, OLA’s recent acquisition is Etergo BV in 2020. And this acquisition will help OLA electric scooters in design and more.
OLA has 48 Investors and has made 4 investments over time. There have been 26 funding rounds and has raised $4.3B in funds.
In Conclusion
Hope you have understood the business model of OLA and how they made it a success. To start a successful business sometimes you just need to go through some hard times.
Just imagine if the driver did not renegotiate in the middle of the road, Bhavish would have never come across this brilliant business idea.
So whenever you arrive with a problem or when something bad happens with you, just think how you can solve that problem instead of cursing over it. You never know, even you might get a great business idea like Bhavish Aggarwal!
Read: Zomato Business Model
