Letgo is one of the biggest online marketplaces for selling and buying used items. The concept of a marketplace for secondhand items has been popular for years. However, there were only a few apps and sites such as Craigslist, eBay, OLX, Etsy etc. It has over 100 million downloads and 400 million listings as of 2020. It is America’s one of the giant marketplaces to trade used items from electronics, furniture, cars, to rent and sell houses. It also lets users list services.
Having its presence in 35 countries over the world, Letgo is known for its innovative features with the latest technology. In fact, it is one of the very few apps that uses AI for image recognition and helps people to list their items in less than 60 seconds. Most importantly, Letgo app is a free platform for both buyers and sellers. The app doesn’t even force its users to make payments through it even.
In fact, it only works as a platform to connect buyers and sellers. The buyers and sellers can chat and meet in person to finish the deal.
Wondering how Letgo makes money if it is a free platform for both buyers and sellers? Well, this article walks you through the Letgo business model and how it makes money and how good is its revenue model. So, let’s get started! Before that let’s quickly look into what is Letgo to understand it better. Shall we?
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What is Letgo?
Letgo is an online platform that lets sellers list their used or untouched products on the app and helps buyers to purchase the preowned products at affordable prices. Thus creating a circular economy where there is less waste. Moreover, it is quite easy to sell or buy items on the platform as it only requires a snap of the item to upload. The latest features of Letgo feature the ad and display it to nearby people (around 50-mile radius) for relevant searches.
Letgo is a recently developed app by Alec Oxenford, former CEO of OLX. It was founded in January 2015 targeting the US market and competing with the 1990’s companies, eBay and Craigslist.
A year after its launch, Letgo merged with another classified company (startup), known as Wallapop. Yet, it remained as a brand Letgo. The startup quickly attracted millions of users in just a year. It had over 10 million monthly active users according to Businesswire in just one year.
There are many reasons why Letgo has become so popular within less time. Of course, it introduced new features such as geo location, filters, reveal, chat etc. Also, it is available as a free platform on iOS and Android devices. Hence, there is no risk of losing their users at any time, no matter how many new apps are launched. Therefore the app is still one of the most-used platforms for trading preowned stuff.
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Key Features of Letgo
Image recognition: This is one of the best features in Letgo. In fact, Letgo is the only app at times that fill the title, categories of the items by recognizing images once uploaded. Only a few buy and sell apps like Letgo uses artificial intelligence for enhancing user experience.
Geographic location: No flooding of irrelevant search results on Letgo. Its geographic location displays only nearby results less than a 50-mile radius. Moreover, users can filter results based on category, price and location.
Chat: Buyers and sellers can interact about the listing and pricing through the chat feature. Hence, no exchange of phone numbers is required. Both parties can talk about the deal on the chat itself and close the deal meeting in a public place.
Review: Buyers can leave comments or rate sellers which will show up on the seller’s profile. This feature helps other new buyers to choose genuine sellers.
Reveal Feature: Unlike many other buy and sell apps, Letgo has an advanced feature known as “Reveal”. It is a video listing for providing accurate and better information about the product to buyers. Sellers can use this feature, shoot a video of the product for fast selling.
Thus, Letgo offers many feel-good features on its platform for both buyers and sellers and growing its user base and income steadily. Okay, now let’s quickly jump into Letgo business model.
Business Model of Letgo
The business model of Letgo comprises three segments (let us call them models again). The three models make almost equal profits to the company. Let us look at those without any further ado.
In-App Targeted Ad Model
As you know Letgo is a free platform for buyers and sellers who are its key members, it has no other way but to show ads to make money. Moreover, it is a smart way to monetize its platform because the app has a free and solid flow of traffic. As it is a free platform, there is no fear of losing its users because people love the term “free”. Moreover, it doesn’t even force people to make transactions through its services, it just provides complete freedom as well as outstanding features for users to come back again and again.
Therefore, it is one of the best platforms for advertisers to show their ads. So, users pay Letgo and display their ads (promoted listing) on the platform. Again, the platform never compromises the user experience. It only shows related targeted ads to its users.
Freemium Model
Letgo is available as a freemium model. Meaning, it is a free app to download for anybody in eligible countries. At the same time, it charges some money to access a few advanced features.
This freemium model has a feature called “bump up” that will let users rank their product on top for 7 days. This feature costs approximately $0.99 to $3.99 based on the product.
Thus Letgo makes money with this freemium model while also benefiting sellers to sell the item faster.
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Subscription Model
In addition to the freemium model, Letgo also introduced two premium subscription models to boost the speed of selling.
Super Boost Subscription
This is a monthly subscription plan in which the listing that has a high probability of selling is featured for 24 hours. Simply put, in Super Boost mode, Letgo selects one listing (which is likely to sell) each day and features it automatically.
Thus, sellers can simply get the subscription plan and upload pictures, Letgo takes care of the rest.
Letgo PRO Subscription
This model exclusively targets car dealers. When a user chooses this model, Letgo allows the user to list their cars. It then boosts the visibility of listing to 100 million users of the app. Additionally, it provides better insights and leads to the listing owners to target and make sales.
This model is available in three different plans: $99/month for upto 30 vehicles, $399/month for upto 70 vehicles and $599/month for upto 150 vehicles.
Investor Funding
Letgo, though facing tough competitions with already established companies, it was never short of finances. The company is backed by investors and is able to run its operations and cover expenses.
Letgo raised nearly $100 million in its first year of launch. Later, when it was merged with Wallapop (in 2016), it raised another $100 million.
As of August 2018, it raised over $500 million and has posted a total funding amount of $975 million.
Letgo Acquisition by OfferUp 2020
On March 25, 2020, OfferUp, one of the top online marketplace apps, announced the acquisition of Letgo. It raised $120 million in the latest funding round held in March. Thus it gained a 40% stake in the company and acquired it along with OLX Group. However, both apps remain as separate apps and function separately for the time being.
How Letgo Makes Money?
Letgo, a popular American based second-hand online marketplace, makes profits in multiple ways despite being a free platform.
As you can see above in the Letgo business model section, the company makes money through its 3 business models.
Advertising
It sells space on its platform and shows in-app ads, it makes a good deal of revenue from its advertisers, the same as Google or any other app does. However, as it doesn’t interrupt the user’s navigation or degrade the user experience, it is still able to keep its users (in fact, it is growing its user base). Thus it will always be the advertiser’s choice to publish ads.
Featuring Products
The second way it makes money is by featuring users’ listing on top (freemium model). This way it not only makes money but it also lets sellers sell their products faster for effective pricing.
Paid Subscription
As discussed above, Letgo charges sellers for letting them use advanced features such as Super Boost and Letgo PRO. Although frequent sellers opt for these plans, there is no doubt that there are thousands of sellers and car dealers who use it.
Additionally, Letgo earns money from funding to manage its costs and expenses. It has raised $975 million in funding to date. Its major investors are Accel, 14W, FJ Labs, Eight Roads Venture, Mangrove, Naspers, NextView, Northzone and Insight Venture Partners.
However, it was acquired by OfferUp recently. Therefore, it became a part of OfferUp, both forming a powerful marketplace for selling and buying things.
Besides the merger, both apps function separately and users need to just download the new version of the app they use (this applies to both OfferUp and Letgo).
Future of Letgo
Letgo is one of the popular buy and sell platforms across many countries in the world. It has been continuously working to improve user experience and add new features in order to fight the competition. It had tough competition with other sites such as OLX, OfferUp, Carousell, one of the eCommerce giants eBay, etc. Moreover, after Facebook had introduced Facebook Marketplace, the competition has become even more onerous.
However, there is a chance for the story to change as OfferUp has acquired Letgo. The company is now a part of OfferUp. Thus the two popular buy and sell online marketplaces have joined together to share their strengths. This, in fact, results in a large user base, a huge number of sellers and buyers with a great positive user experience.
Bottom Line
So, that is how Letgo makes money. Within just 5 years, the company saw two acquisitions. Letgo acquired a startup within 1 year and a popular online marketplace app, OfferUp acquired Letgo this year.
However, the business model of Letgo before OfferUp acquired it generated good revenue. Hence, it’s strategies were good enough so that it made good profits to both manage its expenses and implement new features. Anyways, we should wait to see if OfferUp changes its business model in the future to make more profits.
