Ola Business Model: How does Ola Capture its Growth?
The revolution of digitalization has changed the ultimate behavior of individuals in regard to the service industry. Gone are the days when people have to stand in a long queue to wait for buses or other public transport.
With Ola and other ride-hailing brands coming into the picture, there is a progressive shift in the mindset and behavior of the individuals (customers). Ola; similar to any other blooming on-demand ride-hailing startup, has managed to capture individuals’ interest, attention, and preference over any other public transport.
Emerging with an evaluation of $330 Million in 2019, the brand has reached the subsequent height in a very less span of time. This article will cover the initial strategies, post-pandemic changes, and new vision and segments of expansion of business with the moving times.
Keep reading the article to get some valuable insights on the Ola business model.
Ola – How did it start?
The Indian-based startup was founded in 2010 by Bhavish Aggarwal and Ankit Bhati. Initially, it was named Olatrip.com and had a business model to support portal bookings for holidays, weekend gateways, and vacations.
However, after one bad experience travel, Bhavish (one of the founders) decided to craft a comfortable travel experience for the others in the market. This is where Ola Cabs were discovered.
By now, Ola has served 1bn+ rides across 250+ cities in local as well as global markets. By empowering more than 1.5mn driver-partners and employing more than 7000 employees. And is growing with time and is expected to become one of the most prominent names in the industry.
Headquartered in Mumbai, the brand has built its own heritage and is supposed to grow and capture more of the market in the coming times.
The series of funding and growth
So far, Ola has managed to go through 26 rounds of funding. Till now, 49 investors are backing the company which includes big names such as Temasek Holdings and Bhavish Aggarwal.
Ola funding chart:
2010: Company was founded
2011: Raised $500 k from Angel Investors- Kunal Bahl & Others
2012: Raised $5 Mn from Tiger Global Management
2013: Raised $20 Mn from Matrix Partners and Tiger Global Management
2015: Become a Unicorn by raising $900 Mn
2017: Ola acquired Foodpanda and raised $1Bn
2018: Raised $250 Mn and expanded its operations globally( Australia)
2019: Raised $250 Mn for entering the EV segment and London market
Ola, the mobility giant, has raised a total funding of around $5 billion over 29 rounds. It includes various debt financing as well as entering the secondary market. The company has successfully completed its E series funding and was last valued at around $7.3 billion in Dec 2021.
As per its future aspects, the Unicorn is planning to raise around $500 mn in debt via a Term Loan B (TLB) deal. If everything goes well, then Ola could be considered as the 3rd ever Indian startup to raise TLB funding after OYO and BYJUs.
Ola Business Model: How does Ola Generate Revenue
Owned by ANI Technologies, Ola has been one of the most straightforward business models in the startup army. It started by offering Taxi Rental Fleet business services without any mobile application during the initial stages.
With digitalization coming into the picture, Ola has captured the market with the launch of an app-based platform.
Here is a sneak peek at the simple yet impactful business strategy offered by Ola.
Commission from ride-hailing services
There are several types of ride-hailing services offered by Ola. Starting from cabs to autos, economical to luxury, intercity to intracity – Ola has come a long way.
The brand charges around 15-20% on the total trip of the trip.
- Ola Select
It is a subscription-based membership model of Ola that allows subscribers to opt for a membership. For the membership, there is a significant fee that is charged for a specific period of time. In return, the subscribers get advantages, such as no peak pricing, priority bookings, and free wifi.
2. Ola Corporate
Ola has launched its dedicated solution for enterprises – Ola Corporate, which serves the business section. The business trips, corporate travels, and more are covered with Ola Corporate.
3. In-cab advertisement
The several brochures, pamphlets, and sometimes live ads running on the cab – are common sources of earning for Ola. It is an ongoing money-making process and helps in bringing incoming revenue to your business.
4. Ola Prime Play
In order to improve the user experience, Ola introduced an in-cab infotainment – Ola play. This was a smart strategy adopted to compete against their rival Uber. They partnered with Sony and Microsoft to launch this. Ola charges commuters a slightly higher fee if they choose Prime Play.
5. Ola Wallet Money
It has also introduced an online wallet, just like the others introduced by the payment gateways such as PayTM, PhonePe, etc. The wallet is integrated with Ola’s payment services and contributes to the company’s revenue.
6. Ola Food Delivery
As part of its expansion strategy, Ola has partnered with online food delivery services such as Food Panda and is expected to join other food delivery services such as UberEats and Swiggy.
Key Segments of OLA
The app aggregator has shifted its vision and expanded it to meet further business use cases. Here is the list of key segments where OLA has been actively participating and bringing desired results in terms of growing revenue.
Ola Cabs: The primary segment of Ola is the cab model. The app-based ride-hailing business is making grounds with effective and impactful strategies for growth and more.
Seeing the potential in the digital space, Ola evolved into an app-based cab aggregator business. Through its platform, Ola bridged the gap between customers and cab drivers/operators. Ola’s platform makes it easier for customers to book a cab and offers a large customer base for driver-partners.
TaxiForSure was purchased by Ola in 2015 for more than $200 million. Because TaxiForSure collaborated with taxi drivers, unlike Ola, it was touted as an alluring purchase. The acquisition cleverly opened the door for Ola to these operators. Ola quickly achieved the success of Ola Micro as a result of this acquisition. Later, OLA closed the TaxiForSure operation, but it kept offering various vehicle types on its platform, including Micro, Mini, Prime and Lux, Kaali-Peeli, auto-rickshaws, and even bikes, at various pricing points.
Ola EV: This is going to be a very young vertical that has been in the news for all good reasons.
Ola teamed with the Indian government and Mahindra to create India’s first-ever multi-modal electric vehicle initiative in Nagpur, Maharashtra, in 2017. This marked the beginning of Ola Electric’s early efforts. Ola stated that it had invested INR 50 crores in the purchase of the vehicles and the installation of 50 charging stations spread among the city’s key sites.
In 2019, Ola Electric Mobility received funding from Softbank in the amount of $250 million, joining its parent firm Ola in the unicorn club.
Ola had purchased Etergo BV, an original equipment manufacturer of electric scooters with headquarters in Amsterdam, for an unknown sum in order to make progress in the electric mobility area. Following the acquisition, Ola has established a foothold for itself in both the domestic and international markets for high-end electric two-wheelers.
Food Delivery: Similar to the other delivery segments, Ola has entered the food vertical. The on-demand food delivery pattern is doing grounds for all the good reasons and is helping the brand to earn a significant amount of revenue.
With Ola Cafes, Ola began its venture into the food and delivery sectors in December 2015. After things started to go sour, Ola was forced to shut it down after a year. By spending $200 million to purchase Foodpanda India, Ola made a second attempt at success.
After some initial issues, Ola closed FoodPanda’s meal delivery service in 2019, although it kept running the company’s cloud kitchen operation. As they say, the third time is a charm, so Ola changed its business model once more and concentrated on being a food-first company rather than a meal delivery service.
The Great Khichdi Experiment, Bowlsome, That Pizza Place, and a few other private brands are examples of the tailored food options that the local cab-hailing company has built. Ola confirmed that despite Covid-19 limits, its top brand, “The Khichdi Experiment,” achieved 1 million orders in a year.
Financial Services: As an extended vertical, financial services are also offered by experts at Ola. It has helped OLA to explore a very different vertical in the market.
Ola introduced the mobile wallet Ola Money in 2015 for the use of short-term loans, mobile wallets, insurance, and utility bill payment. Ola has agreements with over 20 partners, including BookMyShow, Pizza Hut, and a few more, whose products can be bought with Ola money.
In order to establish a strong presence in the financial services industry, Ola separated its financial services operations from its parent company ANI Technologies in 2019 and established Ola Financial Services Pvt Ltd. OFS received new money in the amount of Rs. 200 crores in its initial funding round from Matrix Partners and Falcon Edge. Ola was forced to compete fiercely with the bigger market players, such as Amazon Pay, Google Pay, Phone Pe, and others, as a result of the shift.
By generating new insurance products and launching lending offerings for a two-wheeler, four-wheeler, and personal loans for the UK and ANZ markets, OFS is now preparing to extend the insurance business abroad.
Ola purchased payment startup Qarth in 2016 in order to continue offering its clients the greatest possible payment experience. The ride-hailing company hid the acquisition price.
As per reports, total consolidated income, including food-tech venture Ola foods and financial services – reached Rs.1,039.7 crore in FY21.
The next business category on Ola’s wish list is Ola Store. Ola will also enter the quick-commerce market with its Ola Store. In Bengaluru, it has started a prototype delivery program for products like personal care, groceries, and pet supplies.
The business aims to deliver products within 15 minutes. Quick-commerce can deliver modest amounts immediately, but standard e-commerce deliveries take one to two days. Dunzo and Swiggy Instamart are now playing in the section. The rapid commerce market in India will increase from $0.3 billion to $5 billion by 2024.
Ola’s Competiton in the Market
Here is the consolidated list of competitors who are giving strong competition to the brand.
DiDi Global: Founded in 2012, the company with its headquarters in Beijing is known to be one of the toughest competitors of Ola. The business is expanded in global areas with a total evaluation of 11b.
Careem: Another big competitor in the market is Careem. Since its launch in 2012, the company’s headquarter has been in Dubai. Due to its on-demand ride-hailing services and big growth in revenue earnings, the brand is getting popular in the market.
Grab: Next on the list is Grab. With a total evaluation of 14b so far, the Singapore-based ride-hailing giant is making news for all good reasons.
Uber: Uber is giving tight competition to Ola and has been one of the competitors for any app aggregator running the business model.
Top Challenges faced by Ola
Acquiring licenses: For intracity travel, the brand needs to enroll its vehicles and get a travel permit and other permissions on the go. This seems to be an exhaustive task for Ola as a brand.
Capturing audience interest: Due to high competition in the market, it becomes surprisingly tough for the brand to capture the attention and interest of the individuals.
Keeping up with high demand: The tech behind Ola is the biggest rescue to the business that has helped the brand overcome the contesting task of matching the demand with the supply algorithm.
Ola’s Marketing Strategy
1) Social Media Strategy
Let’s concentrate on Ola’s social media approach for its marketing plan to explain how it interacts with customers on the web.
Facebook was where Ola had initially begun to establish its internet presence (Oops, we meant Meta!). Sales increased by as much as 60%, thanks to the promotion #ChaloNiklo.
From that point on, Ola created a number of popular hashtags, such as #FarakPadtahai, to promote carpooling and raise awareness of carbon impact. You may have also seen the hashtag #HeroesofOla, which celebrated the bravery and kindness of Ola driver-partners.
On April Fools’ Day, Ola joined other companies in playing the best pranks. Ola began a false advertising campaign in which it claimed to be developing the Ola Air Pro flying automobile. The company claimed that the flying automobile would be so light that it could be lifted with one hand, so finding the ideal parking space and bad urban planning wouldn’t be a problem!
Ola and TVF have collaborated on the renowned web series Permanent Roommates.
A sizable fan base exists for the Indian web series platform The Viral Fever (TVF). Both businesses have benefited from this relationship because they can now draw new customers from each other’s existing customer base.
3) Product Differentiation
Ola offers a variety of mobility solutions to meet the varying needs of its customers rather than being restricted to a single product. What would a customer choose if they wanted to travel to several sites within the same city?
Customers can book rides using Ola for several places within a city. The consumer can also book an Ola Outstation ride, which allows them to take a taxi to another city, in addition to this Ola offer.
In this approach, Ola provides consumers with a variety of mobility options such as City rides, rentals, and outstation rides.
4) Drip Marketing
Creating emails and SMSs that get the most reactions from customers is crucial. Ola uses a drip marketing technique that automates the sending of a series of emails based on the activities and timings of its customers.
Ola will send a highly personalized automated email to a consumer who installs the app, signs up, and then chooses not to schedule a ride. This email will prompt the customer to take action. A more advanced kind of SMS and email marketing called drip marketing encourages customers to make purchases.
Every time Ola sends an automated email, drip marketing ensures that a customer responds. It also involves sharing offers, rewards, updates, and more such information that is luring for the customers to use OLA again.
Ola has successfully ventured into its existence and presence in the market. Despite tough competition, Ola has managed to win the hearts of its potential customers. One of the key reasons for growth could be the multi-dimensional approach to tapping different verticals based on the demand. It has helped the brand to grow, sustain and expand irrespective of tough competition, lockdown, and other external factors. And is determined to grow in the future too. Although Ola’s business model is full of ups and downs, it has still managed to stay above the ground.
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