OLA’s Business Model – How Exactly Does OLA Work?

Ola Business Model - Featured Image

Introduction

It was in December of 2010 when a 25-year-old Bhavish Agarwal started a simple ridesharing company with a vision to change the way India commuted. Nine years later, OLA is now a common household name, with operations in more than 169 cities throughout the globe serving around 200 million customers. And things are just getting started.

Today, almost every entrepreneur in the world tries to copy OLA’s business model, and rightly so. The ride-sharing company has become synonymous with Indians and needs no formal introduction anymore. So it’s very likely that aspiring entrepreneurs will want to know how OLA exactly works, what its revenue generation strategy is, and most importantly, is it profitable? So in this article, we’re going to take a look at everything you need to know about OLA, its business model, and much more. Let’s get started.

Where is OLA now?

Ola Cabs is currently operating in more than 169 cities across India, Australia, New Zealand and the United Kingdom, and generates around $300 million (USD) in revenue. We’ll see if that’s making them any money in just a bit, but it is still commendable how OLA has been able to capture so much of the market given how big its main competitor and a rival company, Uber, is. Before we get into the finer details and begin crunching numbers, let’s first take a look at the various revenue lines of OLA (yes, there is more than one).

OLA’s Revenue Sources

One of OLA’s distinguishable features is how Bhavish Agarwal has meticulously planned the overall business structure of the company – to bring in more revenue thereby cutting their operating losses to some degree. OLA first started as a humble cab booking-via-telephone service, but then quickly drifted towards a more profitable and easily manageable all-in-one app for its customers. It also has a separate app for fleet managers to track their vehicles.

Of course, OLA makes commission-based revenue from all of these, but there are more sources of revenue for the Indian unicorn. The following is a list of all of OLA’s confirmed sources of revenue, although some may have been discontinued in certain parts of the country.

  • Cab booking through telecalling (no longer operational)
  • Fleet management
  • Commission from every trip
  • OLA wallet commissions
  • Peak-time charges
  • Advertising inside cabs
  • Fleet leasing
  • Corporate tie-ups
  • OLA Cafe (discontinued in some parts)
  • OLA Grocery Delivery (discontinued in some parts)

Now that we know the various cash inflow sources for OLA, let’s dig deeper and find out how much OLA earns from these sources.

Ola’s Business Model

Ride Commissions

OLA’s major share of revenue comes from its commissions – be they trip fares or in-cab advertising. It is estimated that new drivers are charged a commission of 7.5 % per trip, but this just lasts as an introductory promotion. After this introductory period is over, drivers are charged commission rates that vary from country to country.

In India, it has been estimated to be around 20%, while in the UK, it’s about 10-15%(depending on the kind of booking, which is either a metered one or a private vehicle). The charges are somewhat similar in New Zealand and Australia too, ranging anywhere between 15 and 22.5%

OLA Money

Another important source of revenue for OLA is its wallet feature – OLA Money – which lets you store cash in virtual wallets similar to those of PayTM and PhonePay. Money from this wallet can be used to pay for rides and other OLA services. Although it isn’t certain exactly how much money OLA can scrape from this, it certainly does bring in revenue for the company.

In-Cab Advertising

In most premium cab rides, you get an infotainment system and free WiFi to sit back and enjoy your short trip. This is a genius move by services like OLA, because they not only make sure their customers are satisfied but also get the opportunity to capitalise on this. Through these infotainment systems, OLA runs ads and it gets revenue from companies that want their ads displayed here.

OLA Credit

OLA recently came up with its own credit system, named the OLA Credit Card. This card is a result of OLA’s successful collaboration with the State Bank of India, and offers great offers to its users. With instant approval and offers like cashbacks on all of your card purchases, OLA is pretty positive of bringing in good money from this venture.

OLA Money

As discussed before, OLA Money is the company’s virtual wallet, and operates just the same way you use your PayTM or PhonePe wallets. The company believes digital transactions to be a major driver in the coming years, and is banking on making good profits in the near future from this source.

Cab Leasing

OLA also gives drivers the option of leasing its vehicles and in turn bring in some extra money apart from the commissions from cab rides. This is a really good strategy because it allows OLA to have more control over the cabs, instead of just depending on fleet managers.

OLA Prime Play

Prime Play is the service that we mentioned earlier, which OLA uses to display promotions. Essentially, it is OLA’s premium ride, and has currently collaborations with Microsoft, Apple Music and many other brands. It isn’t surprising that Prime Play is also more expensive than the other riding options.

So these are OLAs major sources of revenue. The company also makes revenue from other sources that we mentioned earlier in this article, but they are not OLA’s major revenue contributors. Nevertheless, all of these sources have brought in a lot of money for OLA, so much so that it’s valuation at the end of 2019 was roughly $5.7 billion(USD). But there’s still one question that you just have to ask.

Is OLA Profiting From This?

To put it simply, no, Ola Cabs is not a profitable company. At least not yet. OLA has raised a lot of Venture Capital and so far it has had just enough revenue coming in to negate its operational costs. But things are certainly looking more positive as the company has started making money from most of its rides since 2018[1].

Closing Thoughts

In November of 2019, OLA stated that it would reach out to the public for an IPO by 2022, but the sudden rise of the COVID-19 pandemic has apparently pushed their plans a bit. In May 2020, OLA was reported to lay off at least 1400 employees to reduce its losses, in the hope to get back to full speed once the pandemic is over[2]. Nevertheless, OLA has been a standing example for every company out there on how to scale your business, manage expectations, and turn profits over the long run.

Shivaharsh Murugan
Shivaharsh Murugan

A company secretary and lawyer-turned SEO geek and also someone who thinks he is deeply passionate about startups.

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