case study 1

SEE ATTACHMENT 

INSTRUCTIONS:For this Week Case Study, you will review the OfferUp case at the end of Chapter 17

(page 501-503). Upon thorough review of the case, you will then answer the (5) questions for discussion

regarding the case. It is not sufficient to state your opinions alone; you must be able to back up your

responses by applying marketing concepts from the text with the case data that supports your findings.

DO NOT write this as a Q&A. It is an essay.

Review the announcement “How to get an A on the Case Study”

Review key terms from Chapter 17. Use them in your paper.

Through writing this case study you will be required to demonstrate a knowledge of how to integrate

marketing concepts with the case data, how to conduct research, and how to properly cite sources using

APA formatting guidelines.

Be as thorough as possible when writing your responses, and remember, this is an academic assignment,

so no “text-talk,” no conversational tone, and ABOVE ALL OTHER THINGS… don’t plagiarize!! Lastly,

spell-check and proofread your work! Failure to follow these steps will negatively impact your grade.

For this course, you will submit the graded activity using Turnitin.

Company Case OfferUp: A Mobile Solution for the Mobile Era

When people think of buying and selling things online locally, most think automatically of

Craigslist, the classified ad marketplace that has dominated that business for the past two

decades. But as the rest of the world has gone mobile, Craigslist has not. In fact, the familiar but

cluttered collection of blue hyperlinks has changed very little over the years. Some critics

suggest that Craigslist has taken its monopoly for granted. One industry observer refers to

Craigslist as “the cockroach of the internet age—an ugly but effective e-commerce platform

that. . .emerged unscathed from technology shifts that crippled mightier contemporaries like

Netscape and Yahoo.”

In the new landscape of digital disruption, one thing seems certain: What dominates today

could be under threat tomorrow. That tomorrow may already be here for Craigslist as

numerous, more user-friendly competitors have emerged to challenge the classified ad champ.

Enter OfferUp—a relatively new mobile app for buying and selling items that is taking the digital

marketplace by storm. OfferUp is not only challenging Craigslist as the go-to platform by which

individuals and businesses sell goods and services in local markets, it’s also starting to challenge

the likes of eBay and even Amazon by flexing its muscles beyond local market boundaries.

Unexpectedly, OfferUp now rivals the most popular social media apps in terms of time spent by

users.

About a decade ago, as the mobile device revolution began to explode, Seattle resident Nick

Huzar was frustrated as he tried to unload unwanted household items in preparation for his

soon-to-be-born daughter’s nursery. He didn’t have time to post all these items on Craigslist,

which required multiple steps that pretty much required a desktop or laptop to complete.

Instead, he went to Goodwill, where he always found a line to drop donations. With a

smartphone in his hand, he recognized the potential for an online marketplace that made

posting, monitoring, and browsing items for sale in a local market as simple as social media

interactions. That led to a partnership with friend Arean van Veelen and the ultimate launch of

OfferUp in 2011.

A Different Kind of Marketplace

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The main thing that differentiates OfferUp from Craigslist and other traditional online

marketplace platforms is that it’s designed exclusively for mobile channels. For sellers, that

means that posting an item is as simple as posting a photo to Facebook—point, shoot, add a

description, and click. Each local ad defaults to a 30-mile radius, and standard ads are free.

OfferUp’s goal is to have the process take no more than 30 seconds. For sellers, it’s painless

with little risk.

For shoppers, the interface is also very appealing, with a Pinterest-like vibe that is primarily

visual. The bottomless scroll entices users, luring them in to a virtual treasure hunt. People

typically access the OfferUp app looking for one thing but discover a trove of unexpected

goodies. This element of surprise has users spending an average of 25 minutes a day on

OfferUp, the same as Snapchat and Instagram. “It’s not like Amazon where it’s very intent-

based—where you know what you want,” says Huzar. “OfferUp is more discovery-based. You

go in there and you kind of look around and you find that thing you didn’t think you wanted

that you end up buying.”

Beyond the Pinterest-like feel, OfferUp also boasts the strong of community that is normally

reserved for dedicated social media sites. Core to its mission, OfferUp aims to “connect people

and empower them to live locally.” The foundation of this community is trust and reputation.

Take the user profile and rating system for example. Users are not random, anonymous users

but community members. A user can create a profile and upload a photo. What’s more, users

can take it a step further and apply for TruYou verification, submitting a mobile phone number,

a picture, and a state-issued ID. Once verified, a Trubadge is displayed as part of the user’s

profile.

Beyond TruYou, a user’s status can be enhanced through various achievements—positive

reviews, average response time, and trusted connections, to name a few. Users can also

personalize their background images and profile descriptions, just as they can on social media

sites. And when it comes to communicating, OfferUp includes a chat-like message function that

lets users communicate with each other without revealing personal contact information. If that

isn’t enough, OfferUp facilitates Community MeetUp Spots for users to make their exchanges.

Partnering with local businesses and police forces, OfferUp’s more than 1,900 Community

MeetUp Spots provide well-lit, video-monitored places that are safe for buyers and sellers to

make exchanges—a stark contrast to Craigslist’s traditional and laissez-faire approach.

All this does more than just help people feel connected or even develop social networks within

OfferUp. It eliminates some of Craiglist’s biggest security issues. For starters, because phone

numbers and email addresses are typically shared on Craigslist, users are commonly targeted by

scam artists. What’s more, meeting someone in person for a transaction has led to robberies,

assaults, and even murders. That’s right. Dozens of people have suffered death at the hands of

the person they were meeting to conduct a Craigslist transaction.

During its first five years, OfferUp focused on building its user base while putting little effort

into generating revenue, a typical strategy for online marketplaces. In fact, with 18 million

downloads and fifth-year transactions totaling more than $14 billion, OfferUp hadn’t made a

dime for itself. With very little marketing expense and a growth rate that exceeded Craigslist

and eBay in their early years, OfferUp was able to raise money through investors—first in the

tens of millions of dollars and then in the hundreds of millions.

From Mobile App to Mobile Marketer

But OfferUp eventually began addressing the issue of how to make money off all those users

and transactions. Like Craigslist, OfferUp developed naturally as a platform for consumer-to-

consumer transactions as well as business-to-consumer and even business-to-business

transactions. Although there were various options for starting a revenue stream, OfferUp first

focused on businesses. For starters, it designed two optional premium features to facilitate

targeting customers—“Bump” and “Feature.” With Bump, a seller can put an item at the top of

browsing and search results for new items. Feature, on the other hand, allows sellers to

promote items and makes them appear in special promotional spots within the top 50 search,

browse, and category results. Both of these features can be purchased for runs of 3, 7, or 14

days. While these features appeal primarily to business sellers, they can be selected by anyone.

Not one to rest on its momentum, OfferUp made two big moves to increase its value to

national brands and to increase the company’s income base. First, it introduced paid

advertising. Marketers can now target specific users based on their network, browsing, and

posting activities. So when a user searches for a home theater system among the local offerings

by individuals and businesses, for example, that shopper will likely see ads for relevant offerings

by online retailers such as eBay, Amazon, and Walmart as well as by marketers such as Sony or

Samsung that sell their products directly.

To complement paid advertising, OfferUp expanded its marketplace beyond local boundaries by

adding a shipping option. When an item is sold through this new nationwide shipping feature,

the seller is charged a 7.9 percent fee—lower than eBay or Amazon. The buyer pays between

$5 and $20 for shipping, depending on the size of the product. This new transaction fee offers

far more value to companies and brands of all sizes and locations while also increasing the

utility of the platform for shoppers. For OfferUp, advertising and transaction fees represent

substantial new revenue streams over the paid tools for promoting items for sale.

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OfferUp’s strategies appear to be working. It now boasts over 40 million downloads. And while

Craigslist still grabs a huge audience, its traffic has been on the decline. That isn’t entirely due

to OfferUp. There are at least a dozen other viable rivals, not the least of which is LetGo—the

similar mobile marketplace that is doing just about as much business as OfferUp in the United

States. And while OfferUp plans to eventually take its app international, LetGo is already doing

business in multiple countries. LetGo has also raised nearly double the amount of venture

capital as OfferUp and is spending aggressively on advertising, whereas OfferUp has relied more

on word-of-mouth. In addition to LetGo and other dedicated marketplace apps, Facebook

Marketplace has rapidly increased its presence as an avenue for local buying and selling. And

based on its size, Facebook needs only to engage a fraction of its user base to make a large dent

in the market.

Although Huzar recognizes the competition posed by LetGo, Facebook, Craigslist, and others, he

has a different perspective than most. He doesn’t view the business of online marketplaces—

whether local, national, or global—as a zero-sum game. In his view, OfferUp doesn’t need to

take business from Craigslist in order to thrive. Instead, along with LetGo and other entrants,

OfferUp needs to attract a new generation of mobile device users that never even considered

Craigslist as a shopping or selling platform.

Huzar may be right. It’s nearly impossible to calculate the sales volume that flows through

Craigslist—the company leaves all money-changing to the buyers and sellers. But OfferUp and

LetGo combined last year for an estimated $40 billion worth of goods and services sales in the

United States. Compare that to eBay’s total global volume of $95 billion or even Amazon’s

North American e-commerce sales of approximately $125 billion. The new entrants are having a

substantial impact.

Ultimately, although OfferUp faces some stiff challenges ahead, its future looks bright. With its

focus on an easy-to-use interface made for today’s mobile users as well as a growing and safe

community, OfferUp will continue disrupt the world of digital marketplaces. Huzar takes the

challenges seriously but tries not to let it bother him too much. “I don’t lose much sleep at

night over it,” referring to the competition. Indeed, Huzar is counting on OfferUp being around

in a decade when it’s time to buy his daughter her first car.

Questions for Discussion

17-16. As a mobile marketplace, how does OfferUp provide value to shoppers? Sellers?

17-17. Analyze OfferUp’s business model relative to the different forms of digital and online

marketing covered in this chapter.

17-18. Describe the value of OfferUp to national brands and retailers as a channel for mobile

marketing. Does OfferUp also pose a threat to these companies?

17-19. Compare the competitive relationship between OfferUp and LetGo with that of Uber and

Lyft. Based on this comparison, what does the future hold for OfferUp?

17-20. Do you agree with Nick Huzar that OfferUp can succeed without taking business away

from Craigslist? Explain.