OLA Cabs Business Model [Detailed Guide of OLA’s Business Plan]
Overview of OLA’s business model:
- Commissions on trips
- OLA credit card & OLA money
- OLA Prime Play
- OLA Cabs Car Variant
- In-cab advertisements
- Fleet Leasing
- Corporate Tie-ups
- Peak Pricing
How does OLA work?
When OLA Cabs first launched, its business model was that of a fleet based service. This means that OLA owned the fleet of cabs and customers would call their call centre to book OLA cabs as and when required. Later, their business model changed to that of a cab aggregation service. According to this business model of OLA, customers could book cabs for their journeys via the Ola app. Once the customer opens the app, it will detect the GPS location of the customer and provide a list of cab categories available to the customer in that particular area. The customer will then have to choose the cab category, book the cab and enter their destination. At the same time, the request is sent to the driver of the chosen cab and if he chooses to accept the ride, it will send a confirmation message to the customer with the driver’s details like phone number, cab number, current live location & estimated time to arrival.
Ola’s business model aims to connect customers seeking cabs for on-demand transportation with cab drivers who are willing to offer this service. It thus helps connect drivers and commuters via a mobile application wherein all interactions then take place between customer and driver. Ola services are available in India, Australia, New Zealand and the UK.
Detailed Analysis of OLA’s Business Plan
The following are the revenue streams for OLA’s business model:
1. Commissions on trips
The major chunk of OLA’s business plan includes charging customers that book cabs via their app a commission fee for the trips undertaken based on several factors such as:
- Base fare: A flat rate charged to customers using OLA
- Distance per km fare: A fee is charged on distance travelled per km by cab.
- Ride time fare: The total time the cab ride takes to complete its destination. Customers are charged for the time between pick up and drop off points.
- Wait time fare: Customers are charged waiting charges if the driver is made to wait.
- Fare for advanced booking: A fee that customers pay if they make an advance booking on a cab to use at a later time.
- Convenience fee: Applied to those customers that use the in-cab entertainment service.
- Cancellation fee: Charged if customers cancel their rides after booking.
- Service tax: A separate tax fee is levied on the entire trip.
- Toll and parking fee: Fees paid by customers.
2. OLA Credit Card and OLA money
OLA offers its customers OLA credit cards in association with banks and provides their customers with many benefits and rewards if they use the same. OLA money is a virtual wallet service provided to customers through which payments can be made to vendors and can also be used to pay OLA cabs for journeys taken. This form of affiliate marketing also is one of the major sources of revenues in Ola’s business model.
3. OLA Prime Play
OLA has partnered with companies like Apple Music, Microsoft, Sony etc. and provides its customers with in-cab entertainment for a cost of Rs.20/-
4. Car Variants
OLA offers cars in various categories (Mini, Sedan, SUV, Prime etc.) to customers. Customers pay rates depending on car category type, as well as waiting charges, driver charges and per kilometre charges. The more premium the car variant, the higher the price for booking the car.
5. In Cab-advertisements
Commuters may be given advertisements in the form of brochures, pamphlets, televised advertisements etc. for various products and services. OLA charges companies who advertise on OLA Cabs. Advertisements could also be apart of the in-cab entertainments facility available in select car variants, and as with the case for any business, adverts are a major source of revenue in their business model.
6. Corporate Tie Ups
OLA meets with heads of many companies to offer up tie-ups with OLA cabs. This ensures that they promote their cabs and make deals with the companies to use their cabs exclusively for business travel. OLA offers them reduced rates on their cabs which in turn leads to higher demand and generates more sales.
7. Fleet leasing program
OLA buys cars and leases them out to drivers to ensure loyalty to their brand and reduce competition from other companies. The drivers of this program pay a fixed daily fee to OLA to run the vehicle, while the trip revenue fee goes to the driver or they can pay a mix of fixed fee and trip based commissions to OLA.
8. Peak pricing
OLA raises the charges for its cabs during peak times or times of high demand. Customers have to pay more based on the car category chosen, the rate per km, distance traveled, fixed rate, waiting time etc. Peak pricing charges vary depending on geographical location.
OLA Cabs Snippets
- Headquarters & Year Launched: Bangalore, 2010
- Founders: Bhavish Aggarwal & Ankit Bhati
- Revenue: 2,543 crores; Losses: 2,5924 crores
- OLA Cabs business model is a two-sided marketplace, looking to acquire drivers as well as customers. Their primary customer? Believe it or not, are cab drivers. Else, they would not be able to serve the demand.
OLA Cabs Funding History
- Series C– $40 million led by Steadview Capital and Sequoia Capital
- Series D– $210 million led by SoftBank Group, Tiger Global and Matrix Partners India
- Series E– $403 million led DST Global, GIC and Falcon Edge Capital
- Series F– $500 million led by Baillie Gifford, Falcon Edge Capital, Tiger Global, SoftBank Group and DST Global
- Series G– $1.36 billion led by Tencents Holdings and SoftBank Group
- Series H– $1.36 billion led by Tencents Holdings and SoftBank Group
- Series I– $50 million led by Salining Capital
- Series J– $470 million led by Sachin Bansal, Hyundai Motor Co.& Kia Motors Corp, Steadview Capital, Deshe Holdings, DIG Investment, ARK Ola Pre IPO Private Investment Trust