Letgo is presently a very popular mobile app which enables the users to purchase & sell used items within their vicinity or local area. There are absolutely no limits to the ways you can sell on the Letgo app. However, there are a few things which are prohibited to be sold and purchased in this app. While its clear how the users make money on this app, it’s often not clear how does LetGo makes money from this business?
The users of this app have the liberty of listing items anywhere from electronics and clothes to cars and furniture. You can also post apartments or houses available for sale or rent.
The process by which Letgo works
- The sellers enlist their items for sale in the Letgo app
- A buyer in the nearby area or vicinity contacts the seller
- The seller & buyer agree mutually on a meeting place & payment method
Growth of Letgo till the present time
Letgo as a Smartphone app has witnessed impressive growth since it was launched in the year 2015. As per the data and info in Letgo’s website, this app now has achieved 100 million downloads & 400 million listings which undisputedly makes it the largest app for local purchasing & selling of used items in the United States.
Also, the surveys and estimates reveal that 20 million users actively use this mobile app on a monthly basis. The nearest competitor of this app is OfferUp which achieved 80 million downloads.
Also, an estimated volume of 500,000 items are listed on Letgo daily and approximately 100,000 items are sold every day. This app has progressed immensely within a very short duration of time. In 2018, the net worth of the company was valued at approximately $1.5 billion. This staggering Letgo net worth is indeed an envious figure for its competitors.
How does Letgo make money?
Unlike several other apps of this nature, Letgo does not take a percentage of the users’ sales. For example, eBay is one of Letgo’s major competitors & charges 10% of the sales value of the sold item for most of the categories and also 12% in categories like books, movies and music.
Mercari is another competitor of Letgo. This app charges a 10% fee on any item which is sold through the app. OfferUp is another competitor which charges a 7.9% fee of the sales value on any item sold through the app. Mercari, eBay & OfferUp – all of these apps charge a payment processing fee extra as a commission fee on each item sold.
So, the big question is how does Letgo make money without charging anything to the sellers for the sales that they make or any kind of processing charges?
Well, the Letgo app uses a couple of revenue models in order to generate a profit. Apart from raising funds from the investors, they have a fool-proof business model.
Here is a breakdown of the revenue streams of Letgo business model.
1. Freemium model
- Completely free to download, purchase and sell products/items
- Offers in-app purchases which include the option to feature the listings as well as boost visibility
The primary revenue model of Letgo business structure is the freemium model which means that the app allows the users to sign up in the app for free and list the products for free as well. This eventually helped the app to build a massively large user base quickly.
2. In-App Purchases
Instead of earning revenue from app downloads or sales, Letgo extends several offers of in-app purchases. These are optional features that the users can optionally purchase to draw attention or to highlight their listings. Opting for these features maximize the chances of selling their items quicker and effectively. For example, the users who pay to ‘feature’ a listing will enjoy a premium advantage of their posts appearing at the top of users’ feeds & there would be a special “Featured” ribbon on it to highlight the ad. There would be a special button added which allows the buyers to easily get in touch with the sellers in just a single tap. The sellers have the option to feature their listing for time periods like 24 hours, 72 hours or a week.
So, this is obvious that the app’s major functionality – selling and buying are free but there are several other opportunities or special features which will enhance their overall performance on the app. This is very obvious that how to make money in Letgo by selling old items but you can make the process quicker and more effective by using the paid special features.
This business model is a wise way to strategically acquire wide usage of the app and increase the overall brand awareness in the initial stages of the business. There are maximum chances of the consumers trying the app if offered free.
Needless to say, Letgo attracts users with a wide variety of income levels and various spending habits. The in-app purchases in Letgo range from just $0.99 and go up to $44.99. There is also a wide array of options for the users in this app which generates maximized revenue for all its shareholders.
3. Subscription model
- Monthly subscription charges for Super Boost monthly subscription automatically features the listings daily.
- Letgo PRO is a monthly subscription that allows dealers of the vehicles and receive certain advanced features.
Apart from the one-time purchases within the Letgo app, Letgo also generates a considerable chunk of revenue by offering its large user base the option of paying a monthly subscription fee for the premium features.
4. Investor funding
Last but not least, Letgo helps fund its operations by raising huge capital from the investors.
- Letgo raised $100 million venture capital funding in its very first year of inception.
- The company again raised $100 million in the year 2016 after it merged with Wallapop which was another popular classified app for the Smartphone.
- After receiving five rounds of funding, the app has raised a total of $975 million as investors’ capital. Out of this, $500 million from Naspers in August 2018.
After going through this, I am sure that it would be very easy for you to understand Letgo’s overall business model and how does Letgo make money.
