OLA Model Explained

Ola Cabs is an Indian ride-hailing company founded in 2010 by Bhavish Aggarwal and Ankit Bhati. The company has its headquarters in Bengaluru and is India’s leading cab service provider.

Besides the ride-sharing business, the company also operates in the food delivery, electric scooter, and cloud kitchen businesses.

Being the biggest ride-hailing company in India isn’t easy. Not only does Ola have to fend off competition from Uber, but it also has to deal with the myriad of challenges that come with operating in a country with over 1.3 billion people. These include things like bad roads, a lack of infrastructure, and language barriers.

But despite all these challenges, Ola’s managed to grow at an astounding rate. The company serves over 250 cities across India and has over 1.5 million drivers on its platform.

Financially, Ola isn’t at its best currently. The company’s ride-hailing business reported 9.8 billion Indian Rupees in FY 2021, a 63% decrease from the 26.63 billion Indian Rupees it reported in FY 2020.

The Covid-19 pandemic was one of the reasons for this sharp decline. But besides that, the company was burning through cash even before the pandemic hit. Ola’s business model is facing a setback, but it’s not dead yet. 

This article takes an in-depth look at Ola’s business model. We’ll discuss how the company makes money, its key revenue streams, and whether it is a sustainable business.

Bottom Line Up Front

Ola’s business model is the reason the company is the largest ride-hailing service in India. It enables the company to make money while providing affordable rides to millions of people. While the pandemic and other challenges have hurt the company’s business, Ola is still growing and expanding into new markets.

Understanding Ola’s Business Strategy

Ola’s business strategy was to grow as quickly as possible and become the dominant player in the Indian ride-hailing market.

That came to pass, and Ola did achieve a leadership position in the market. Several venture capitalists like Softbank Group have stakes in the company and are vouching for its long-term potential. 

In 2015 Ola Cabs acquired TaxiForSure, a smaller rival in the ride-hailing space, for $150 million. Later that year, it made another acquisition, this time of Geotagg, a trip-planning and mapping startup, for an undisclosed amount.

In 2017 it acquired FoodPanda India from its German parent company, DeliveryHero, for $31.7 million and pumped in $200 million of its own to grow the food delivery business. The company has had eight acquisitions and raised $5 billion per Crunchbase.

In 2018, Ola made its first international foray by launching its services in Australia. Later it launched in New Zealand, and in 2019 it entered the UK market.

Ola’s global expansion was an attempt to replicate its domestic success in other countries. While its operations in other countries are still in the early stages, Ola is slowly gaining market share.

Ola is running a four-phased business strategy. The first was the cash drain, where the company was spending money to acquire customers and subsidize rides to gain market share. Ola gave customers heavy discounts and incentives to drivers to get them on its platform.

The second phase was trust building, where the company focused on improving its service quality to build trust with customers and drivers. Drivers left their jobs to join Ola and customers were willing to pay more for better service. 

The third phase was dependency creation, where Ola created a network of drivers and customers depending on the platform.

Drivers became financially dependent on Ola, and customers became habituated to the convenience of the service. The fourth phase was control and consolidation, where Ola leveraged its position to decrease incentives and discounts and raise prices.

Ola’s Business Model Canvas

The following section is a visual representation of Ola’s business model. It highlights the building blocks of the company’s business model and how they relate to each other.

Ola’s Value Proposition

The first building block of Ola’s business model is its value proposition. Below we’ve outlined the main value proposition Ola offers its customers and drivers.

To Customers:

• Affordable rides
• Quality customer support
• Booking feature
• High services
• Convenient
• In-cab entertainment with Ola Play

To drivers

• Daily payments 
• Flexibility in working hours
• Hands-on training
• Drivers can manage a fleet of cars 
• 24/7 support 

Channels

Ola uses a combination of online and offline channels to reach its customers. Online channels include the Ola app, website, and call center. Offline channels include on-street marketing, TV ads, and radio ads. The mobile app is the primary channel through which customers book rides and drivers receive trip requests. 

Customer Segments

Ola has two customer segments: riders and drivers. 

Riders are individuals who use the Ola app to book a ride. They can either use the City Taxi service, a point-to-point service within a city, or the Outstation service, a round trip between two cities. 

We also have rentals and Ola corporate for businesses. Rental riders can book a car by the hour for local trips within a city. Ola corporate riders are businesses that use Ola’s ride-sharing service for their employees. 

Drivers are individuals who use the Ola app to find riders. They can either drive their cars or rent a car from Ola. Drivers can choose to work full-time or part-time. Ola also has a Driver Partner program in which interested individuals can apply to become Ola drivers. 

Customer Relationships

Ola relates to its customers in different ways depending on the customer segment. Ola offers a self-service platform where riders can book a ride with a few clicks.

Riders can also contact Ola’s customer support team if they need help. Ola also offers promotions and discounts to riders to encourage them to use the service. 

For drivers, Ola has a more hands-on approach. Ola offers onboarding and training to new drivers. Ola also has a driver support team that drivers can contact if they need help. In addition, Ola offers financial incentives and rewards to drivers to encourage them to use the service. 

Key Resources of Ola

Ola’s key resources are its technology platform, cars, and drivers. The technology platform is Ola’s main product to its customers and drivers. Ola’s technology platform includes the Ola app, website, and call center. 

Other key resources include its brand reputation, shareholders, and investors. Ola’s brand reputation helps it attract customers and drivers.

Ola’s shareholders and investors provide Ola’s capital to grow its business. Major investors include SoftBank Group, Matrix Partners India, Tiger Global Management, and DST Global.

Key Activities of Ola

Below are the major activities of Ola: 

• Developing and maintaining the Ola technology platform: Ola must ensure that its technology platform is always up-to-date and running smoothly. 
• Building relationships with customers and drivers: Ola ensures its customers are always happy with the service. Ola also builds relationships with drivers to ensure they are satisfied with the service. 
• Marketing and promotions: Ola engages in marketing and promotional activities to attract new customers and drivers. The company offers incentives and discounts to customers and drivers to encourage them to use the service.
• Manage finances: Ola must manage its finances carefully to ensure it can grow its business. An important part of this is to raise capital from investors.

Key Ola Partners

An important part of Ola’s business model is its partnerships. We can categorize Ola partners into three categories: driver partners, operational partners, and extended partners. Operational partners, like GPS and data analytics providers, are the enablers of Ola’s technology platform. 

Extended partners are businesses that Ola partners with to provide additional services to its customers. These partners include event organizers, auto insurance, and automotive maintenance providers. 

Ola’s Cost Structure

Ola spends a significant amount of its resources on developing and maintaining its technology platform. The company also spends money on marketing and promotions to attract new customers and drivers. Operational costs include driver incentives, support, and training. Ola also incurs costs for insurance, licensing, and permits.

Revenue Streams of Ola

Trip commissions are the primary source of revenue for Ola. The company takes a commission from every ride booked through its platform. Ola also earns revenue from Ola money, in-cab promotions, Ola credit cards, a Cab leasing program, corporate accounts, food delivery services, and Ola prime play.

Ola’s Revenue Model: How does Ola Make Money?

This section takes an in-depth look at how Ola makes money. 

Trip Commission

Ola’s primary source of revenue is from trip commissions. The company takes a commission from every ride booked through its platform.

Several factors affect the commission rate, such as the type of vehicle, city, location, wait time, peak pricing, access fee, convenience fee, and service taxes. In India, the commission is approximately 20%, 10% in the UK, 18% in New Zealand, and 22.5% in Australia. 

Ola Money

Ola is also a provider of mobile wallets or “Ola Money.” The Ola Wallet is publicly available in India and allows users to store money, which can be used to pay for Ola rides. Ola Money offers other features, such as mobile recharges, utility bills, and shopping payments.

In-cab Promotions

Ola also earns revenue from in-cab promotions. The company has tie-ups with brands, such as Coca-Cola, Amazon, and Nokia, to promote their products during the ride. Ola makes money by charging these brands for promotion. Ola also runs live ads and charges a commission for every click. 

Ola Credit Cards

In partnership with SBI and Visa, Ola launched the “Ola Money SBI Card” in India. The credit card offers cashback and discounts on Ola rides. Ola earns revenue from the fees associated with the credit card. 

Car the Leasing program

Ola started a car leasing program in India called “Ola Fleet Technologies.” The program leases cars to drivers monthly.

Ola charges a fixed fee of 700 to 1150 Indian Rupees per day for the lease. Ola also charges a non-refundable fee of 4000 Indian Rupees and a refundable charge of 21,000 to 31,000 Indian Rupees as a security deposit. 

Corporate Accounts

Ola also has a corporate account product, which businesses can use to book rides for their employees. The company makes deals with organizations where they convince corporate managers and employees to use Ola for their official travel. Ola charges a discounted rate for these rides.

Food Delivery Services

When Ola acquired Foodpanda in December 2017, the company entered the online food delivery business. The company is taking on UberEats, Swiggy, and Zomato in India’s online food delivery market. Ola makes money by paying restaurants for every order made through its platform. 

Ola Prime Play

Through Ola’s in-cab entertainment product, “Ola Prime Play,” riders can watch movies and TV shows during their ride. Ola has tie-ups with content providers, such as Apple Music, Eros Now, and Hungama. Ola charges 20 Indian Rupees per ride for this service. 

Ola Cabs Marketing Strategy

Ola’s marketing strategy focuses on creating a strong brand image, increasing its customer base, and expanding its geographical reach. The company uses several marketing strategies to achieve these objectives. Below is an overview of Ola’s marketing mix: 

Product Differentiation

Ola differentiates itself from its competitors by offering its customers a wide range of vehicle options. The company provides not only cabs but also electric scooters. Ola also offers rentals and outstation services. Given Ola’s wide range of services, the company has something for everyone. 

Aggressive Pricing

Ola is well-known for its aggressive pricing strategy. The company often runs promotional campaigns to attract customers, such as discounts and cashback. This pricing strategy has helped Ola gain a large customer base. 

Advertising and Promotion

Ola spends a significant amount on advertising and promotion. The company’s advertising campaigns are designed to create a strong brand image, whereas its promotional campaigns focus on increasing its customer base. 

Drip Marketing

Ola uses drip marketing to promote its brand and services. Under this strategy, the company regularly sends promotional messages to its target audience.

These messages are usually in the form of emails or text messages. Besides promoting its brand, drip marketing is also used to engage customers and increase loyalty. 

Social Media Marketing 

Ola uses social media platforms like Facebook and Twitter to interact with its customers. The company also uses these platforms to run promotional campaigns. Ola also uses these platforms to make special announcements, such as new services and features. 

OLA Model Explained (FAQs)

Bottom Line

Ola Cabs’ business model is true to the company’s name – it is efficient and smooth, just like the ride itself. The company’s effective business model allows it to generate revenue from multiple sources. Its financial tribulations are a testament to the fact that this business model can be volatile. 

It’s important to note that Ola’s success is primarily due to its focus on the Indian market. The company has a strong presence in India but is also strongly expanding its international operations. Given the current state of the ride-hailing industry, it will be interesting to see how Ola’s business model develops in the future.

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John Hughes

John Hughes is a seasoned expert in digital marketing strategy, business model analysis, and financial insights. Possessing a robust background in finance, his expertise extends into deciphering complex business models, conducting comprehensive SWOT analyses, and staying attuned to the latest market trends.

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