The two leading app-centric general marketplaces in the U.S., OfferUp and LetGo, are joining forces to create a new powerhouse. OfferUp announced plans today to acquire LetGo, creating a formidable competitor to classified goliath Craigslist.
OfferUp, which launched in 2011, is privately held; it had received investments totaling $260 million. LetGo, founded in 2015, is owned by the OLX Group, a subsidiary of Prosus.
OLX Group, which will lead a new $120 million funding round, will take a 40% stake OfferUp when the deal closes. Existing OfferUp investors, including Warburg Pincus and Andreessen Horowitz, will also participate in the round.
The companies said both apps will continue to operate independently for now. But a core goal of the deal was clearly to create one entity, one marketing budget and one opportunity to become a market leader. There was no comment from the company on the size of the combined workforce, but downsizing is all but assured.
The announcement was made today by OfferUp CEO Nick Huzar, who will remain CEO and chairman of the new entity. Alec Oxenford, one of the two founders of OLX.com — which was originally started by Oxenford and Fabrice Grinda as a Craigslist clone — will join the board of OfferUp and serve as a senior advisor to OLX Group and its parent company, Prosus. (Prosus is majority-owned by South African media conglomerate Naspers and is publicly traded on Euronext Amsterdam.)
The transaction is expected to close in May, pending regulatory review.
The two companies will finally present a fundamental, perhaps even fatal, threat to Craigslist — where both traffic and revenue have been dropping. The 25-year-old San Francisco-based website, owned by Craig Newmark and Jim Buckmaster, reached an estimated $1.03 billion in revenue in 2018, but saw revenue drop by almost 27% last year to $760 million. While it’s still the leading horizontal classified advertising site in the U.S., with 336 million monthly visits in February, traffic has dropped substantially from around 800 million monthly visits in 2017.
In comparison, the new OfferUp / LetGo entity expects to reach about 20 million users monthly, far lower than that of Craigslist.
Craigslist is also facing increasing competition from Facebook Marketplace, the fast-growing tool within Facebook for buying and selling cars, homes and second-hand goods.
Back in 2017, Recode reported that OLX and OfferUp had begun merger talks, but nothing emerged from them.
“If an opportunity arises to merge with OfferUp, we’ll look at it,” said Martin Scheepbouwer in 2017, then CEO of Naspers Classifieds and now president of OLX Group. “It’s kind of difficult to plan. … A merger takes two to tango and it might never happen. It might happen in a few years.”
The deal may be the first of many in the coming days in which second- and third-tier marketplaces across the globe combine forces. Stock market valuations at almost all classified / marketplace companies have been pummeled in recent weeks, dropping far more than the overall market. The trend seems to be less severe for leading marketplaces, regardless of category, indicating that investors are looking unfavorably on sites that are not the market leaders.
OfferUp and LetGo are neck-and-neck in terms of app downloads, with LetGo slightly ahead recently on Android and OfferUp leading slightly on iOS. LetGo has been downloaded more than 100 million times worldwide, although some of those downloads have been in popular international markets like Turkey. OLX Group will retain control of LetGo’s international assets and operate them separately.
“LetGo and OfferUp have always shared the same core vision,” said Oxenford, the OLX.com founder. “Bringing our apps together moves us much closer to that vision.”
“My vision for OfferUp has always been to build a company that helps people connect and prosper,” Huzar, the OfferUp CEO, said in a blog post. “Bringing together the strengths and resources of OfferUp and LetGo is an incredible opportunity that will help us reach our goal of creating the largest, simplest, and most trustworthy marketplace for local buyers and sellers.
Huzar noted “the world is upside down right now” due to the Covid-19 pandemic.
“For nearly ten years, OfferUp has strived to maintain a safe, happy, and healthy community — both in-person and online — for buyers, sellers,” he said. “This news helps us to continue to innovate and grow, in spite of these challenging times, and continue to deliver on that promise.”