OfferUp is rolling out a new feature that aims to solve a major pain point for local buyers and sellers, letting a buyer reserve an item with an authorized payment before meeting up in person.
The extra protection against “flaky buyers and sellers,” as the company calls them, was previously tested in a limited beta, but it’s now rolling out nationally. The new “Hold Offers” feature lets buyers reserve items and complete the transaction via QR code when the in-person exchange occurs.
It’s the latest attempt by the well-heeled startup to differentiate its 8-year-old mobile marketplace from competitors, including Craigslist, eBay and Facebook Marketplace. Advances in payments are a big part of the company’s strategy, dating back to its initial work to integrate in-app payments in its app several years ago. OfferUp also says it’s the first peer-to-peer marketplace to offer Apple Pay, Google Pay and Samsung Pay as an integrated part of the buying and selling experience.
In an interview with OfferUp CEO Nick Huzar, GeekWire got a demonstration of how the company is working to simplify the buying and selling process on the app, eliminating the need to use cash or other third-party payment services like Venmo or PayPal.
“By bringing (payments) into the experience, we can actually help if things arise in the transaction,” Huzar said. “But if you take it off the platform, there’s not a whole lot we can do.”
Integrated digital payments are a common practice in traditional e-commerce but still somewhat rare in person-to-person marketplaces. The new features are the latest move by OfferUp in the battle against its more well-known competitors. Despite its status as one of the most valuable startups in the Pacific Northwest, with $260 million in lifetime funding, OfferUp puts a lot of stock in word-of mouth as a tool for growth.
OfferUp’s headquarters in Bellevue, Wash., fit the company’s somewhat understated approach. The company isn’t at home in a downtown high-rise or a trendy office in a hip neighborhood. It sits in a two-story structure of tucked along the edges of a revamped office park just off a major highway surrounded by marsh and wetlands.
From the main board room conference table to knickknacks at engineers’ desks, a large majority of the décor in the office was actually purchased on OfferUp. The company bought from retailers and individual sellers, including one person who managed to put his child through college at Washington State University using the proceeds from a series of creations from his father’s garage full of junk.
Huzar, a Washington State alumnus himself, has one on his own desk.
“So he takes all this old junk that his dad has and he makes these steampunk lamps and bird feeders and stuff, and he sells them on OfferUp, and now he’s paid for his kid’s college through this,” Huzar said.
OfferUp has grown to become one of the top shopping apps in the iOS and Android app stores, alongside giants such as Amazon and Walmart. The app has been downloaded more than 80 million times, and OfferUp has 44 million users.
But OfferUp is facing some serious competition from companies with more name recognition and bigger audiences. Rival eBay has 182 million “active buyers,” according to its most recent earnings report. Craigslist had 60 million users as of early 2018, and Facebook Marketplace is a sleeping giant that only needs to capture a sliver of the company’s massive audience of nearly 2.4 billion monthly active users to be a major force.
In recent years, the share of time users are spending on OfferUp has become comparable to major social media apps, a sign of a dedicated user base. OfferUp says that more than 15 percent of adults in markets including Seattle, Los Angeles, Las Vegas, Phoenix and others are using the app regularly.
The company hopes to continue to gain more market share in additional markets with the new payments features that are also designed to up accountability.
When a buyer reserves an item via the Hold Offers button on the app it becomes marked as sold. At that point, OfferUp authorizes an associated credit card to make sure the money is there to pay for it.
When the meet up to exchange the item occurs, the buyer pulls up a QR code for the seller to scan. Users can tie their OfferUp accounts to credit cards or mobile services such as Samsung Pay, Apple Pay and Google Pay.
This isn’t OfferUp’s first run at mobile payments. Last year, OfferUp expanded beyond its bread-and-butter of local commerce with a new shipping initiative that needed mobile payments to work.
Adding payment information can complicate things for a company like OfferUp, including the possibility of becoming a target for hackers after customer data. OfferUp’s payments operations are powered by Stripe, the mobile payments powerhouse that opened an engineering office in the Seattle area three years ago.
OfferUp hopes that these features simplify the payment process and rectify the problem of a buyer expressing interest in an item only to stop responding to messages or not show up to a meeting, putting sellers in limbo.
However, OfferUp hasn’t yet put in a mechanism to make sure the seller doesn’t get hung out to dry if a buyer flakes after putting an item on hold. Huzar said OfferUp is working on finding the best solution to that potential problem.
“That’s exactly what we’re still exploring right now and talking to users about,” Huzar said. “If you don’t consummate the transaction, what’s the best thing that we can possibly do to bring more accountability?”
Payments also represent new revenue stream for OfferUp. The company takes 5.9 percent from transactions made through the app.
Huzar wouldn’t give specifics about the company’s balance sheets, nor whether or not it is profitable, but he did say the company draws revenue from two main areas. OfferUp’s promotions arm includes its popular used car business as well as retailers and individuals who pay to boost the visibility of things they’re selling. The other side is the payments business, which includes revenue from shipping transactions and the cut OfferUp takes from mobile transactions.
Used car sales have always been a significant section on OfferUp, and the company has taken advantage of that by forming partnerships with dealers. Roughly 10 percent of all U.S. used car sales in 2018 took place on the platform, Huzar said. The autos section, where dealers pay a subscription fee to OfferUp in exchange for favorable placement and other perks, has become a key part of the company’s business in recent years.
“It took off organically, and then we just had to figure out how do we best support this and scale this effort,” Huzar said. “I always say that it wasn’t like we were geniuses and really figured out autos; it just kind of happened.”
Founded in 2011, OfferUp was started by Huzar and co-founder Arean Van Veelen after they struggled to find ways to unload household items that had accumulated in their homes.
Huzar had never really sold anything before, and he wondered why there wasn’t a simpler way to sell things than Craigslist, where issues with unreliable buyers and sellers were well known. Huzar thought there had to be another way, but for the most part, there wasn’t.
There were times when Huzar wanted to give up, but the company has grown to about 250 employees today, all based in its Bellevue headquarters. In recent months, the company has shaken up its leadership, bringing in veterans of some big-name tech companies.
- Ameesh Paleja, previously CTO of premium cable network Starz, took the job of chief technology officer at OfferUp in March. He spent time as CEO of Atom Tickets and has a decade of experience at Amazon under his belt, where he managed teams focused on products including Amazon Prime Instant Video and the Amazon Appstore.
- Jeff MacDuff, a former Microsoft exec and co-founder of big data IoT company Buddy joined OfferUp last September as director of engineering. He also spent time as an executive at Bluetooth and the Seattle-area traffic information company INRIX.
- Amazon veteran Bill Carr was named COO in October. During Carr’s 15 years at Amazon, he built the company’s video streaming and music services, now a core part of the company’s business. He left the company in 2014 and spent a stint as an entrepreneur-in-residence at Seattle venture capital firm Maveron before joining OfferUp.
- OfferUp brought in eBay veteran Rodrigo Brumana to be its first CFO last September. He served as head of finance and analytics for eBay Americas, where he oversaw financial planning and analysis, business performance, and marketing analytics.
These executives have all played integral parts in building out major businesses within big companies. As OfferUp continues to scale, the company needs executives who have a track record of managing growth.
“When you’re small and scrappy, it’s awesome,” Huzar said. “But at some point you get to a massive scale and you need people around the business that have seen that movie.”
