19.06.2015

Wallapop and the race to beat Craigslist

Wallapop exceeded its threshold of early adopters in April 2014 when its ads started appearing on television in Spain. That’s when your mother, your friend, your upstairs neighbor and the couple next to you on the bus began using it.  They bragged about what a bargain they had gotten or, when that old furniture didn’t fit in their new living room, they said, “I’ll put it on Wallapop”.

The line between a startup (only known to those who are a part of its small world) and an app with its own name (a product that people talk about in real life) is significant. Few make it across: apart from the American and European Spotify and Blablacar, perhaps the Spanish example would be Tuenti or, more recently, Red Fridge.

The curious thing about Wallapop is that after make a name for itself with users (over 5 million) and word on the street, the name is back in tech circles and among entrepreneurs. It is rumored to have raised $140 million and has the financial capacity to acquire more users in the long term, thereby posing a threat to eBay and Craigslist.

Wallapop is an app that enables sales between individuals: an old idea on a sector of the web that’s already been territorialized with clear winners. In Spain, for example, Milanuncios had more traffic than Marca when the German group Schibsted bought it. What’s going on? We are in 2015 and it’s time for the industry to move forward and be more mobile than web based  and that’s where the Barcelona startup is now making progress and getting a piece of the pie.

Founded in 2013 by Agustín Gómez, Gerard Olive (of BeRepublic) and Miguel Vicente (from Letsbonus), Wallapop now has a web version but it began as just an app. There are two characteristics which make it ideal for phone screens: the first being a camera (to upload pictures of what you want to sell) and secondly, its messenger. According to the company, today they are more than 25 million conversations between users and the average session is 8 minutes (17 at night).

They call this time session ‘engagement’, and that’s probably what has attracted the attention of investors. An old rule of software says that, when you are developing, imagine that your user will be a bored teenager in their room. What does a bored teenager in his room do? Chat. That’s what their TV ad focused on.

In late 2014 Wallapop raised $25 million from Insight Venture Partners. A later update said it had received $40 million and had attracted other investors, both international (Accel, which had already invested) and Caixa Capital Risc and Bonsai. Techcrunch summed it up, and when speculating why the app would receive so much investment, it mentioned the investment rounds of their competitors: OfferUP, Seattle was trying to raise between $60 and $100 million in March and DePop, in Europe, raised $8 million in January.

The idea works, it is cost effective (when you have many users as Wallapop, one could, for example, charge commission for each sale) and space in the area is limited because, as was the case on the web, a single platform that brings together most of the offers (things sold) and demand (people buying), usually wins. They have spent a lot of money on marketing and attracted many users.  Now the competition is not only among apps but also among investment funds.