No-Meetup Classifieds, an $8 Billion Market Opportunity in the Middle East and Growing

This is a condensed conversation with the co-founder of Melltoo, Morrad Irsane.

We’re discussing Melltoo’s beginning and ongoing strategy to become the largest “no-meetup classifieds” in the Middle East.

Ahmed Medien is a Marketing Aid and Customer Experience Manager at Melltoo.

The answers have been shortened for flow.

AM: Why mobile-first instead of building a mobile-responsive website?

MI: When we first started working on Melltoo in 2013, mobile-first was the only way to go. People were eager to download any new app and try it out. Today, in 2017, it is a bit tricky. People don’t want to download an app just to try a product. They prefer to try it on the web first and if it makes sense, they move on to the mobile app. If you are just launching a new product today, go with mobile-responsive web first, then launch an app if your product takes off.

Mobile-first, however, has a better user experience. The native mobile app experience is superior to the mobile-responsive web when it comes to realtime geolocation and push notifications which are very important in consumer-facing products. A mobile app keeps the product front-of-mind and allows a product to become part of a user’s daily routine, making habitual use much more attainable. A good mobile experience should make things easier for the user, hence the importance of both UI and UX for our business. Today’s users are pressed for time and impatient. We work hard to make Melltoo intuitive without a steep learning curve. We know people just want to buy and sell without complex signups, payment methods and other UI friction.

Why “social” classifieds?

A product will become a part of a person’s life only if it’s social. Let’s not talk psychology, but social interaction is a fundamental human need. My dream is to contribute to building a more sustainable world by making it easy for people to resell and reuse. To do that, we have to not only make it easy, but to make it fun, rewarding, and engaging as well. And nothing is more fun than interacting with people in a safe environment.

Classifieds is an inherently social experience. However, the traditional classifieds experience is fraught with risk and as much anti-social behavior as there is social behavior. At Melltoo, we set out to facilitate positive social interactions in buying and selling by being the referee and go-to if things break down. In some ways, we are creating a safe social arena where people build relationships on the basis of their roles as buyer and sellers; for lack of a better term, a social network for buying and selling.

There are practical reasons for keeping things social as well, establishing trust. Part of the experience in Melltoo revolves around building an identity and reputation in the community. Knowing who you’re dealing with builds trust, which is important for successful transactions to take place. Ratings and reviews for previous transactions further solidifies credibility, especially in this day and age where fakes and counterfeits have become a global problem.

We want our users to be engaged in our community and to build relationships with one another. Features like comments and chats not only allow users to discuss and exchange product information, it’s also allows them to build relationships, creating stickiness in the marketplace. When you’re using Melltoo, you’re not just an individual behind a screen dealing with another individual behind a screen, you are part of a community. We are often asked whether the private chat is a leak for us, a way for buyers and sellers to take the transaction off-app to avoid paying selling fees. It probably does happen at times, but we believe that the service we are providing is valuable enough that people will prefer to keep things in-app. Not to mention the fact that transacting off-app does not help users build their reputations in the Melltoo community, which is a key element to successful transactions.

Why do you limit yourself to making money off transactions rather than other more available revenue streams such as selling media banners or premium listings to users?

Our model is purely transactional, we take a percentage off successful sales. Melltoo is not interested in selling mellsters’ data and personal information to advertisers for money. Nor are we willing to compromise the user experience with ads in our app. We have different aspirations. We value our privacy and want the same for our users. Paid listings is not something we do either, we want users to pay us only after they have derived value from the service, not before.

On Melltoo, users only pay us if their item is sold through the app. We believe this is the best way to make money for now. In future, we plan on introducing other paid services that bring value to users.

Why the insistence on remaining peer-to-peer?

Peer-to-Peer is the most difficult business model to build and sustain, yet the most rewarding when you succeed. Think any classifieds, airbnb, Uber, eBay (in the early days), etc. There is no peer-to-peer transactional platform in the UAE and the region. We are tackling secondhand items with fulfillment for the first time in the region. What is amazing about the peer-to-peer business model is interchanging user roles: buyers become sellers and sellers become buyers. This is maximally engaging since users can participate on both sides of the marketplace seamlessly. It also means that peer-to-peer businesses are high-impact businesses since participation is afforded to large segments of any given population.

From a strategic perspective, there are many other businesses doing B2C marketplaces, Amazon/Souq.com, eBay (today) and others. We follow Peter Thiel’s school of thought that prefers to avoid competitive industries and instead focus on achieving monopoly status in our space. In terms of user acquisition, a peer-to-peer marketplace is a notch more difficult to establish than B2C or ecommerce. For this reason, competitors are few. And the good news is that once we establish network effects, Melltoo will be highly defensible and enjoy monopoly profits in the region.

From a personal standpoint, my goal is to be an enabler, to enable people to help make the world a more sustainable place through resale and reuse. In this, power lies with the masses and hence the only way to do this is peer-to-peer.

What is the growth potential in the UAE and the region?

The average UAE household has about USD $2000 of unused consumer goods (e.g. an old iPhone, TV, furniture, toys and clothing) in storage in their homes at any given time. These can be resold and will inevitably get replenished as households continue to purchase. The population in the GCC and Levant is about 160 million or about 40 million households. Assuming about 10% of those households sell their stuff, that’s an $8 billion a year opportunity. If we succeed in our mission of making buying/selling second nature, we can increase the participation rate and the market opportunity will grow.

As you know, Amazon recently announced that they will be acquiring Souq.com. While this deal is great for the region in many ways, it is particularly important in validating the market demographics. We’ve had more than one outside VC questioning our market size. Compared to India, China, Brazil, etc, 160 million souls scattered across multiple countries seems small. However, about 40 million of these people are already online consumers and smartphone penetration is among the highest in the world. Currently, ecommerce represents 2% of total retail spend and the region boasts the youngest populations in the world, which means growth potential is huge. Anecdotally, I’ve spoken to founders of large Indian startups who find the region more lucrative than India in certain categories (restaurant, travel etc). While there may be many more Indians, online consumption among Indian consumers is still low. In addition, per capita income in the GCC countries are among the highest in the world.

I have lived in the region for over 12 years. This is my home and I have no plans on leaving. I’m committed to the region and I’m bullish about it’s growth potential. When I first moved to the UAE, the population was 3 million, today, it’s 9 million (tripled in 12 years). Where there were 30 skyscrapers on Sheikh Zayed road when I first arrived, today I’ve lost count, including some of the world’s tallest buildings and 25-star hotels. All signs point to growth.

How have you managed to grow and develop your product, your company and your team over the past 3 years while so many other startups die after barely launching?

Baraka (roughly translate to blessings), hard work and a low burn rate. In this game (startup) the only thing that is not forgivable is to run out of money :). Having said that , we have a great team that works with passion and determination. We all know that we are building something fantastic, something that will make a difference in our world, and that our time will come … We have the right product, in the right place, at the right time. These things are starting to align and we are seeing progress everyday.

It is also incredibly important to be aware of your surroundings and the context we are in. Knowing the users, the socioeconomic context, the funding environment, investor sentiment, other products making waves…these things are important in the decision-making process. A lot of founders just focus on internal data and metrics, that’s really not going to give you enough information to make good decisions. For example, we have the ability to grow very fast. However, considering the current economic and funding environment, growing too fast will mean that we shorten our runway at a time when fundraising is difficult. So these external considerations need to be accounted for when making internal decisions.

What is most important to you right now?

Our users have been and continue to be the most important thing to us. We are continually working to improve the user experience, be it via technology or operations or customer service. To this end, we need to execute fast and to keep ourselves on top of the game. It is all about pleasing the user by building the right features and improve operations to increase new users while retaining old ones.

As the CEO, I don’t do the actual work and all credit goes to my team. However, my job is to build an organization where everyone can achieve their objectives and goals unimpeded. I focus my attention on supporting and building the organization and creating a work environment where talented people can do their thing. Borrowing a page from one of today’s most successful CEOs, Jack Ma, if we take care of the customer and the team, everything else follows.

Why We Built A No-Meetup Classifieds In the Dubizzle Era

When we first launched Melltoo in 2014, we saw ourselves as classifieds on mobile. Everything was moving to mobile, except classifieds. Online classifieds were still just electronic notice boards. We saw the opportunity to bring classifieds into the post-smartphone era and to take advantage of hardware capabilities like geolocalization, instant messaging, and push notifications. The rise of social networks also brought about a paradigm-shift, every product became social, so why not social classifieds?

To be clear, we didn’t pick classifieds from a long list of industries needing disruption after, classifieds has always been in the blood of the founders. Morrad Irsane, co-founder and CEO of Melltoo grew up around buying and selling second-hand. While raising a family of 13 children in France, Morrad’s mother regularly re-used clothes and hand-me-downs were standard. During their annual summer break in Algeria, she had a thriving side business reselling clothing she collected from France.When Morrad invested his savings to launch Melltoo in 2014, he was reviving an old family tradition. Morrad envisioned a mobile app he could take with him anywhere, with a built-in chat so he would never miss a deal.

Finding ourselves

As with all first-time founders, we thought that we would build it and they would come. Launch an app and everyone would use it. We were wrong.

While we grew in our first year, it was a struggle. We had to get creative. We experimented with many different user acquisition models, content marketing, social media, app store optimization, SEO, spamming, even offline events. Name it, we’ve probably done it. In fact, our downloads were healthy with over 500 new users daily with almost no marketing spend.

But, there was no WOW moment. Users came, they tried, they left. Meh. “The app is cool, but…”

While our first iteration was not a huge success, it gave us plenty of opportunity to talk to our users and this is what we discovered.

User Objection 1: “I would like to use your app, but I don’t have anything to sell.”

When someone says this, it isn’t because he doesn’t have something to sell, it’s because he doesn’t want to sell his stuff. Search a bit more and you’ll discover that what he’s really saying is: “I don’t need the money so I don’t want the hassle of selling my stuff.” Yes, selling via traditional classifieds is a hassle. In some cases, it’s downright torture. The main problem is meetups. List something for sale, get a bunch of phone calls from strangers at all times of the day and night, get lowball offers and then take time out to meet with multiple buyers before one finally buys (or not). If you don’t need to, why would you?

User Objection 2: “I don’t trust buying second hand, there are too many scammers.”

Web classifieds are no-man’s land. Anything goes. List something for sale and get an offer from the wife of the ex-president of some unknown country on a continent halfway around the world. People ask you to ship them stuff cash on delivery. You get spammed. Who do you trust, who can you trust?

User Objection 3: “Your app is cool, but nobody is talking to me to buy my stuff.”

Lesson 1: Peruse the startup literature and it is littered with the idea that founders must be “obsessed with the product.” There is no doubt that a great product is important, but a great product that nobody uses is still a flop. It is much more useful to be obsessed with the customer.

Lesson 2: 2-sided marketplaces are among the most difficult businesses to build. You need buyers and sellers, but buyers don’t go where there are no sellers and sellers won’t go where there are no buyers. What do you do?

Armed with this knowledge, we began to realize that classifieds didn’t simply need to be moved from web to mobile and the problem wasn’t one of technology and UI/UX. The problem was that classifieds was broken. People have stopped trusting classifieds and hate the hassle involved. They use it only when necessary, which meant when selling a used car or home and large items that needed to be disposed of, such as furniture. Anything less was simply not worth it. And just like that, we saw an opportunity to re-imagine classifieds, no-meetup classifieds.

Melltoo’s first anniversary: A year of many achievements

Melltoo's first anniversary
First anniversary: A year of many achievements

On March 1st, the Melltoo team celebrated the first anniversary since Melltoo first launched. Melltoo has experienced explosive growth in numbers of users and listings in our first year with double digit month-on-month growth, something we are extremely proud of. We also recently closed our first ever external funding round in a region where funding is challenging, to say the least.
A few weeks ago, we hit our first major milestone: 100,000 downloads for our iPhone and Android apps! On average, we have 500-550 new organic downloads per day with a retention rate of 40% and, no, we don’t spend any money on paid advertising! How does Melltoo do it? How do we build our brand? What are our growth and retention strategies?
There’s no secret. All you have to do is solve a problem and do what your users tell you to do.

Organic growth

Organic growth

Melltoo’s growth strategy is 100% organic. We provide value to our users by listening to their pain points and being there for them in every way we can. We also try to support our users by curating, creating and publishing the content they are searching for. By identifying keywords and promoting our blog content with SEO, we make it easy for users to find what they’re looking for . At Melltoo, we believe that creating valuable and searchable content is the best way to gain users’ trust, eventually converting them into users for life.
Apps are the new search engines of the internet, as people don’t search for things on Google anymore. Nowadays, people prefer to search for things on apps (e.g. opening Zomato to search for a Chinese restaurant in the neighborhood). As a mobile-first startup, app store optimization has become a central part of Melltoo’s growth strategy. Very often, users are only looking to browse items in a particular category, in a specific geographic region (eg. second-hand mobiles in Dubai). Melltoo has addressed this phenomena by creating various apps for every one of our six verticals (Kids, Mobiles, Homes, Rentals, Cars, Fashion) in multiple cities in the MENA region. In this way, we provide highly customized and localized content for users.

Growth hacks

Our vision at Melltoo is to become the world’s default mobile people-to-people marketplace. To bring Melltoo closer to this goal, we are launching our in-app payment and delivery service on June 15, 2015 (only available in Dubai in phase 1).
While While Meltoo’s main focus is on the sale and purchase of fast-moving consumer goods, we also pay close attention to used cars and property rentals to acquire new users. Few people have the luxury not to resell a used car or search for property. Unfortunately, because smaller items (such as books and baby clothes) are difficult to sell second hand in the UAE, people are reluctant to even try. By offering a free and user friendly platform for buying and selling, Melltoo is changing that behavior because « everyone has something to sell » no matter how big or small!
Over the past couple of months, we have observed that users start browsing in our car vertical and then move to the mobiles vertical. Similarly, we found that many users start browsing in our rentals vertical and then move over to our fashion and kids stuff vertical.

We call this the funnel strategy. Our user acquisition and retention costs are ‘the cheapest’ on the cars and rentals verticals. This is mainly because of the abundant demand. Our role is to encourage new users who enter Melltoo through the cars and rentals vertical) to use our other verticals, thereby providing a holistic brand experience that goes beyond finding a new rent or selling an old car. The “Melltoo Experience” is buying and selling in a comprehensive mobile marketplace of trust.

Onboarding

Being user-first, we believe that user onboarding and customer support are the most important activities that we engage in, because it helps us build and consolidate Melltoo’s brand image. Every member of the Melltoo team monitors our user-facing and social channels, regardless of their job title or field of expertise. We all chip in when it comes to user support, because we believe that the interaction strengthens our team’s collective commitment to being user-first. Not only do we make sure to respond to all user queries in a detailed manner, we also strive to answer all queries within 24 hours of their submission.
A week after signing-up, every Melltoo seller receives a “hello” from us and an invitation to participate in our weekly “Hot Deals,” a newsletter that we created to help Melltoo users sell their items faster and improve SEO. This has proved to be an effective strategy because it allows us to communicate with our users and offer them all the support that they need to sell their items. In return, users support us by telling their family and friends about us and our services. The Hot Deals Newsletter is yet another example of how the entire marketing team works together to support our users. Not only do the Zoom-In’s allow us to engage existing users, it also helps us attract new users, by putting user-generated content at the center of all our social media channels.

Analyzing and Optimizing

Analysis plays a key role in the creation and implementation of new strategies at Melltoo. Impressions, click-through rates and conversion drive most of our marketing strategy. We closely monitor the posts that we share in our email campaigns, blog posts and social media, so we can get a better understanding of our email open rates and user behavior on our website.
Our newest strategy combines search marketing and branded content partnerships to increase the amount of UAE-focused content available to our users. So far, search marketing (use of keywords to improve SEO) is our most robust marketing performance metric. The Melltoo team consistently strives to write keyword-rich articles that our target markets (and vertical segments) are looking for. By joining forces with other local startups, we also hope to promote a spirit of entrepreneurial collaboration that will bring more valuable content and services to our users.

The best is yet to come

As we celebrate our first year anniversary, the Melltoo team would like to take the chance to thank the people who made this all possible: our users! We promise to continue supporting you by helping you sell your used items in the easiest way possible. No matter how big or small, everyone has something to sell. So, whether you’re saving for a dream vacation or a “new” car, we want to help you monetize your “junk.” Download Melltoo today and start checking things off your wish list today!

Why the Web Giants Can’t Go Mobile-First

As a mobile startup with an impressive web-based competitor who’s been around and has deep deep pockets, we get asked this question a lot: “Can’t XXYYZZ  build your app in 12 days?” When we explain Melltoo‘s value proposition as a mobile first social selling platform with a payment and delivery service and a built-in chat function, people understand how we are different from our web-based competitor. They immediately recognize that we have a compelling value proposition. However, they always come back to: “They have tons of engineers, I’m sure they can build the same app in a month.” Then we show them Melltoo, and they inevitably go “WOW” but nevertheless say: “It’s an amazing app, but XXYYZZ has loads of cash, they can do what you did and CRUSH you.” Well no. They can’t and let me tell you why.

1) Mobile First, Mobile Only

In Fall 2012, Facebook launched it’s native mobile app for iOS and Android and declared itself to be a mobile-first company . This was after a “painful” (Mark’s words) 18-month transition for one of the world’s largest web companies. Why was it painful? Because the mobile experience is totally different from the web. And if you are used to building for the web first, while your mobile app plays catch up, then your mobile experience will always be sub-optimized and limited. There are certain things that the mobile can do that the web can’t, such as geolocalization, pulling from the camera hardware, and push notifications for starters. So if you’re building for the web first, you will neglect these oh-so-important mobile-only features, which means your user experience will be sub par.

2) The Amputation Problem

In order to become a mobile-first platform, you’ll have to greatly streamline and simplify your web experience in order to maintain consistency across services and platforms. Just this March, Paypal rolled out it’s new “mobile-first” website which fronts a major overhaul of Paypal services to enable and enhance mobile transactions. The point here is that the move to mobile is not simply about building a front-end app. It’s also about what’s going on in the backend; and in some cases, the move to mobile affects the product offering at its core.

3) Organizational Misbehavior

Let’s suppose that the big web incumbent has an enlightened CEO like Mark (Facebook) or David (Paypal), who recognizes that it’s time to go mobile-first. Then, there’s the rest of the organization to contend with. Large successful companies are run by large numbers of people who require bureaucratic processes to work together effectively. Forgetting brainstorming on Slack, like we do at Melltoo. Bureaucratic processes are by definition slow and that’s why large companies move slowly. Once our enlightened CEO figures out it’s time to go mobile, she has to coax her board of directors and clue in all her senior management. Then, after much back and forth, strategy is hammered out across departments and implementation plans are drawn up. New bureaucratic processes need to be introduced at this point to manage change and reduce risk. Finally, the little worker Joes, on whose backs the company runs, need to be retrained and realigned. The whole organization needs to be restructured to tame the misbehaving beast.

4)The Hiring Nightmare

The average non-coder seems to think that if you can build a “hello world” program on javascript, then you must be able to build an app. The reality is a bit more complex. To build a good app, you not only need an experienced front-end app coder, you also need a UI/UX expert, a backend database coder, a backend administrative web services coder, a project manager, and the officeboy who serves coffee and brings donuts. And if you are a big, successful company, then you’ll need two of everyone because you have an image to protect in order to win the “Employer of the Year” award. And no, you can’t just get your existing engineers to do the job. Firstly, they may not have the expertise. Secondly, who’s going to do their current job? So you have no choice but to hire and we know how that nightmare goes.

A Dollar Now is Better than Two in the Future (no matter how near)

Suppose you are the web-based incumbent that is making tons of money with your website. Melltoo shows up on the scene, a startup with 6 (at last count) team members and some VC funding. Melltoo hints at a future of unrealized potential. You sense that Melltoo could be disruptive, the keyword here being could. Would you at this point overhaul your entire business model and take your organization through a painful transition in order to respond to the little startup nobody has heard of? I think not. And your board of directors is unlikely to go for it. Which means you won’t move until Melltoo has 50 on the team and a Series B under its belt. Then the battle begins, and may the most innovative company win!