Declassified: Inside Sulit’s incredible rise as an online classifieds



The Finishers: Learn First-hand from the Philippine Founders Who Willed Their Startup from Idea to Exit
was written by Ezra Ferraz in 2017. This book documents the stories of 11 local founders who were able to scale their startup and exit. This excerpt, titled “Declassified: Inside Sulit’s incredible rise as an online classifieds,” which focuses on the journey of Sulit and its founders, RJ and Arianne David. 

 

A drive down inspiration lane

 

On a long drive from Manila to Tagaytay in 2006, RJ David and Arianne David, who had been sweethearts since high school, traded business ideas back and forth as they snaked their way up toward the mountains.

They were on the way to meet one of RJ’s clients—he freelanced full-time as a web developer, and Arianne helped out on the side, when she was not at work, coding for a local bank as a project development lead—which was what had inspired the brainstorming session in the first place.

“We had been creating these big projects for clients when we realized: Maybe we can do our own thing, something for us,” RJ said.

The couple had no shortage of ambition. Most of the websites RJ and Arianne created served as an online presence for brick-and-mortar businesses. What they wanted to build now, in contrast, was a platform in the spirit of Web 2.0, where the bulk of the action came from user-generated content, such as in the case of Facebook or social news aggregator Digg, which enabled users to submit links to articles, vote them into greater visibility, and discuss hot topics with peers.

Digg’s founder, Kevin Rose, had been trying to solve his own problem. “He was a tech and news junkie and was frustrated by the jewels that mainstream editors and websites missed. That’s when the idea occurred to him: an army of Kevin Roses could do such a better job,” wrote then BusinessWeek columnist and now PandoDaily editor-in-chief Sarah Lacy in her book on the first wave of Web 2.0 companies.

None of the ideas that RJ and Arianne pitched one another seemed to possess the inherent appeal of a Digg, which had grown so popular that even The New York Times and CNET were sporting “Digg This” buttons beneath their articles. After a lull, Arianne asked, “Why not a classifieds site?” At first mention, the idea sounded to RJ like all the others they had vetoed—an online classifieds would not deploy technology in any new or novel way—but as he processed it further, the light bulb in his mind flickered on, igniting his imagination.

While he felt that classifieds were a generic business, one that must have dated back to the dawn of the printing press, the concept intrigued him because it had remained largely unchanged since then, at least in the Philippines.

For even the most popular local classifieds at the time, the internet was an afterthought. Once a user text messaged his listing to the company’s SMS hotline, they recorded it for publication in their next print edition. They then inexplicably duplicated the listing to their web portal, verbatim, even though there was no character limit on the internet, as there was with SMS. As a result, a would-be buyer would have to sift through hundreds of curt listings, many written in a blend of headache-inducing text speak.

While there was virtue in limiting characters, as microblogging platform Twitter began exploring to great success that very same year, these classifieds did not enforce this constraint to bring any value to the user experience. They were just blissfully blind to the opportunities offered by the medium.

By the time they arrived in Tagaytay, RJ and Arianne were resolute: they would create an online classifieds that fully embraced and leveraged the information richness of the web. If you were interested in buying an item, you would have a detailed description, information about the seller, and photos of the product to help you make a choice. The days of trying to make a purchase decision from a one or two sentence listing
would be over.

Living rent-free out of the home of RJ’s parents in Angono, Rizal, the Davids vowed to run their classifieds—Sulit, as they were now calling it, meaning “worth it” in Tagalog, in an ode to the great deals you would find on the site, as well as SUper Low Internet Trading—as an experiment, sort of like Amazon.com in reverse.

Jeff Bezos had launched Amazon selling only books, determined to expand category by category as soon as he figured out the financials and logistics of each line. The arrow Amazon would later affix between its logo captured his ultimate ambition: Bezos wanted his site to be an everything store, carrying products from “A” to “z.”

RJ and Arianne would launch Sulit with all the typical sections an online classifieds had—real estate, cars, jobs, and buy-and-sell verticals like appliances, furniture, electronics, and so on—and then double down on the category that got the most traffic from users. Proclaiming this one the winner, the Davids would develop Sulit around it and scrap everything else. “If we saw that cars would be most popular, then we would do something with cars,” he said, adhering to a kind of Darwinism by data. In short,their goal was to focus Sulit from a horizontal classifieds, like Craigslist, to a vertical one, like Zillow.

This experiment was a low-cost one. As with their web development business, RJ could do most of the heavy lifting, and Arianne could contribute when not at her bank job. To get up and running, RJ had a framework he used for most of his web development clients and he repurposed it again for Sulit. He set no limit to the length of a listing. If a seller thought it would help him sell, he could write an epic poem about his rice cooker.

RJ also registered Sulit with Google AdSense, which dynamically matched websites with relevant advertisers. A travel blog, for instance, might get placements from airlines, resorts, or travel agencies, and then receive a monthly check from Google as part of the standard revenue share agreement.

“For the web site, it was a dream come true: revenues without having to lift a finger,” Lacy proclaimed, noting that Digg, along with YouTube and a host of other Web 2.0 companies, supported its early operations with AdSense, before conceding, “To be sure, smaller sites might generate just pennies per ad.”

RJ channelled his childhood for Sulit’s branding. At the beginning of each Walt Disney film, its logo appeared before a majestic castle, gleaming as bright as the shooting star that arched overhead. He commandeered this iconic Walt Disney font for Sulit, which said as much about his design aesthetics (he was definitely not the designer in the relationship) as it did his long-term expectations (as much as he wanted to build a Web 2.0 platform like Digg, he did not foresee just how big Sulit could become).

When Arianne saw this early version of Sulit, she was horrified. She stepped in to redesign the Disney-styled logo and beautify the site. Mark Zuckerberg had chosen Facebook’s blue and white palette because he was red-green colorblind. Similarly, Arianne accented Sulit with sky blue and apple green because these were her favorite colors. Web 2.0 was nothing if not intimately personal.

Arianne also tested the site and conducted quality assurance. When working together, the two had to follow the traditional rules set by RJ’s parents—no matter how much they wanted to be leaders of a Web 2.0 startup, Angono, Rizal was still not Silicon Valley.

“Around that time, she was still my girlfriend,” RJ said, “so whenever she needed to work on Sulit, we had to keep the door open.”

 

An army of link builders

 

RJ turned Sulit live on September 11, 2006. The launch consisted
of RJ posting the link to Sulit’s home page on several discussion boards
and waiting for traffic to trickle in. Once visitors did poke around the site,
RJ held his breath in anticipation of a seller submitting a listing. When one
finally did, he was as pleased as he was puzzled. Sulit’s first listing—and
their first data point in deciding which classifieds category to eventually
pursue exclusively—was a brand new birdcage. The first used item was a
PlayStation 2.

Over the next three months, traffic to Sulit soared. User behav-
ior, however, defied RJ and Arianne’s expectations. Rather than flock to

certain sections more than others, resulting in a clear hierarchy between
them, sellers were submitting listings and buyers were viewing them
across the site. Cars was a popular category, as RJ had anticipated, but so
was real estate and jobs and buy-and-sell subcategories of all kinds.
The birdcage and the PlayStation 2 had been prophetic. Filipinos
were eager to sell almost anything in the peer economy for extra pocket
change. Sellers celebrated the arrival of Sulit, especially those from real

estate. After completing the sale to a house or condominium, agents in-
vited RJ and Arianne out to thank-you dinners, or sent them food.

As empowering as it was to get this kind of response, the cou-
ple was at a crossroads. The people had voted and their choice won by a

landslide: they wanted a horizontal classifieds that catered to their ev-
ery need, rather than a vertical classifieds that addressed only one. Yet

the breadth that users appreciated in a horizontal classifieds could also
spread RJ and Arianne thin, for the product roadmap would be much more

complex—someone searching for a job would need a slightly different in-
terface than someone shopping for a condominium, for example.

The Davids decided to take on this challenge based on a sense of
mission.

“If we stopped, what would happen to our users?” Arianne asked. “We couldn’t because we were already helping a lot of people.”

The Davids had some money, at least. Since RJ had registered Sulit with Google AdSense, they had achieved what Y Combinator co-founder and venture capitalist Paul Graham called “ramen profitability” within five months—they were earning enough to pay for their basic living expenses, and as a result, bide their time. Though these monthly earnings from Google seemed like easy money, the couple exercised incredible discipline in its use, reinvesting all of it right back to support brand-building and the development of Sulit.

Product development, at this stage, was at its purest. Several years later, when the couple already had a corporate investor who maintained online classifieds in dozens of other countries, RJ and Arianne could turn to them for guidance on Sulit’s direction. As with any other industry, of course, there were best practices to consider. In these early days, it was just the Davids and their users, whom they communicated with through Sulit’s discussion boards.

He asked the users for their thoughts on new features he recently implemented, along with others they would like to see added. If an idea intrigued him, he bounced it off Arianne, and together they debated its merits. If it passed this evaluation, the feature could be live on the home page in as little as a few hours. If it did not, well, RJ and Arianne had hundreds more to consider from what was essentially their own private focus group, running 24 hours a day, all for free—after all, you didn’t need to butter people up with tokens when they feel your product has a direct impact on their livelihood.

Sulit’s user base was increasing amid all these iterations, but not to RJ’s satisfaction. The Web 2.0 companies he admired the most had grown much more explosively. You didn’t even need to look at their numbers to know this—Digg could send so much referral traffic to a website linked on its front page that it would crash, which occurred with such regularity it had become known as the Digg effect.

RJ was searching for a growth hack that could hasten Sulit’s land-grab when he settled upon search engine optimization (SEO). As a web developer, he knew site owners devised and executed a complex strategy for ranking higher in Google search results. Just like with a physical store, the success of your web site often came down to location, location, location—the closer you were to the first result in a relevant search, the more traffic you got.

Unfamiliar with the nuts-and-bolts of SEO, RJ halted product development to dedicate himself to its mastery, pouring through online guides, e-books, and forums. Though these resources numbered in the thousands, they were easy enough to vet (you could bet the people who ranked high in search results knew what they were talking about). He then brought this knowledge back to Sulit’s users via the discussion boards, like a prophet evangelizing some new kind of techno-gospel.

He began with on-page SEO. He told sellers to add relevant keywords to their listings. A listing for a pre-selling condominium in Laguna, San Pedro should include not just a description of the development, but related terms that people looking for a home in that area might use, such as nearby landmarks or schools. If users wanted to see how much search volume a keyword or a string of keywords got, RJ referred them to Google’s own Keyword Planner, which they could query endlessly to come up with the copy that packed the most SEO punch.

According to entrepreneur and SEO specialist Sean Si, RJ’s crowdsourcing strategy was a brilliant one. “Why do the work when other people can do it for you?” Sean asked, and from this vantage, RJ had succeeded far better than most: he had not only persuaded them to do SEO, but he had gotten them to take to it with the gusto of only people who felt it was in their best interest to do so display. “And for free.”

Linkbuilding was the second, but most important skill RJ taught Sulit’s users. In the heyday of Yahoo! and MSN—the most popular search engines before Google—their results were cluttered with irrelevant web sites and spam, largely because their formulas did not consider the volume and kind of links pointing to a particular page. Google’s very first version did, which improved search results and distinguished it in the long run. “It’s how Google rose to power,” Sean said.

Because links mattered so much in Google’s formula, RJ advised his sellers to link to their SEO-optimized listings wherever they could, and post they did, even on their personal blog or Friendster profile. Although the sellers posted these links themselves, Google’s crawlers considered them all the same, ranking the listing higher in relevant search results depending on their quantity and quality.

This explanation is a simple interpretation of Google’s algorith- mic ranking processes, but it is in keeping with how little RJ and Sulit’s users really understood them at first. For the time being, there was no arguing with results.

“Sellers would ask their customers, ‘How’d you find my ad?’ and they’d reply, ‘I just found it on Google,’” RJ said.

The confirmation that their efforts were paying off only encouraged them to carry on with their link building, and the growth of Sulit’s user base went from a steady upward march into a near vertical ascent.

The arrow on the growth line pointed promisingly toward infinity, and nothing stood in its way until one unassuming day in April 2007, when RJ received an unexpected notice from Google.

He read through Google’s boilerplate statement with growing alarm. Google cited their guidelines for search engine optimization, and then stated in no uncertain terms that Sulit had broken one of them or a combination, but did not specify which. As a result, Sulit would be removed from its index. Users who searched for a bird cage in Metro Manila would not see the corresponding listing on Sulit in the results. In terms of the internet world, Sulit had been wiped off the face of the Earth.

Sulit’s death penalty could be traced back to RJ’s fanatical, if misguided crash course on SEO.

“When studying something, you may not realize there’s a bad and a good side. In my case, I just implemented whatever I read online. I hadn’t realized we had lapsed into doing some questionable things,” RJ said, reflecting the ethos of an engineer, which was if you could get something to work, you did. That some methods might be inappropriate was not even a part of the initial framework. You solved the problem by the path of least resistance.

In the parlance of the SEO industry, RJ had practiced black hat. When penalized, some black hatters try to get Google to lift the ban by addressing their violations. Others dump the flagged domain and start anew.

“Usually starting a new domain is the better option because getting your site reincluded in Google’s search results page can mean 3 to 12 months of cleaning, waiting, and praying for a miracle,” Sean said.

Sulit’s domain was too valuable to scrape, so RJ had no other recourse but to try to correct their possible violations, even as their traffic and revenue bottomed out. The only way to visit Sulit was to directly type in its web address, or click on a link directing to it from another site, which few people, as you can imagine, did. For most people online, Google was not just a search engine, but their portal to the internet.

After overhauling Sulit’s SEO practices, RJ submitted a rein- statement petition, held his breath, and indeed prayed that Google was a forgiving god. One week later, Google included Sulit again on its search index, and traffic started to return to its pre-suspension levels, like a heartbeat recovering from a flatline.

For Sulit, the incident was a near-death experience, and RJ vowed to never tempt fate again. “We became very serious about following the guidelines after that,” he said.

 

Lower the bridge, or deepen the moat?

 

After getting the new lease on life from Google, Sulit bounced back, stronger than ever. By August 2007, the site was generating enough revenues from AdSense that Arianne quit her job at the bank to focus on Sulit full-time. At one of her first external meetings, the representative from Philippine television channel GMA mistook the baby-faced Arianne for a fresh graduate Sulit had hired. When she properly introduced herself, Arianne realized that even she could not wrap her mind around the fact she was a co-founder of the fastest growing online classifieds in the Philippines.

At the beginning of 2008, the couple incorporated Sulit, formalizing what had become obvious: They had a real business on their hands. Yet as Sulit’s users increased, so did complaints. One of the most common had little to do with Sulit at all. “Why isn’t my listing ranking higher on Google?” sellers would ask, sometimes affixing a screenshot as an exhibit number one.

Others complained of botched deals. While RJ promoted a sound rule of thumb for determining whether a listing was legitimate—“If the price sounds too good to be true, it probably is,” he said—common sense did not always prevail, and it was easier to point the finger at Sulit than the shadowy figure you wired 1,000 pesos to for a new iPod that never materialized.

These angry, frustrated, and disappointed buyers and sellers who fired off an email to Sulit likely assumed a site as large as theirs had an entire floor of call center agents, ready to solve their issue at a moment’s notice. In reality, their message fell into an inbox cluttered with hundreds of other unread missives that RJ and Arianne could only address when they weren’t already busy doing product development.

Top tier call centers in the heart of Makati already had a tough time recruiting talent and combating attrition. Sulit’s headquarters was in Angono, Rizal, still in the home of RJ’s parents, and for all of their growth, people were still hesitant to join a startup that officially existed on paper only a few months ago.

RJ planned to offset the risk of joining Sulit with meaningful equity, but found that no one understood its importance. Unlike in Silicon Valley or other startup hubs, where a percentage stake in a company had minted thousands of early employees into new millionaires, the Philippines had no such track record.

“What we lack are stories of employees who became rich because of the equity that they cashed out during an exit,” RJ said. “That’s what we’re missing.”

Due to few Filipinos valuing equity, RJ had to recruit from the people in his social circle who already trusted him—employee number one, hired in March 2008, was his cousin, Rey Ner. He had been working as a customer service representative for eBay, the buy-and-sell auction site that had survived the dot-com bubble to popularize peer-to-peer transactions in the United States, much like Sulit was trying to do in the Philippines.

He jumped head first into Sulit, on account of his trust in RJ. “I believe anything he ventures in will turn into gold,” Ner said. At eBay, Ner had a script to guide his interactions with customers. At Sulit, he had to improvise responses, and then distance himself enough from his own performance to decide what would and would not work in the long run.

Even a seemingly simple concern, such as the one about a listing’s ranking on Google, was difficult to standardize an answer for. On one hand, Sulit benefitted if sellers continued to apply SEO best practices to their listings—it would only tighten the site’s stranglehold on thousands of different search results; on the other, Sulit could be held liable by Google once again if those users veered into black hat, subjecting them to another, perhaps fatal delisting. Customer care, at this point, was a matter of life and death.

If he didn’t have enough pressure on his shoulders already, Sulit dethroned Inquirer.net as the most trafficked local website in the Philippines in his first month on the job. RJ and Arianne took the news straight to Sulit’s discussion boards, where their users celebrated right along with them. Sulit had arrived—Alexa said so. The platform for website traffic, analytics, and statistics, owned by none other than Amazon.com, showed Sulit as the undisputed local market leader, behind only the likes of Facebook, Google, and YouTube.

Sulit’s achievement was all the more impressive considering its resources. As a point of comparison, Inquirer.net employed hundreds of editors, copyeditors, writers, columnists, stringers, photographers, and designers. Sulit had Arianne, RJ, Ner, and new hires, Nedy Mallorca and Alvin Roan, who also pitched in with customer service, in addition to just about everything else.

That this fivesome surpassed every media site and ecommerce platform in the Philippines was akin to what Silicon Valley’s tech unicorns had accomplished years later.

“Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate,” wrote Tom Goodwin, the senior vice president of strategy and innovation at Havas Media, in the opening paragraph of his TechCrunch article that would be immortalized across social media.

To apply Goodwin’s framework: Sulit, the country’s most popular local site, creates no content. Sulit, like Uber, like Facebook, like Alibaba, like Airbnb, was an interface layer, connecting the supply of listings with the demand from buyers, enabling it to grow nationally as fast as those unicorns did globally.

News outlets like ABS-CBN and PhilStar contacted RJ and Arianne to request interviews about the milestone, and the couple sensed a kind of transitive property at work: The enemy of their enemy is their friend—the competitors of Inquirer.net were eager to herald its downfall, even if it meant featuring an online classifieds who was taking advertising market share away from everyone. It was not just schadenfreude, but journalistic schadenfreude, the most strategic and stinging kind.

Happy to play into this dynamic, RJ and Arianne articulated their vision to reporters and smiled for photos. While the publicity was intended as a branding exercise—they wanted Sulit to be top of mind—he buzz reached the investor community. Venture capitalists and angels were soon pressing the couple for a meeting. Though they were not actively fundraising, they accepted these invitations. “We were curious to see
what was out there,” RJ said.

In November 2008, RJ and Arianne met with the Singaporean product listing site 701Search, whose portfolio included other classifieds in Southeast Asia. 701Search was not interested in making an investment. They called the meeting to propose an acquisition. Sulit could be 701Search’s dog in the classifieds race in the Philippines, much like mudah.my was their bet in Malaysia.

Even as the 701Search team presented their case, RJ and Arianne were already both evaluating their next move. If they agreed to an acquisition, they would be compensated handsomely for what amounted to two years of work. Under the 701Search regime, how- ever, RJ and Arianne would be shown the door. A new management team, full of battle-tested executives would be brought in to run the show.

While the tone of 701Search’s pitch was friendly, the couple could read between the lines: If they refused an acquisition offer, Sulit would be forced to compete with a new player. 701Search was entering the Philippine market with or without RJ and Arianne.

Over the next few days, RJ and Arianne weighed their options, and made their decision based on the same criteria. Since both of them had never lead their own business, the opportunity to scale Sulit on their own terms was too enticing to pass up. They thus rebuffed 701Search’s acquisition offer. “But we realized we had to be ready—they were coming in with a lot of money,” RJ said.

 

An ultimatum

 

By March 2009, RJ was clicking through AyosDito.ph, the recently launched classifieds by 701Search. The site’s level of polish—Sulit was certainly not anywhere near as sophisticated when it had gone live—opened RJ and Arianne to the idea of corporate backing, if they could retain some element of control. For AyosDito.ph, 701Search not only brought financial resources, but guidance on how to allocate these dollars wisely, all based on its experiences with the other classifieds in its portfolio.

At the time, South African media and internet group Naspers was seeking to back a classifieds in the Philippines, so they reached out to venture capitalist Manny Ayala to broker a deal with local market leader, Sulit.

Naspers was relatively unknown even in tech circles. Upon hearing RJ and Arianne would be meeting with them, a handful of Sulit employees believed they were going to see the people behind Napster, the file sharing service that had been sued into oblivion by the music industry.

The anonymity was exactly how Naspers wanted it. The company did not wish to attract the attention of a Facebook or a Google to the already ultra-competitive online classifieds space. The name of the game for Naspers by this point was diversification: After pouring $32 million in Chinese company Tencent in 2001, more than two-third of its market capitalization later on would be derived from this investment, much like Yahoo!’s stake in Alibaba.

Since Naspers routinely bought out startups, the company presented RJ and Arianne with the standard template they used the world over as a starting point for negotiation. Under this agreement, Sulit would remain an independent subsidiary of Naspers, and best of all, RJ and Arianne would continue to run it as managing directors. For each milestone they achieved in market share after the acquisition, the couple would receive a cash bonus, since it drove up the company’s overall valuation.

Since these targets were based on Sulit’s current standing, RJ and Arianne had to assess their position with precision rather than pride. “It was important to evaluate the site as realistically as possible, or we would not be able to hit the milestones,” RJ said.

While most founders try to negotiate for as short a vesting period as possible, RJ and Arianne asked to extend theirs. “Giving them a longer time frame to buy 100% of the company means Sulit’s valuation and the valuation of our shares will continue to grow,” RJ said.

Once they agreed on terms—RJ and Arianne would stay on until December 2013—Naspers commenced legal and technical due diligence. When this period dragged on for months, the couple grew frustrated, itching as they were to focus on the AyosDito.ph threat. The usually soft-spoken RJ returned to Naspers with an ultimatum. “If you are serious about joining us, we are giving you one week,” he said. “Or we’re looking for other investors.”

Naspers did not give RJ the opportunity to make due on his threat: They finalized the majority acquisition of Sulit a few days later, and the new partners turned their attention to conquering the Philippines.

Their first big move was an actual move. The fivesome signed a lease for a new office on the 24th floor of Unionbank Plaza in Ortigas. In preparation of the transfer to a much larger space—it would accommodate 30 people—the co-founders went into full-on hiring mode, interviewing candidates non-stop at a nearby coffee shop.

Given the venue, one can only imagine RJ and Arianne asking candidates about their strengths over the whir of blenders—some candidates questioned the legitimacy of Sulit, as diplomatically as only someone looking for a job can. 

“It was funny because some people were wondering, ‘Is this real? Is this a serious job?’” Arianne recalled, as though she were a multi-level marketer about to ask candidates whether they were open-minded.

If there was any indication RJ and Arianne were confident in the people they did hire, it was in the expectations they thrust upon them, even if it could be more than people were used to. On Justin Calingasan’s first day at the new office, the user interface manager was asked, “What are we going to do with the website?”

At this stage, there were also no department meetings. Every meeting was a town hall, even until the time Sulit’s team reached twenty people. One of the most important early discussions centered around a possible foray into above the line advertising.

Naspers had advised RJ and Arianne to air television commercials (TVCs) for Sulit. As digital natives, RJ and Arianne hated the idea of traditional marketing, but kept an open mind based on what Naspers told them had happened in Russia. In the span of two years, Avito.ru had won the online classifieds space in the country owing largely to its television commercials.

Would TVCs work the same way in the Philippines? RJ, Arianne, and the early team members did not get Sulit to where it was if they were not open to at least trying. Sulit’s string of TVCs introduced the online classifieds to both buyers and sellers. In one designed for the latter, the voice-over asks, “Ano hanap mo?” before cutting to a female proprietor gazing longingly at a passing man. “Ah, customer,” the voiceover intones knowingly. He then says there are many of those on Sulit.com.ph, as it shows “Arianne’s Online Store” get overrun with sales. The commercial ends with Arianne’s stand-in being chased with a swarm of mouse cursors.

On April 9, 2012, the day Sulit aired its first television commercial in this series, RJ’s phone did not stop ringing. Friends and family called one after the other to congratulate him for nabbing John Lloyd Cruz as Sulit’s endorser. The confused RJ—he had never met Cruz before—soon discovered that the actor was promoting AyosDito.ph in their own television spots, which had also began airing that very same day.

 

Enter the OLX era

 

These TVCs doubled Sulit’s traffic over the course of only three months, but there was one major problem: AyosDito.ph also had a lever that they could crank for more visitors and users, and they had seven times the budget.

As such, it became even more important for RJ and Arianne to distinguish Sulit through its branding. One avenue was security. Sulit could gain significant ground on AyosDito.ph if it established itself as the safest community through which to transact.

To this end, the couple toyed with company-sanctioned meetup points, where buyers could arrange to confidently meet sellers in a secure public location. Sulit tested the concept at MRT stations, but found adoption low. Buyers were wary of using these meetup points for all but the smallest of items. “You don’t want to be carrying 10,000 pesos to meet up in MRT,” Arianne explained.

A far more effective alternative would be to prevent scammers from even reaching the meetup stage. Sulit had relied mostly on self-policing here—users could flag a suspicious ad for escalation to a team member. In November 2013, RJ and Arianne took this a step further by hiring out a support team to screen listings.

The support team’s first line of defense was an algorithm that assigned points to each listing, depending on its content. “With most people who try to scam someone, they have a script,” RJ said, likening it to a fingerprint—it was unique to each person and could thus be used as a means of identification. Examining the different data points of a listing—the title, the copy, the keywords, the photos, and even the email address—told the algorithm how likely it was to be a previously posted scam.

High ranking listings, or those most likely to be genuine, were published automatically to Sulit. Posts that netted only a moderate amount of points were forwarded to a support team member for further evaluation, and low ranking listings were blocked immediately.

While the points system hurt the scammers who did not bother to switch up their tactics, the savvier ones were always bound to get away. On one occasion, RJ received a subpoena to appear at the headquarters of the National Bureau of Investigation (NBI) regarding an incident in which a Sulit user wired money to a seller for a phone he never got. “Am I going to jail?” RJ asked Arianne. For the next few days, RJ did not sleep soundly, until Sulit’s legal team reassured him such subpoenas were a normal course of business, especially for a site as large as theirs.

By 2014, RJ and Arianne were striving to ward off not only AyosDito.ph, but the Rocket Internet-backed Lazada.

“At that time, you could buy a brand new iPhone with a 20% discount, 14-day money back guarantee, and free shipping from Lazada,” RJ said.

Since Sulit did not control its own inventory, RJ and Arianne could not compete with these offers. While many small electronic stores were selling the same iPhone model on Sulit, he could not force them to drop their prices even lower, create a more favorable return policy, or match Lazada’s free shipping. RJ’s powerlessness was illuminating. Just as his hero, Kevin Rose, realized that an army of Kevin Roses could do a better job of sourcing news than desk editors, he saw his possible edge in the crowd: an army of RJ Davids could present infinitely more options to consumers than Lazada and also AyosDito.ph.

In other words, if Sulit expanded from its base of micro entrepreneurs and small businesses to focus on customer to customer (C2C) trading—that is, individual Filipinos looking to sell their secondhand items—the choices for consumers would multiply manifold. For every million Filipinos who dusted off something from their proverbial closet, Sulit would gain a million unique items. Why, then, would someone take up Lazada’s iPhone deal when you might find a seller on Sulit willing to part with theirs for cheaper, or get it to you not only for free, but faster (they may live in your city and be willing to meet up)? With C2C, Sulit would not offer a good deal like Lazada, but thousands of good deals, so you were bound to find one that suits your price, quality, and time sensitivity.

Since RJ knew it was not in the nature of Filipinos to sell their old belongings, he bankrolled a study that attempted to compute the value of all second-hand items in the Philippines. The think tank returned with the astonishing sounding number of 21 billion. If that figure was not enough to encourage Filipinos to emerge from the woodwork to claim their piece of the pie, RJ and Arianne developed new TVCs targeting the C2C segment.

In these, the voice of reason—a mother, a roommate, a friend—would command, “Ibenta mo na!”*

The country listened. Sulit’s C2C segment grew, and in turn so did the B2C market—when you have a core of individual customers, you have that many more people to patronize your small businesses. It was a classic network effect in action: The more individual Filipinos who adopted Sulit, the more valuable it became to everyone, businesses included.

In February 2014, Naspers sought to unify all their classifieds around the world under the global brand OLX. RJ pushed back and in a big way: Not only should Sulit remain Sulit in the Philippines, but Sulit should become the mother brand for all of the classifieds under the Naspers umbrella. While RJ was bold, he was also misguided—“Sulit” meant “difficult”

in Indonesian, and Indonesia was one of the group’s major markets. The decision became final: Sulit would be rebranded as OLX.ph.

At a team building seminar the same month, RJ fumbled the rebranding announcement. During his presentation, he mistakenly pushed the button to the slide revealing the big change before he could work up to it.

“Everyone was quiet. I could actually see people from the marketing team crying. Because it took them years, almost five years, from 2009 to 2014, to help us create that brand. It was an emotional day,” RJ said.

By the time Sulit rebranded as OLX.ph on March 19, 2014, most of the team had warmed up to the idea that operating under the global brand would help them conquer both the local C2C and B2C markets. The ultimate validation came nine months later, on January 22, 2015.

Users who regularly visited AyosDito.ph were in for a shock: Their web browser was now redirecting them to OLX.ph. The move was part of a deal OLX.ph completed with AyosDito.ph less than two weeks into the new year. RJ and Arianne had literally turned the tables: the people who once sat across from them, proposing an cquisition of Sulit, now found the company they backed absorbed into theirs. If the reversal of fortunes was not enough to remind the co-founders how far they had come, in January 2017 graffiti artist Egg Fiasco commemorated their journey with investors, team members, and millions of users in a mural at the OLX.ph headquarters, or what you could also call the house RJ and Arianne built. 

 

To learn more from founders like RJ and Arianne David, please check out the full book, available for purchase here


The Finishers - and other business books about the Philippines and Asia Pacific - will soon be streaming on Audiophile, our platform for exclusive Filipino audiobooks.

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