Dmytro Malakhov: How the startup became a «cash сow» and started gaining profit

Dmytro Malakhov, the founder of a daily apartment rental service, tells us about his experience of launching an online marketplace. Dmitry invested in his own business — he used the income from the main business for the startup funding and helped it to reach a break-even point. The interview contains the current metrics of the web marketplace and also the insight of real estate and tourism markets in Ukraine.

A marketplace that solves the market's problem, a website for daily apartment rental, has over twelve thousand rental advertisements. The partner base contains refined apartment hotels, guesthouses, and private flats. Such diversity allows users to quickly find the desired accommodation and rent it for a night. The idea of launching  this web platform arose 6 years ago.

We saw similar websites and applications in Europe. At that moment, we liked ApartmentsApart, and right then was launched in Ukraine. The latter got directly into the hotel sphere, but at the same time they realised that a great share of the Ukrainian market is filled with apartments so flat owners were also allowed to register on the site. After this, the Ukrainian site, was also taken into consideration.

Our company, Partner Guest House, worked within the real estate industry. Our team leased luxury apartments in the centre of Kyiv. Having seen the demand, we desired to create a Ukrainian resource for booking apartments. Our company invested in this project, we provided a stable cash flow for the startup.

Frankly speaking, nobody believed that would be a cow with real milk. It was more of a pet project/hobby to begin with. And for sure, our team spent all of its free time with this adorable pet.

Dmytro Malakhov

Nevertheless, the online marketplace started to show good results. This was confirmed by the market analysis conducted within 2 years after launching the project.

Analysis of the real estate market and USP of

It was useless to make the analysis of the market prior to launching a web platform — we have already learnt the market perfectly. Our team paid attention to the new project only after 2 years: we evaluated our opportunities and the number of available accommodations.

In Kyiv, the guestroom inventory counts ten thousand rooms, and there are five thousand apartments in the city. Just imagine that half of the hotel business is represented by apartments. With such numbers, it's obvious in which direction to move.

The online platform lists more than 2800 city flats. This is a very good base, keeping in mind that only 1000-1500 flats of the 5000 listed can be recognised as apartments. The rest of them are economy class accommodation priced at 300-400 UAH. Besides Kyiv, we also work in 330 other cities.

Initially, the goal was to leave behind online rental platforms. That's why our team created a call centre as a unique selling proposition.

dobovo results

The web platform is a booking system that registers a large number of orders via the phone. The audience of Ukraine cannot go through all the steps from searching for an apartment to ordering it without the operator. Clients feel more comfortable when they hear a real voice.

In general, the order is confirmed on the online platform within three minutes. Less than 20% of clients complete their online booking by themselves, which includes paying for the rent without being connected to the operator.

How to improve marketplace functionality

A web marketplace, in my opinion, is the future of the Internet. And as we are dealing with an actual «market», ratings and feedbacks play a crucial role here. This is what our team has done to improve the functionality of

  1. Offered 18+ payment options (credit cards, online transfers, webmoney, etc.)
  2. Cancelled deposit when booking an accommodation. In 2014, 40% of clients used this option, in 2015 —  only 27%.
  3. Added ratings of owners reliability. Ratings are affected by clients who booked accommodations on the site. Trust anchor is a renter's card (with the personal information and grades) on the online platform.
  4. Synchronised the booking calendars for flat owners (Ical, Channel managers, Google calendar with the possibility to import and export information from and to other resources).
  5. Added reviews from people. There are more than 23K сomments. All of them are from real people.

These solutions are relevant for any online marketplace.

Creating a business model and initial fee

Today we use the Transaction Fee Revenue Business Model. Our team assigned fees of 5% to 15% for online booking. The percentage differs depending on the city in Ukraine, but it is fixed for a particular city.

Pricing was affected by international services of the same kind. For example, Expedia takes 25%, Booking — 18%. We decided to take the average value — 15% is a common fee in the booking sphere.

The only exception is Airbnb, their fee is not fixed and may vary. Our policy is different.

We keep working on increasing the web traffic. Context advertising and organic traffic bring the majority of visitors (the more landing SEO pages, the better). Comparing to 2013, we increased the user flow from social networks and site recognition due to partner programs (referral links, widgets, XMLAPI). 8% of users come from email subscriptions that we launched. We send them by«cohorts», segments of the audience with the same interests. To identify them, our team is tracking their requests. So we send people the information they are interested in.

dobovo’s traffic channels

On the chart you can see, which devices (in percentages) are used for visiting the site.

new dobovo's users by device

dobovo E-commerce Conversion Rate

Main marketing metrics of the web platform

I would highlight the following:

  • The number of accommodations

This is what we had when we entered the market. This number keeps rising. About 200 apartments are added each week.

  • Owners

There are more than seven thousand of them. According to our statistics, every second owner stays with us. It does not mean that others don't want to. It means that some of them register, don't use their account and then create another one. Finally, there are 7500 accounts with 3600 users active. We can easily calculate that 1 owner has 4 flats. 3600x4=12000.

  • Clients' reviews

This is what helps a tourist make a decision. Due to this information, we grow and move forward

Comments left by the’ users

Using analytics, our team tried to identify the most valuable clients for us. For example, we found out that the clients that speak Turkish spent more money per visit than others. After that, we adjusted the advertising campaigns.

We also determine the percentage of paid orders per day. For example, let's calculate for 1000 orders:

  • 300 orders — demanded, often they are unavailable;
  • 300 orders are expiring — either the owner has not confirmed the availability of the flat or the client has not paid for it;
  • up to 200 orders are paid;
  • about 50 cancellations both from the clients’ side and from the owners’ side.

With 1000 orders, we have 20% of paid orders.

Conversion can be easily estimated. Each day, our marketplace is visited by about ten thousand users. One thousand of them complete their order and make a purchase. This is 10%.

Clients return to our web platform every 9 months. This is an average estimate that we have. It's hard to estimate LTV for this project.

Work on conversion increase

Because of the product specifics, work on the conversion means improving the site and its usability. Conversion of is influenced by those factors that may not relate to the site itself — seasonality, availability of accommodations on certain dates, popularity of the destination.

Cards of owners

We added ratings of owners reliability on the page with the flat rent. Due to this innovation, conversion increased by 30-35%.

cards of landlord on dobovo

Implementing a mobile version of the site

We implemented a full mobile version in November 2015. Comparing indexes for two similar periods (November, 2015 — August 2016 and November 2014 —  August 2015), it's easy to say that conversion on mobile devices has grown by 25%, and the turnover earned by the mobile traffic has doubled. The average booking price made from these devices has increased.

results after implement mobile version dobovo

Loyalty system

Our team has introduced fixed discounts that are available to customers that make repeated bookings. Using this incentive, we inspired more clients to register. Because of this, the number of registered clients has increased by 60% in the last two months.

Search over the map

The last thing that we have done is introduced map search function. It's the easiest way to navigate the selected region and compare prices for flats in different parts of the city. From July, the number of clients that looked for accommodations using the map has tripled. It's hard to say whether it has any impact on the conversion — the season should also be taken into account, for example, accommodations were in high demand in Odessa over the summer, but the potential of this solution is obvious.

Changes in tourism geography

We reached the break-even point 1,5 years ago, 1 year after the Revolution of Dignity. At first, we barely survived, the first 2-3 months were very tough for us. Then we were able to adjust our business to the local market, and the curtain was raised.

Ukraine was isolated because of currency depreciation. As most of the people could not afford to travel abroad to Europe, local tourism started developing. The apartments that our site offered were in high demand.

dobovo business difficulties during Ukraine’s Revolution of Dignity (Jan-Feb 2014)

The most popular cities for Ukrainians to take a break are still Kyiv, Lviv, and Odessa.

Travel destinations of the’ users in Ukraine

The geography of tourists who come to Ukraine has significantly changed.

Who travels to Ukraine

Such global changes on the market have confirmed that it's critical to be sure about your idea here and now. If something is done at the wrong time, the chances of success are very low. It's vital to do it now so your project can pick up momentum. In that case, neither competitors nor global players that enter the market can influence your profitability.

Header photo: DaLiu /

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