Making money: the bike makers win every time
Where did I leave that bike?
It’s a new kind of plague. Major cities around the world are caught up in the rent-a-bike craze. Ride it to your destination and dump it —not your worry. But how does the scheme work? Share bikes—cluttering footpaths, laying on the beaches—piled up in parks and hanging in trees. Who makes money and how? Given the huge number of bikes it has to be the bike manufacturers. But the riders are tracked and say goodbye to their privacy. Is this being green?
How your personal information funds share bike schemes
You’re 25, you ride your brightly-coloured share bike across the city to get dinner and drinks with friends at the same pub every Friday, you take the same route home, and leave the bike near your house each time.
That kind of portrait is legally captured by the navigation systems and phone apps linked to the dockless share bike schemes quickly spreading across Australian cities, and is a valuable source of income, especially when they charge as little as $1 per half hour.
How do share bike companies make money?
They don’t cost much to use, they compete in a flooded market and have been targeted in widely covered acts of vandalism. So how do they make any money?
Business and urban planning academics say it’s a mixture of capturing and selling data on their users, collecting membership fees, advertising, and major funds from venture capital firms.
Dr Sandra Peter, from Sydney Business Insights at the University of Sydney’s Business School, said the information collected by the companies can be very lucrative, especially if combined with the data their investors have.
“The data they have on their users – when they use them, how they use the bikes, what routes they use – are fantastic sources of data and that’s revenue,” Dr Peter said.
“They can use that data to target advertising and combine it with other data sets or sell it to third-party companies.”
Like the Uber app, users agree to being tracked while riding the bikes under the terms of service and privacy policies for the Obike, Ofo and Reddy Go schemes, which all say they may share personal information with third parties.
Dr Peter said another source of revenue is charging start-up fees, like the $69 deposit for Obike, and the $99 membership fee for Reddy Go.
“Some of these companies have something like 100 million users in China – that is a lot of money to be sitting on.”
Mobike and Ofo, which both operate in Australia, are China’s biggest bike share companies, which also operate in Europe, Britain and the US, and have been valued at $4 billion combined, according to recent reports in financial publications, including Bloomberg.
Investors like Chinese e-commerce business Alibaba and telecommunications giant Tencent recently poured hundreds of millions of dollars into Ofo and Mobike.
The data they have on their users – when they use them, how they use the bikes, what routes they use – are fantastic sources of data and that’s revenue.
Dr Sandra Peter
Sun Sheng Han, professor of urban planning at Melbourne University, said many of the businesses float on funds from investors, who are prepared to risk short-term losses to bank on a huge shift to sustainable transport and a sharing economy in the future.
“It’s a concept that [investors] buy into to the future of all urban transport development. The present form is very much car-driven, which is associated with road congestion, pollution, resource depletion and climate change,” Professor Han said.
“So by introducing bikes there is a possibility to replace the current urban transport to a more sustainable form, there is a possibility to make a good shift.”
Aside from well-publicised acts of vandalism and criticism of the bikes – like Melbourne’s Lord mayor Robert Doyle describing them as “clutter” – another major challenge for the schemes is cycling infrastructure, Professor Han said.
“If these shared bike resources can be better directed to certain areas … then the outcome could be better managed.”
Mobike, which launched in Sydney on Tuesday, claims to set itself apart by launching only in Green Square, after consultations with the council identified it as a region in need of an alternative to public transport and roads congested with cars.
Dr Peter said the future for bike sharing in Australia is unclear, pointing to cities where the schemes have not succeeded, including in cycle-centric Copenhagen, where GoBike went broke after failing to find new investors.
“They were always seen as one of the places likely to succeed, but they couldn’t keep up with the cost – it cost around DKK80 million (about $16 million) to keep them afloat.
“Don’t get me wrong I moved here from the Netherlands, I love bikes and biking, and I think it’s a fantastic thing, but I think quite often we get enchanted about the claims around them and forget the difficulty of realising the potential of cycling as viable transport in a big city.”