It sometimes seems as if the bike-sharing industry has entered into a suicide pact.
For some months, the bike-sharing industry has been beset by public relations problems. Riders complain about bikes that break down too easily due to poor quality, while others complain about bikes crowding sidewalks. City governments from Beijing to Shanghai have also begun to lean on the companies with new restrictions on how they can be lent out. And all the while, the three major companies of Mobike, Ofo, and Bluegogo have been locked in ruthless competition, whittling down prices to almost nothing.
In the face of all of this, the bike companies are sparing no effort—just not to address any of those problems.
This month, at its new office in the upscale Wangjing district of Beijing, Bluegogo’s founder Li Gang hosted a press event to publicize its latest generation of bikes, on which it has begun installing iPad minis. This is part of a new business model the company calls the “Kylin Plan.”
Inasmuch as the tablets will be able to offer navigation during rides, they make a kind of sense. But if that were the only purpose for them, it would be far easier to simply install a holder for riders’ phones. The real purpose is for the tablets to show ads for nearby businesses: shops, restaurants, hotels. With these popping up on a navigation map, it begins to look like a mobile version of Dianping or Yelp. The effectiveness of such ads might be limited; after all, in most cases, people already have a destination in mind when they borrow a bike.
Which is why Bluegogo intends for a more “disruptive” model: sales ads.
Bluegogo’s own comparison here is to advertiser Focus Media and to Toutiao, a popular news aggregation app—Focus because of its ubiquitous elevator ads, Toutiao because of its user data driven recommendations. The tablets would collect data on users’ rides and then deliver more targeted ads based on that.
Li emphasized that, for safety reasons, the ads would only display when the bikes are not in motion.
“If the bike-sharing industry were to have a hundred million rides per day, making a hundred million yuan per day, then you’d have a ceiling of just over 300 million per year.” Li hopes that, with ads playing six times per ride and an ad cost of around one to two yuan per thousand plays, there may hundred millions more in revenue.
Competitor Mobike seems to be thinking in parallel, focusing on slick business dealings rather than enhancing its core services. In addition to releasing a bizarre music single titled “Orange Bike,” Mobike recently announced partnerships with the apps of other companies like Baidu Maps and China Merchants Bank. The reasoning is simple enough: by being placed in messaging, finance, health, and hotel apps, it offers more entry points for potential users. In Baidu Maps, for example, where one has the option of finding routes to a destination “on foot” or “by bike,” a link has been added to connect users with Mobike’s bikes. A similar link is to be added to the “public transportation” section in the near future. At best, these measures seem designed to scrape a few users away from the competition.
Mobike and Bluegogo’s plans seem level-headed, however, against Ofo’s intentions. At the Tianmo music festival this month, the company announced its “X Project,” entailing the launch of a satellite into space that can be “shared” by users.
Jiutian, the company which will be providing the satellite, says that is will be capable of taking photos of users’ locations—space selfies, as it were—and that it will be equipped with a 360 degree camera so that users will be able to view space in VR. It will also carry LED lighting to make it visible to those on Earth with the naked eye, which users will be able to transmit visible messages by altering the flash duration and frequency.
If that all sounds a bit frivolous, Ofo does have some practical uses in mind: the satellite is hoped to be the first in a constellation of IoT satellites that will help in geolocation and monitoring of their bikes. What benefit this would offer over existing GPS and other geolocation satellite networks, which Mobike and Bluegogo use, is unclear. But then again, PR aside, it’s not yet certain Ofo will even move forward with the plan. When contacted about the exact nature of their partnership with Ofo, Jiutian said they were still in discussions about “platforms, channels, technology, and branding.”
Ofo’s astronomical ambitions mark a turn in the ruthless competition among the bike-sharing companies. Other fields of service have gone through pitched battles before, from group buying to ride-hailing to food delivery, but none have perhaps ever burned money with such abandon, nor tried to “innovate” in so many ways so completely divorced from the service they ostensibly provide. The latest plans from Mobike, Bluegogo, and Ofo have little to do with users, their rides, or their experience.
But then again, bike-sharing is a business with a low threshold for entry, and so long as the bikes are in working order, there is little to distinguish one company from another in the eyes of users. More concerning is that the user rates charged, at often less than a yuan per ride, have been suppressed by special deals and discounts until they have become virtually negative. The result has been a state of “cold war,” with bike-sharing companies unable to unseat one another despite their best efforts, and diverging farther and farther away from their original business.
How will this end? Bluegogo’s Li Gang offers two predictions: that by the end of this year the recycling rate on broken bikes will create a turning point, and that another turn will come in the companies’ business models in 2018. It may be that which company survives will have little to do with which has the greatest user experience or market share, but simply which can mop up the most cash, by whatever means.
Investors, however, may not be pleased to see their capital being burned through like this, and a reckoning may come sooner rather than later. And with the ever more complex situation for funding, the market may quickly be forced into a monopoly. For investors, after all, PR stunts and gimmicks count for very little. What matters is, ultimately, the bike-sharing companies cannot let users ride for free.