We covered Obike about a year ago in our article "Singapore's Obike - Yet to prove itself" and many things have changed since then.
Changes in the Bike-Sharing Landscape in Singapore
First, there has been new entrants in the economy starting with the usual suspects which are Ofo and Mobike respectively. Baicycle, Gbikes and SG Bike are the other entrants who are lesser known. Competition is plainly fierce.
Second, Land Transport Authority (LTA) and bike-sharing companies are working together to ensure that public spaces are not affected by the parked bikes. There are even designed parking zones nowadays.
Credit: Channel News Asia
Third, Obike was the first-mover in Singapore but Ofo and Mobike have quickly taken over significant market share over the past 12 months. Obike has reached 10 million rides globally since it was founded, compared to Ofo and Mobike who are doing 32 million rides and 20 million rides respectively on a daily basis.
On a personal note, we have also shifted from Obike to Mobike.
Has Obike evolved since our first article?
In a nutshell, we believe Obike is growing and has learnt from its early days. In this article, we are excited to cover the company's (updated) business model and the set of features rolled out to improve its positioning both in Singapore and in its other markets. As usual, we would focus on the company's presence in Singapore and throughout the ASEAN markets.
Obike's Business Model
Obike started out like all the other Chinese brands (Ofo, Mobike to name a few) which had a revenue model of pay-per-use. With time the company has added new sources of revenue, which are possibly aimed to be predictable, stable and with scalability factor. The company has had to further work with Land Transport Authority to encourage its users/riders to properly park their bikes after using. An initiative that would require and hopefully teach Obike that working with local Government and related authorities as their key partners would be essential for their business model in any given country.
Analysing The New Sources of Revenue
Firstly, Obike has introduced the oBike’s Global Business Partner Program which is the company's approach to scaling up by outsourcing the groundwork to potential partners in new cities/countries. It is a simple franchise model that works on a revenue share basis.
By doing so, Obike would effectively minimize market risk by having someone else to test the waters, while sharing their operational expertise to a localized 3rd party with, hopefully, an established network.
Secondly, Obike has introduced Obike Flash which is similar to an on-demand delivery service by bike (but not limited to Obike bike). The key premise here would have been to monetize on its network of bikes and riders (i.e. converting riders into delivery person) offering both parties an additional source of income.
It could effectively work with restaurants or e-commerce players but would then need to have a dedicated fleet of riders to ensure timely deliveries, lest aside to meet service level agreements (SLA).
Thirdly, Obike has ventured into advertising. Some of its bikes have been tagged with Grab's logo, which implied a collaboration beyond the investment received from Grab.
Credit Source: Tech in Asia
The strategic partnership would allow Obike users to pay using GrabPay, while also earning GrabRewards. In addition, there is a bit of branding going on, as seen on some bikes.
Lastly, Obike has been collecting deposits from its users. While this has been a controversial topic, we would see the opportunity in investing deposit money into dividend-yield paying assets (preferably, with liquidity). Airbnb is now known for using a similar strategy to generate cash flow.
It is a dangerous game to play for Obike, but sound financial management could help the company to make a steady source of revenue while continuously tweaking its business model and finding solid source(s) of revenue.
Profitability remains evasive to Obike (and perhaps to its competitors too). The business model originally intended that more people would use the app more frequently, which subsequently would generate the revenue.
It would be something along the line of
Revenue = # of daily rides x $ per minute
With time this formula might not work as the market is too competitive, and profitability would have to come from somewhere else.
It remains to be proven whether bike-sharing and Obike can survive the competitive landscape in Singapore. For other markets, it would also include infrastructural challenge among others.
Obike has probably built a decent user base at this moment, and could possibly pivot into another space.
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