In the past year, bike-sharing companies have transformed China's cities: Suddenly, bicycles are everywhere, in hues from sky blue to canary yellow to flashy gold. Riders unlock them by scanning a QR code with a smartphone and then park them wherever they want; there are no docking stations. Each ride costs just pennies via mobile payments, which have been widely adopted in China.
Obviously, marketers are interested. Bike-sharing apps can potentially yield a lot about riders, like the area where they live, their route to work, which shops they typically pass by and whether they're on holiday in a new city. And brands have been experimenting with how to tap into the sudden Chinese craze.
Pizza Hut ran a two-day promotion on the Mobike service, with 10 million riders collecting digital stickers on their smartphones; two stickers could be redeemed for a free breakfast coffee. JD.com, a big Chinese e-commerce player, also did a sticker-based campaign with Mobike for its annual sales event, dubbed "618" because the date is June 18 or 6/18; people needed five stickers for a chance to win prizes worth 618 yuan, about $90.
Some bikes from the Ofo bike rental service, meanwhile, turned into moving billboards promoting the movie "Despicable Me 3." Ofo bikes are bright yellow – the same shade as the movie's stubby Minion characters, which are called "Little Yellow People" in Chinese. Handlebars were outfitted with the googly Minion eyes.
The business model
Some Chinese cities have long had rental bikes similar to New York's Citi Bikes or Paris' Velib service, but things really took off when Chinese companies offered bikes that can be parked anywhere. There are several dozen companies competing in the sector.
Kleiner Perkins Caufield & Byers partner Mary Meeker's Internet Trends Report said the bikes' user numbers have been doubling from month to month; as of March, it said, there were over 20 million monthly active users.
Bike-share companies have been a hit with investors too, amassing funding at breakneck speed and marking a hot new area of competition for China's tech companies. The two standouts, Mobike and Ofo, are both valued at over $1 billion. Mobike, whose investors include internet giant Tencent Holdings, has raised more than $1 billion since January. Its expansion to the U.K. city of Manchester this month marked its 100th city.
Ofo, meanwhile, has backing from Alibaba Group-affiliated Ant Financial, and is in the midst of a new funding round. Louis Houdart, founder of China-based boutique branding agency Creative Capital, says Ofo has been successfully positioning itself. It hired pop superstar Lu Han as a pitchman, adding to the brand's blend of cuteness and romanticism that appeals to young people, he said.
Since the sector is so competitive and awash with venture capital, rides are cheap and often free. A typical Mobike ride costs 7 or 15 cents. There have been questions about the business model; Jeffrey Towson, Peking University professor of investment, has argued that given the thin margins, it might take at least a year to recoup the cost of manufacturing a bike, without taking into account vandalism, maintenance and theft.
Others are bullish. Matthew Brennan, founder of China Channel, a tech research and consultancy firm, believes bike-share companies will branch out. In the future, users might even be enlisted to deliver packages for a small payment, he says. And successful bike-share companies are also well-placed to expand into autonomous-vehicle-sharing services, he said.
Already the data they have is valuable to a wide variety of brands, he said, and it's easy to incentivize people to go to a store and buy something with a virtual coupon that pops up on your smartphone. "They've got so much data, they can analyze it and know the right time to push stuff to people when they've just got on a bike and are able to go somewhere," he said. "That can be incredibly powerful."