Inside Bird's Scooter Economics - The Information


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Electric scooter rental service Bird told prospective investors in June of this year that it was on pace to generate around $65 million in revenue annually. At the time, Bird was operating in roughly 10 markets and has since launched service in almost 100 more cities domestically and abroad. The company is now on pace to generate hundreds of millions of dollars annually in gross revenue, said a person briefed on the matter.

Those early revenue numbers compared favorably with Bird’s main rival Lime, which told investors as of April that it was on track to generate $25 million annually based on its business at the time. Lime, which operated in many more markets with both scooters and bikes, projected its revenue would climb to a pace of $500 million by the end of the year, according to Axios. Lime had an existing bike-sharing business, so the figures probably would not be an apples-to-apples comparison with Bird, which only rents scooters.

Extensive data on Bird’s business were part of a pitch to investors as Bird raised hundreds of millions of dollars in the spring, at a post-investment valuation of $2 billion. Much has changed since then: Some cities have introduced caps on the number of scooters able to be rented, while additional companies have launched scooter services, almost certainly crimping Bird’s growth in some places. It has also had early discussions with investors about a new round of funding at a $4 billion to $5 billion valuation, although the company isn’t seen to be far along in the process, people close to the company said.

Still, the presentation to investors, a copy of which was made available to The Information, gives a sense of what Bird was telling investors before the industry became more competitive. Bird said it expected to greatly improve its gross profit margin in the “near term” to a level that would nearly match what ride-hailing firm Lyft recorded when it was five years old, according to an analysis of the confidential documents. Bird’s rental service is barely a year old.

However, the pitch to prospective investors did not deal with some of the thorny issues facing scooter companies—namely, the fragility of the vehicles, which quickly break down. And it did not disclose losses, but it did detail the cost of a vehicle, including the software modifications made by Bird, and various other fees and costs associated with running the rental service. Such data have never been disclosed publicly.

The ongoing fundraising efforts by Bird, and Lime, which was valued at more than $1 billion as of July, have been the subject of intense interest in the transportation world where they are seen as potentially undercutting the growth of ride-hailing firms Uber and Lyft. Those firms, meanwhile, have launched their own rival scooter services, in the belief that scooter businesses are stronger when paired with car-based rides that can fulfill travel no matter the distance, topography, or time of year.

In the presentation, Bird said it was generating $3.65 in revenue per ride: The company generally charges $1 upfront plus 15 cents a minute after that. And Bird told one investor that by the end of May, at its peak, the company generated more than $180,000 in a single day, or more than $65 million on an annual basis if multiplied by 365. That was nearly double the revenue the company could generate in a single day as of early May. (A Bird spokeswoman had no comment for this article.)

Lime customers typically have to pre-load the app in $10, $20 or $50 increments, which gives the company more money up front. Bird sees such a move as a barrier to a customer taking their first ride, so it just charges them each ride, a person close to the company said.

In the documents from May and June, Bird did not disclose its bottom line results. But the company was up front about the “operational barriers,” saying that it was “difficult to scale” to more than 1 million vehicles around the world and that car-based ride-hailing was “easy by comparison.” It said that among the challenges were dealing with supply chain issues—indeed, obtaining enough supply is a challenge for all scooter rental firms—and regulations that may cap scooter fleets.

It added that Bird’s executives, many of whom worked at Uber previously, have “deep experience in operationally intensive businesses.” At least six executives at Bird previously worked at Uber or Lyft or both. The CEO, Travis VanderZanden, is in the latter camp and his departure from Lyft was not pretty.

When it comes to viewing Uber and Lyft as the competition, the Bird fundraising pitch deck downplayed the threat. It said Uber and Lyft “are preparing for IPO, so they won’t invest aggressively and won’t subsidize prices.” And in general, Bird said Uber and Lyft “move slowly” and are 8 to 12 months behind. Since then, both ride-hailing companies have indicated they would invest in electric vehicles and have launched scooters in some American cities, though they have run into scooter supply constraints along with Bird and others. A person who has data on Uber’s and Lyft’s scooter and bike plans said together they already have planned to invest a combined $1 billion in the field.

Here are some details from Bird’s pitch:

Bird said it was handling nearly 170,000 rides per week as of the first week of May (with 80,000 occurring in the Los Angeles area), up from 135,000 in April and 90,000 in March. In an update to one investor, Bird said its scooters were ridden 820,000 times between the first week of May and the first week of June, or more than 200,000 rides per week.

Bird had around 10,500 “active” Bird scooters as of early May, up from 3,500 two months earlier. Each vehicle cost $551 as of May. That includes a GPS device, shipping costs, assembly and putting Bird brand stickers on it. And that cost was down from nearly $600 previously. Bird said that in the “near term” it believed it could lower the cost of each device to $360, mainly by bringing down the cost of each scooter’s “brain,” which may refer to the firmware tinkering necessary to connect it to the Bird network and be able to turn on the motor and battery remotely. It is not clear how Bird would bring down this cost. And the costs likely don’t factor in a roughly 25% tariff that has since come into effect as part of a U.S.-China trade war.

Bird said each “active” scooter was used five times per day as of early May, down from close to six times around the start of the year. Two rival scooter executives said they believed it would be difficult for Bird to maintain such a high “utilization rate” in competitive markets. That rate also doesn’t include inactive scooters that need repair or maintenance. Companies need to have many more scooters on hand in order to replenish the active fleet when vehicles break down in the field. Today’s electric scooters often last one or two months before needing replacement, according to investors and executives in the industry.

Bird data appeared to show that as of May, its gross profit margin was 19%. It calculated the figure by subtracting costs from the $3.65 average ride revenue: For instance, it spends $1.72 per ride to pay people to charge the scooters; that’s nearly half the gross revenue generated per ride. In addition, it costs an average of 51 cents per ride, or 14% of gross revenue, to repair scooters. Credit card fees add another 41 cents, or 11% of gross revenue, and fees paid to cities for permits are another 20 cents per ride, or 5% of gross revenue. Customer support averages out to 6 cents per ride, and insurance is another 5 cents per ride. From what is left, Bird still has to cover fixed costs such as its employees and offices, and sales and marketing.

Bird projected much better economics in the “near term,” allowing it to generate a 33% gross profit margin. That assumed a “reduction in charger fraud, restructuring of mechanic program, and batching credit card charges.” With that margin from each ride, it may still take Bird about three months to make enough money from each vehicle to offset the vehicle’s costs. Vehicles typically don’t last three months, according to executives of rival firms.

The company told prospective investors that it had spent no money to attract riders through advertising, though it apparently offered a promotional rate—which it refers to as “incentivized first rides”—that 16% of new riders took advantage of, costing Bird an average of $5.25 per person. All together, the company said it cost 83 cents to attract each new rider. Bird said more than half of riders take a second ride less than a week after their first, and 3.6 rides on average during the first four weeks. Notably, Bird did not disclose rider churn. But it said that as of June it had nearly 1 million registered riders.
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