Why Do Micromobility Companies Keep Losing Money?
7:26 PM PST on January 15, 2020
The micromobility movement is bleeding money. But does that mean there’s no future for bike- and scooter-share on American streets?
Of course not, but that’s the question many advocates are asking themselves after a rash of disappointing news in the sustainable transportation tech sector. Lime made national headlines when it announced last week that it was laying off 100 employees and pulling out of 12 city markets to “shift [their] primary focus to profitability.” And it’s not just the private-market giants that are struggling to make the numbers work; San Antonio’s bikeshare non-profit, San Antonio Bikes, just became the latest city-supported program to fall into jeopardy when its exclusive title sponsor unexpectedly opted out of its contract.
How is this possible, when you seemingly can’t walk down the street in an American city without bumping into a Bird leaning against a bike rack? After all, scooter ridership is on the rise, and every day brings a new breathless op-ed (often in Streetsblog!) about how solo transit options are the future of transportation. And why does every setback for a micromobility company come with "end-of-days"-style headlines, even though no other form of public transit is expected to make money?
Yes, the revolution is surely hitting some potholes — and here are five reasons why micromobility isn’t mathing out yet — but shared bikes, scooters and other sustainable modes of transportation may yet thrive and take their place as the kind of stable public services our cities need.
1. Scooters (and bikes) wear out
If you've ever seen a Divvy bike folded into a trash can or a pod of scooters hurled en masse into the ocean, you can probably guess one of micromobility's greatest Achilles heels: keeping fleets on the streets. And while a scooter can generally start turning a profit after about four months, Calcalist reported in June that the average scooter only lasts for an average of three months. Do. The. Math.
Luckily, this is a challenge that's fast being solved by better design. Bird launched a new scooter model last year that has four times the longevity of its standard fleet; Lime has announced plans to unveil its own durable alternative that could last even longer.
2. Micromobility is still a hotly contested market
Remember when you had to download a dozen-odd apps on your phone if you wanted to have comprehensive access to your city's many (many, many) micro-mobility options? In many American metros, that's still the case — and it isn't easy to be profitable with the market split so many ways.
Beating your rivals costs micromobility companies more than just ad dollars, too. San Antonio Bikeshare Executive Director J.D. Simpson says her network's ridership numbers fell when dockless scooters came to town — and not always because consumers preferred them to the docked cycles SABS offers.
"People thought the scooters were ours," Simpson says. "I mean, people were trying to dock scooters where our bikes are supposed to go, and they were blocking our stations. And then people were confused about what and how the docked bike program worked all of a sudden; people started taking bikes out of stations and then just leaving them wherever, and we lost bikes that way. There was just a lot of market confusion."
As the law of survival of the fittest wins out, though, micromobility will become easier to navigate — and in the process, more profitable.
3. On the private side: a sea change in venture capital
It's no secret that private bikeshare companies all have one thing in common: loads and loads of venture capital funding. And if you follow the funhouse mirror-world of VCs, you know that the basic business model is this: grow, grow, grow, then worry about turning a profit.
In the mobility sector, Silicon Valley funders seemed to collectively reach that inflection point in 2019 in the wake of initial public offerings from Uber and Lyft. That meant it was time for mobility giants to stop hemorrhaging cash while they jockeyed for market share and start showing a real profit—a cultural sea change that also hit not-yet-publicly-traded micromobility companies like Lime.
That's a long way of saying that headlines like Lime's layoffs (and Bird's, and Scoot's, and Lyfts, all of which occurred earlier in 2019) aren't necessarily a sign that the private scooter share industry is on the brink of collapse. It just means the private market is pivoting from a model subsidized by big-money backers to one that will have to stand on its own two wheels. We shouldn't be surprised that there are some bumps in beginning of the road.
4. On the public side: fickle sponsors
Without going too deeply into weeds of how city-specific bike- and scooter-share programs are funded — a messy process that CityLab described as a "sorta-public, sorta-private mishmash" — suffice it to say that in many markets, these systems often rely on single large sponsors for their continued existence. And when those sponsors pull back, they can take the whole microtransit system down with them.
While San Antonio is the latest example of a bikeshare undone by a fickle benefactor, they are far from the first. Cleveland's UH Bikes shut down last month after title sponsor University Hospital opted out of its contract renewal. The region is shifting to a contract with private bikeshare company HOPR instead.
"There’s been lots of banter about the sponsorship avenue no longer being unrealistic," San Antonio Bikeshare's Simpson said. "In the early days of bike share, it seemed to be the way to go. Now, we're not necessarily talking about this traditional sponsorship model anymore, where [a sponsor] has its name on the bike and the station. ... We're talking about a larger section of the community and private enterprises stepping up and provide funding."
Simpson is interested in new sponsorship models, such as corporations subsidizing bikeshare subscriptions for their employees.
5. Autocentric streets
Of course, the single biggest challenge facing micromobility companies is the one every American road user outside a car faces every day: autocentric streets with little dedicated infrastructure for revolutionary new modes of public transportation. And if the physical landscape isn't bad enough, add in a regulatory landscape that makes micromobility even more unwelcome — Boston Consulting group estimates that micromobility companies spend an average of 7 percent of their revenue on regulatory challenges — and it's no wonder the transportation corner of the sharing economy struggles.
Alex Baca, who previously managed Cleveland's now-defunct UH Bikes, put it bluntly: "Riding a bike in Cleveland kind of sucks." The notoriously autocentric city covers a sprawling 82.5 square miles and didn't get a protected bike lane until 2016. To get to a robust bikeshare program in a place like Cleveland, she said, "there just isn’t much you can do from the standpoint of improving operations, because the land use is completely fucked."
Cory Epstein of Lyft, though, thinks public-private micromobility partnerships can be a part of the solution for car-dominated cities. Among other markets, his company administers New York's Citi Bike in a sort-of partnership with local government, an arrangement he says has been instrumental in making New York City streets better not just for Citi Bike riders, but for everyone on two feet or two wheels. (My Streetsblog NYC colleagues will likely be able to drive a truck through the holes in Epstein's arguments.)
"At Lyft, we're always thinking about how we can pair our growth with the growth of the protected bike lane network," he said. "We’ve planned for increased micromobility hand in hand with cities as they planned for better streets, I think that’s why you’ve seen us succeed." Citi Bike notably reported over $49 million in year-to-date revenues in its last monthly report — money it will need because the de Blasio administration isn't chipping in a dime, even though Citi Bike serves an astounding 90,000 rides on many days.
For Baca, though, those bottom-line numbers aren't really the point. "I mean, no one's asking whether highways make money," she said. "Every transportation option is subsidized in some fashion. I guess my question is: should the measure of the value of a micromobility program be that it makes money? I'm not sure about that."
If the real measure of a micromobility program is simply "does it get people where they need to go without getting in a car?" shared scooters and bikes are clearly proving their worth. And if we want our cities to be even more sustainably connected, maybe we should focus on ridership and connectivity metrics rather than budgets, and just maybe, start treating micromobility options for what they are: a public service that deserves our public investment.
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