What has two wheels and is extremely unprofitable?
In late 2018, someone from tech news outfit, “The Information”, got their hands on a Bird Scooter investment presentation and wrote an article about it.
The pitch laid out Bird’s plan to reach profitability, revealing that their core business was very, very unprofitable. Using numbers from this article, we can do a little scrappy math to see what their margins might be:
The variables relevant to our calculation are:
Revenue:
$3.65 per ride.
Cost of goods sold :
Price of juicer per ride: $1.72 - “juicers” are the independent contractors that scooter companies pay to recharge their scooters. They use an app to find out-of-charge scooters and are paid a bounty to recharge them.
Price of scooter repair per ride: $.20
Price of scooter permit fees per ride - $.06
Price of insurance per ride: $.05
The cost data above appears to have been pre-amortized by ride.
From that information I was able to produce this chart:
First the good news: Our little model shows that the base business, the revenue minus cost of goods sold, is positive! Bird appears to make $1.11 per ride. That’s over 30% of every ride! If that were the whole story they would look to be in great shape.
You may have noticed an important factor missing from this calculation, however: The Scooter. We know from “The Information” that the cost of Bird’s scooters is $550 per unit. That means, with a gross profit of $1.11 per ride, it takes just over 495 rides on average to recoup the cost of a scooter. So how many rides does the average scooter have in it?
“The Information” says that Bird got an average of five rides out of each scooter per day. A Quartz article about Louisville KY’s data project, making data about scooter usage in that city available to the public, provides an estimated median scooter survival time of 26 days. That’s just 130 rides in the entire lifetime of a scooter. Our scooter euphoria begins to fade. Amortizing $550 over the lifetime of a scooter reveals a cost of $4.23 per ride. Adding this to our graph, the picture becomes stark:
Bird appears to lose $3.12 per ride. That’s a Loss of over 85% taken per bird ride based on our available data.
So the scooters- if these numbers remain the same - are not profitable to say the least. Is this the end of scoot nation? Are we doomed to walk from place to place like savage, stupid animals? I don’t know, but keep following “Scooter Math” and we’ll do our very best to find out!
Attached here is the spreadsheet I used for my calculations. Feel free to download and tinker with it. The first tab is full of data inputs, and the second page contains the actual profit calculations. By playing with the linked data, you can see what variables Bird might have to change to become profitable on a per-ride basis. Note: the calculation is based in the median scooter survival rate, so adjusting the mean rate will not change the math.