In a blow to China’s cash-burning bike sharing companies, the city of Beijing has banned commercial advertisement on bicycles deployed in the city, according to regulatory guidance released last week.
The move is a setback for China’s numerous bike sharing start-ups, including market leaders Mobike and ofo, as the companies and their investors had looked to commercial advertisement as a source of much-needed revenue. Both Mobike and ofo have said they will comply with the new regulations.
To attract customers, bike sharing companies charge very low rental fees. Mobike charges riders RMB1 (US$0.15) per half hour, while ofo charges RMB1 per hour. And last month, the two companies stopped requiring deposit fees from riders after a number of smaller players eliminated deposits.
"Mobike currently does not have a clear method to monetize, and we are relying on investors’ money," Wang Xiaofeng, CEO at Mobike told media last December. "We will aim to gain market share as much as possible first, and then discuss how to become profitable."
Advertisement was seen as a key means of achieving profitability. Tianjin-based bike sharing firm Bluegogo said in June that it planned to install smart digital screens on its bikes for both navigation and to display advertisement videos when customers were parking the bikes or waiting at traffic lights.
In July, Mobike began placing advertisements on the wheel covers of their bikes. Chinese media has reported that many bike sharing companies were selling advertisements space on bike wheel covers and baskets for RMB3 per day, per bike.
The new Beijing rules also require bike sharing companies to make riders park bikes inside designated parking areas, and purchase personal injury insurance for customers.
Earlier this months, the Beijing government banned new shared bikes in the city. Currently, 15 bike sharing start-ups have deployed a total of 2.3 million bikes in Beijing, according to Beijing Municipal Commission of Transport. To date, 13 cities in China, including Beijing, Shanghai Guangzhou and Shenzhen, have banned new deployment of bikes.