Uncertain profit model makes an acquisition inevitable; in-depth integration with existing tech powerhouses is their only way out

For both Mobike and ofo, their last largest funding injections were in July 2017. Both suffered from different degrees of cashflow strains resulting from a fierce subsidy war launched upon receiving their respective massive fundings.

Despite the cooling capital market, their dubious monetization model hasn’t proven sustainable. The original pay-by-per-ride approach proved to be difficult given the high maintenance costs resulting from high damage rates. What’s more, the fierce competition, fueled by capital inflow, established subsidy as a new normality in the industry, making it even harder for the companies to generate gains.

China’s largest O2O platform Meituan-Dianping announced its purchase of Mobike for $2.7 billion on April 4th. When commenting on the deal, many local media argued that it’s difficult for bike rental firm to seek independent development given the monetization model, and in-depth integration with existing tech powerhouses is their only way out.

Ofo under mounting pressure to pick a side
Facing a similar, but more complex situation stuck between Alibaba and Didi, ofo’s founder Dai Wei is more tenacious in maintaining the company’s independent status. In an internal speech given in May, the co-founder sought to rally the company by comparing its current status to Winston Churchill and wartime Britain. Ofo’s dark time would seem to refer to acquisition talks held with Didi at the end of April.

However, the bike rental titan seems to be coming under fire, with swirling negative publicity and rumors of their impending demise. In an article published on June 5th, local Chinese tech blog Huxiu cited many sources who disclosed that ofo would launch its largest-ever job cut, with up to 50% losing their jobs. Along with the cut, the sources said several top execs of the company including Nan Nan, SVP of public relations, have left their positions. Shortly after the post, thousands of posts featuring almost identical bearish views on ofo’s prospects appeared across China’s social media.

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