Yesterday, Ofo has announced a partnership deal (in Chinese) with China Telecom (中国电信) and Huawei. The partnership will see China Telecom providing wireless data access, Huawei providing NB-IoT chips (PDF), and Ofo providing the bikes. The announcement emphasized a big pain point for the company: their technology.

At this point, it’s fairly clear that Mobike and Ofo are not part of a “sharing economy”, rather they are an O2O solution to a notoriously difficult transportation problem. However, what isn’t so clear is whether they are technology companies.

O2O ride-hailing services like Uber and Didi must create and optimize their software and underlying algorithms to reduce friction and ensure that customers are satisfied through short wait times, easy payments, as well as a sense of trust between driver and passenger. Bike-rental, on the other hand, is much simpler. Mobike, through GPS and QR code-based authentication systems, at least has a way to keep track of their bikes and create a pool of data. Ofo, however, has an app which tells you the static combination for a 4-digit lock.

Ofo bike on the street with serial number and QR codes painted over

This lack of technology has been Ofo’s greatest weakness. Without GPS, Ofo users have no way of finding a bike unless they are looking at one nor can the company accurately locate bikes that need pick-up or servicing. With a static combination, indefinitely borrowing any given bike is a piece of cake. Indeed, around the same time as the announcement yesterday, The Paper released a video showing just how easy it is to unlock an Ofo bike. On top of that, there have been reports of people collecting combinations and selling them online for as little as 3 mao (US$ 0.04).

The partnership between Ofo, Huawei, and China Telecom brings obvious benefits to Ofo: first, they can better protect their investment in their fixed assets; second, they now have the ability to gather data about users and transportation patterns (something that Mobike has already been doing), giving them a better chance of success.

The bike-rental certainly is not over and shows little signs of cooling down. Even with smaller players still expanding, Mobike and Ofo have such a lead that it is hard to imagine them slipping to third or fourth place.

John Artman, outgoing EIC of TechNode

John Artman

John Artman is the Editor in Chief for TechNode, the leading English information source for news and insight into China’s tech and startups, and co-host of the China Tech Talk podcast, a regular discussion...