Simple Analysis of ORide’s Business Model
By Abdulazeez Kuranga / 6th October, 2019
Curious to know about how ORide (A division of OPay) operates and generates money for themselves and Okada Riders, I decided to make use of their service from Ikeja City Mall to Iyana Ipaja Under Bridge. The purpose was to engage in a conversation with the rider on how they operate and generate money for themselves and OPay. Here is a run down of a simple analysis of Oride’s business model:
According to the Rider, they deliver N2000 per day to ORide no matter the total amount of money the riders make. For example, if in a day, a rider makes N12,000, he is entitled to N10,000 while ORide is entitled to N2,000. So even if most of the transactions the rider makes are off the application, all he just needs to do is to have N2,000 in his account to give ORide for that day. However, if a rider just joined, he will only be remiting N1,000 per day (Mondays to Fridays Alone, as Oride does not charge them for weekend rides) to Oride for the first 2 months, after which he will be remitting N2,000 for the next 10 months. After the 12 months is completed, the Motorcycle belongs to the Rider. Now, let us do some calculations on behalf of ORide: Based on the foregoing and using a case of a Rider who just joined in January, this means that the rider will only be remitting N1,000 per day from January to February. Monday to Friday is 5 days and there are 4 weeks in a month. This leaves us with 20 days in a month. Therefore, ORide receives N20,000 in January and N20,000 in Febuary, making N40,000 for the first two months.
For the remaining 10 months, ORide charges N2,000 and this translates to N40,000 per month and N400,000 for the 10 months. Therefore, in a year, ORide receives N440,000 per rider after which it gives the rider the motorcycle as his own. The price of a Baja v15 ranges between N200,000 and N230,000, and we assume a best case price scenerio of N240,000. Removing the cost price of N240,000 from the revenue ORide gets per rider in a year (N440,000), then we are left with a surplus of N200,000. As at the time of writing this article, the total number of Oride’s Riders cannot be ascertained. Therefore, the analysis can only be limited to just one rider.
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That’s a nice and good Analysis. More like a 100 percent return on the bike sold.
To make this information more robust then you need data about Oride in other states where the owner is the original owner of the bike, what Oride only provide is the Helmet and Mobile Phone (which will be paid for also in that pattern you gave above but theirs is in 90 days.
And also how do they make their money looking at the bogus bonus/promo they do for the boarders.
People have being arguing about their Sustainability
Do you think this is sustainable?
Thank you for your feedback. We believe that in the locations where Oride only provides Helmet and Mobile Phone, then the model will still be the same with when they provide the motor cycles. So by the end of the 90 days, Oride will make more money than the cost of both the helmet and the mobile phone. However, we beleive it is still not sustainable as Oride is only a part of the overall company which is OPay and as at now, Oride is basically the one which generates bulk of the revenue of the company.
Don’t forget that opay is basically a Fintech. They even have account number. Recognized and money can be directly sent in and from the account. Your phone number is your account number. Can this add to the support of their Sustainability?
I believe the use of phone number as account number is just a strategy to make sure people have access to their service, have a different experience and get them to embrace a new form of technology. Once more and more people use it, it should pay off in the future.
Great analysis. Could you please analyse the sustainability…cos they were giving bonuses of #50 any drop. How would this culminate into the #1000 per day remittance on an average (plus or minus). I know this would be based on the average number of patronages per day. Could you do the analysis also
Thank you Similoluwa. The cost of the bonuses are borne by ORide, so the #1000 per day remittance will be charged based on the distance covered.
Accordingly, profitability is a secondary priority for Oride for now because it is evident from their model that they are trying to expand the number of locations and also increase the number of trips, thereby controlling a significant share of the market.
Whether they will be sustainable or not will be dependent on how they later fall back to increase their revenue and profits.