AI for Online Cycling

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2:18Businessweek Editors:You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio.

2:48Businessweek Editors:Try not to fall off, which is very easy to do. No, very easy not to fall off, I mean. Yeah, it's not an issue. The AppConnect cyclists riding their bikes inside to real-time races in virtual worlds through a mobile device, a computer, Apple TV, kind of anything. The company's raised$620 million. Backers include KKR, Premier Holdings, Amazon's Alexa Fund, adding up to a market cap of more than a billion dollars. We've got back with us the co-founder and CEO of Zwift, Eric Min. He joins us from New York. Eric, welcome back. How are you? It's good to see you. We're going to work on getting your audio all set up.

3:20Businessweek Editors:You're in New York because you've got a new map out. It's essentially an update to the game that allows people to ride in a different place. We're going to get to that in a second, but it's been close to a year since we caught up. So I just wanted to get an update on the business. So about a year ago, you had just announced the Zwift ride. It's this$1 ,300 smart bike to get more people on the app. Has it worked?

3:41Joel Weber:Yeah. Yeah, you know, we started the business as a software company, really discounting the hardware. We didn't want to be in the hardware business, but it's just such an important part of the overall experience. And I think after, you know, years of working hard and investing in hardware, I think we really landed a product that resonates with the masses. So it's been very successful. This is our second year and the sales have been very, very strong so far.

4:08Eric Min:Talk to us a little bit about how strong they've been. Can you give us some idea in terms of growth year over year, what kind of momentum you're seeing, what kind of growth? Yeah.

4:20Joel Weber:So, you know, the hardware business is really just to help facilitate the onboarding. You know, we've probably spent the last 10 years figuring out how to just remove friction in the whole onboarding and getting customers to just get on Zwift. so we we see this as a just a huge opportunity as we sort of widen the the audience from you know sort of the the core cycling enthusiast to a broader audience that just you know likes to ride bikes and and like to exercise indoors and cycling happens to be one of the the you know the one of the most the easiest and the safest and and one that is is most enjoyable I think out of all the different activities that are out there but in terms of growth we are seeing really a strong growth in our both in our subscription and in our revenues.

5:11Joel Weber:So, yeah, we think that the hardware is an important aspect of that. I think one of the early and early, early investors that I spoke to, this was like almost 10 years ago, he said to me that the right price point for this hardware, this is the, you know, the trainer part, which you attach to the bike back then, he said, $500 is the right price point. And it's taken us 10 years, a lawsuit, lots of investment hardware to finally get to that price point. And I can tell you that it's finally working. How much? Well, go ahead, Carol.

5:44Eric Min:Well, I know you're a private company, and so you don't necessarily have to reveal tons of metrics, but we are Bloomberg. And I am curious about what kind of growth you've seen in terms of bike sales, Because it does sound like it's an important part, just or your top line overall, how much it's growing.

6:03Joel Weber:Yeah. So we've seen, you know, revenues grow, you know, double digit growth. You know, we're not we're sort of not in that phase of growing, doubling our business every year. And we had a crazy, crazy growth during COVID years. I think now we're in sort of responsible growth. And I think, you know, over the last few years, we sort of went through the painful adjustment of making sure that the business is right size. And the business is really strong now. We're very profitable. And we have, you know, plenty of capital to invest in all sorts of areas. It was a blessing that we were able to raise a lot of capital.

6:45Joel Weber:I don't think capital is the issue anymore. It's really just where do we want to place our bets? and I think it's, yeah, it's business the old-fashioned way, right? Well, it's funny.

6:57Businessweek Editors:Every time I've spoken to you year after year, you've said you don't have to raise more capital, you don't have to raise more capital. I think this is the first time I've heard you say that you're very profitable though.

7:06Joel Weber:That's right. This isn't the first year we're profitable, but this is the first year we are, I'd say profitable in a meaningful, meaningful sense. And that's because we've just become more efficient as a business. You know, we've made a number of mistakes in the past And I think now we know we're really good at and we're focused and investing in those areas. And I think, you know, we're not going to start making speculative investments like we did back, you know, perhaps a few years ago.

7:35Businessweek Editors:So does that mean an IPO is on the horizon?

7:38Joel Weber:I think for us, we need some more time to grow into a story like that. I think what we just need to do is just create a great business, great product experience. And I think hardware is a big, big part of that. I think we have an exciting product roadmap, both on the software and the hardware side. I think for us, going forward, it's got to be side by side. But our focus will remain for the foreseeable future around the experience of cycling.

8:11Businessweek Editors:So what does that roadmap look like?

8:14Joel Weber:well i mean there's just so much we can do um on the on the on the product side the product experience side um and ai is something that we're really investing heavily in um i think uh you know many people show up uh unbeknownst to them perhaps uh to get into shape and i think we've done a i think we can do a much better job in demonstrating how they can improve uh quantify those metrics and showing progress. I think every Zwifter who shows up on Zwift should be recommended the best content given what they've done, perhaps the day before, the week before, the month before. So we're really investing in training and personalized training.

8:58Joel Weber:So this is where AI comes in and this is something that we'll start delivering this fall.

9:03Eric Min:Hey, before we go, Eric, we've just got about a minute or under a minute. How does the new New York City map kind of fit into all of what you were saying?

9:11Joel Weber:Well, you know, I'm a New Yorker, so I'm super excited. When we launched the business, we didn't start with Central Park. So we landed that a number of years ago. And this is the first expansion of the city. I'm really excited. We're going to Brooklyn. We're going to Times Square. And so this is a bit of nostalgia for me. This is my playground for many, many years. So we're here in New York activating and launching the expansion.

9:41Businessweek Editors:Well, next time you're here, Eric, come by. We always love it when you join us on Bloomberg Business Week Daily and give us an update on Zwift. Once again, Eric Min, he's the co-founder and CEO of Zwift. Joining us this afternoon from New York. When there's the Hudson Tunnel in this map, I'll be excited. No bikes allowed in that tunnel, Carol.

10:00Eric Min:Really?

10:01Businessweek Editors:Yeah. Casey Neistat did it a few years ago. Many years ago. Just saying. There's an old YouTube video of him doing that. I'll check it out. Yeah, it's kind of scary. I can only match. Yeah, no bikes in there.

10:15Eric Min:He's dribbling the ball with everything on the line. He's driving down the pitch. He's facing price hikes and cuts past him. Carrier Contracts tries to block him. Oh, he leaves him in the dust. He's at the edge of the box. He cuts past the nonstop group chat trash talk. He clears on goal. He shoots. No! Unlimited data for$25 a month forever.

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