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EcoATM, the Automated iPhone Pawnshop

These damaged devices look like trash, but to EcoATM, and its customers, they’re pure treasure

Photograph by iFixit

These damaged devices look like trash, but to EcoATM, and its customers, they’re pure treasure

Millions of people are ditching their phones and upgrading to the new iPhone 5. And Mark Bowles is expecting a lot of business for his company’s EcoATMs. The automated kiosks, parked in malls and grocery stores, allow people to exchange their used or broken electronics for cash. “It’s immediate gratification,” says Bowles. “There’s no 30-day wait for a check in the mail.”

About 150 EcoATMs are in operation in 10 U.S. states, and Bowles’s San Diego company, also called EcoATM, is installing two or three more per day, he says. Using cameras, artificial intelligence, and proprietary algorithms, the five-foot-high kiosks recognize 4,000 phones, MP3 players, and tablets with 97.5 percent accuracy, Bowles says. They assess physical and electrical damage and spit out a cash offer. The average going rate for a slightly damaged iPhone 4 or 4S is $175; a beat-up Samsung Galaxy S generally fetches about $60.

“We have a huge physical library with a copy of every phone ever made, just about”

Bowles, a serial entrepreneur, became interested in electronics recycling four years ago after reading that, back then, only about 3 percent of phones worldwide were reused or mined for parts (today, roughly 20 percent are recycled in the U.S., according to market analysis firm Compass Intelligence). Realizing he didn’t know where to recycle his own old phones, he founded EcoATM in 2008.

“The initial test was a wooden machine—Ole Bessie, we call her,” says Bowles. Comprising a simple touchscreen on a wooden box with a trap door, it was stationed in a Nebraska shopping center. Once customers typed in the brand of their phones and a damage assessment, an attendant would name a price and complete the exchange. “Within a few weeks we had 45-minute waiting lines and crowds out the door in the morning,” says Bowles. He collected 2,300 phones in 30 days.

Bowles landed $650,000 in research grants from the National Science Foundation and gathered roughly $31 million more in funding, mostly from Oakland (Calif.) venture capital firm Claremont Creek Ventures and Coinstar (CSTR), the Bellevue (Wash.)-based operator of coin-counting machines. The next two and a half years went into development. First, the kiosks were programmed to recognize devices. “We have a huge physical library with a copy of every phone ever made, just about,” says Bowles. The EcoATM’s artificial intelligence system conducted studies using high-definition cameras, mirrors, and special lighting to create a 3D model of each device.

Bowles and his team then developed a system for evaluating electrical damage. Each EcoATM has a robotic carousel of plugs so it can sync with nearly any device. The kiosk compares returned devices with undamaged models and uses algorithms to determine their value.

Devices EcoATM aims to recycle by 2014: 20 million

Although the machines are designed to recognize fakes and store display models, customers have successfully tricked EcoATMs into paying for about three dozen knockoffs. Each time, Bowles refines his technology. Users of the machines are also required to provide their driver’s license numbers and thumbprints to discourage theft.

EcoATM’s revenue, which Bowles won’t disclose, comes from selling the recycled electronics to refurbishers, who resell them mainly to insurance and warranty companies. (Some 30 percent are sold in emerging markets.) About 90 million people worldwide have mobile-phone insurance, Bowles points out. When their phones break or are lost, insurance companies usually replace them with refurbished models rather than new ones. “They might buy a broken iPhone 4 from me for $250 and then put a $50 refurb in to fix the glass,” says Bowles. “If they had to buy it from Apple, it would be $700.”

Roughly 25 percent of the phone models recycled through EcoATMs are too outdated or damaged to reuse. The kiosks accept them anyway, paying a few dollars per device. The company then sells them to certified recyclers who smelt them down and reclaim the metals inside.

To date, EcoATM has collected about 500,000 devices, and it aims to recycle 20 million by 2014. The company has 62 employees in engineering, design, operations, sales, and marketing, and about 75 contractors and subcontractors who build and maintain the machines.

Most wireless carriers offer buyback programs, and people can always turn to Amazon (AMZN) or EBay (EBAY) to sell their old phones. Still, using EcoATMs is often more convenient, says Kate Pearce, a research strategist and consultant for Compass Intelligence. “You’re just taking away that element of, ‘Well, I have to go into the store and deal with the rep, and the rep is going to try and upsell me,’ ” she says. Compass Intelligence predicts that by 2015, there will be nearly 530 million deactivated or retired handsets.

Bowles adds that his EcoATMs can also be used to raise money for charity. “We’ve had churches where the preacher was passing the plate on Sunday, collecting phones to sell.”

EcoATM data: EcoATM. Data compiled by Bloomberg. Graphic by Bloomberg Businessweek; Photo illustration by 731

The bottom line: EcoATM is trying to profit and reduce waste by reselling old electronics that its automated kiosks have assessed for damage.

Winter is a reporter for Bloomberg Businessweek in New York.

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