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The price seems high for something Square presumably needed to unload. Who else would have been bidding it up? And why are food delivery businesses still in a b

by dewitt 7y ago

The price seems high for something Square presumably needed to unload. Who else would have been bidding it up? And why are food delivery businesses still in a bubble? That's not a slam on businesses in a bubble phase, either. Many industries go through one before settling into a steady, sustainable state. Just surprised that delivery is still in one, while related industries, like ride-share are cooling off.

loceng 7y ago
They make a lot of profit, recycling it buy up and coming startups to maintain market share and the business model.
- MegaButts 7y ago
  > They make a lot of profit I have always heard food delivery as a business is a great way to lose money. Do you have any examples of companies doing it profitably?
  - AmericanChopper 7y ago
    Different market, but Gojek does it profitably. They do delivery, ride hailing, and a bunch of other stuff, and all of their segments are profitable, except ride hailing. They also have a slightly different model, which might not work in other markets. They don’t need to onboard merchants in the same way, because with them the driver pays for the order, and then the customer pays the driver, either in-app or with cash.
    - bduerst 7y ago
      Interesting business model, but Jakarta is insanely dense (largest city in APAC) which is probably why its more profitable. In the U.S. you have urban sprawl and suburbs, which increase variable costs of delivery.
      - AmericanChopper 7y ago
        Jakarta has ridiculous urban sprawl, has worse traffic than any city in the US, and floods for months in the year. I lived there for years, it’s much harder to get around than LA or NY.
        bduerst 7y ago
        That probably explains why their model has the driver taking on the liability then.
        AmericanChopper 7y ago
        The driver doesn’t take on any liability at all, it’s all backed by the company. I’m not sure why you’re so keen to shit on this business when you don’t seem to know anything about it or the market it operates in.
        bduerst 7y ago
        Relax, I'm not attacking you or the business - you said this: "because with them the driver pays for the order, and then the customer pays the driver" which seems like a liability for the driver. It makes sense in a region that floods regularly.
        AmericanChopper 7y ago
        They just handle the transaction. The system is technically exploitable from a driver perspective. Earlier this year a group of drivers were arrested for defrauding the company with hundreds of fake orders.
  - SilasX 7y ago
    Every pizza chain.
    - jonknee 7y ago
      They make money selling pizza (super high margin), not at delivery.
      - SilasX 7y ago
        It's a distinction without a difference. It's not like they lose money by offering the delivery service, so they've found some model where delivering food is profitable, it's just that the model involves a tight coupling with the food producer. It might be more accurate to say that food delivery as a separate business from producing it is hard to profit on.
      - JustSomeNobody 7y ago
        Unless you’re Papa Johns and you tack on a delivery fee that doesn’t go to the driver.
  - bardworx 7y ago
    Unit economics on food delivery sucks (if that’s your only business)...too many inefficiencies with travel to/from (time wasted w/empty hands). Food delivery as part of a QSR can be profitable but most businesses don’t track margins efficiently enough to know the difference.
- loceng 7y ago
  Too late to edit my original comment to clarify: the incumbents are profitable, have enough revenue to recycle into buying up new competition in existing and different markets, keeping the their position and business model alive.
mylons 7y ago
food delivery service is blowing up because it's still extremely inefficient in the USA. you can get _anything_ delivered in Hong Kong for about $1. some hong kongers don't even have kitchens and live like that for years. travis kalanick is investing millions of his own cash into this space.
- henryfjordan 7y ago
  The density of HK is not comparable to basically anywhere in the US, except maybe just Manhattan. The labour sources are also a lot cheaper. There's room to improve in the US, like making kitchens without the attached restaurant more prevalent, but as long as you have to get in a car to deliver the food, there's going to be the same problems the rideshare industry faces.
  - mylons 7y ago
    HK was just an example. it's true for most/all chinese cities.
    - spullara 7y ago
      Most/all Chinese cities are denser with cheaper labor than any US city so the point stands.
      - monomyth 7y ago
        Are you sure about the first point? https://en.wikipedia.org/wiki/List_of_United_States_cities_by_population_density https://en.wikipedia.org/wiki/List_of_United_States_cities_b... Neither Shanghai or Beijing would make top 20 on this list
        xmprt 7y ago
        Did you even click on one of the "cities" on that page? The size of Guttenberg is 0.196 sq. miles. It's a tiny part of a city in a small state. You're comparing apples to oranges. A more reasonable comparison would be all of New York City or all of Los Angeles to Shanghai which would be more interesting.
4ntonius8lock 7y ago
I'm guessing like most things in the US: investors are looking to consolidate so they can get into monopolistic positions and extract resources from the market once they have it cornered. The risk of legislative intervention into such anti-competitive market manipulations is virtually zero. If they get big enough, next time they steal wages, they won't have to back down. Heck, if they get big enough, they can steal wages, drive the company broke, and then get a bail out to pay the higher ups that are making the decisions that drove the company into the ground in the first place. We then have the gall to blame Adam Smith, who didn't even believe in separation of funding and management (i.e. he didn't believe in joint-stock companies)
- rolltiide 7y ago
  What are you talking about? Its awesome Intervention? The government only discourages anticompetitive practices. Literally buying a competitor is not one, its subject to approval at some amounts, but is not anticompetitive behavior, as in predictably by the rules. There should be enough role models by now to dissolve whatever egalitarian promise you were fed in elementary school. Why even waste any breath on these completely ineffective set of rules, when you already know the playbook, you spelled it out! Play those cards man, generational wealth is knocking at your door
- wpietri 7y ago
  I'm not sure why you're getting downvoted. The valuation of quite a number of hot companies doesn't make any sense unless they can extract oligopoly rents. As an example, take Uber. The Economist recently asked whether it can ever make money. [1] And events in the months since don't make it any clearer. [2] I think tech's wave of quasi-monopolies (Google, Facebook, Amazon) gave investors the notion that similarly dominant players could be established in non-tech fields if they were dressed up as technology plays. So we see absurd amounts of cash being poured into things like Uber and WeWork. Unlike the previous players, we also see them going to IPO while they're still losing money. And sadly, I think you're right about regulatory laxness. Antitrust regulation has been out of fashion for a long time. And if we see it come back, it could well be more an authoritarian political tool than any actual attempt to ensure competitive markets. [1] https://www.economist.com/business/2019/04/27/can-uber-ever-make-money https://www.economist.com/business/2019/04/27/can-uber-ever-... [2] https://www.economist.com/business/2019/04/27/can-uber-ever-make-money https://www.economist.com/business/2019/04/27/can-uber-ever-...
dheera 7y ago
It's probably a mostly equity deal, i.e. most of the $410M is not real money. They recently raised $600M and I doubt they'd spend $410M of that on an acquisition. It would be more interesting if we knew how much they actually paid in hard cash; the rest is effectively just promises of money in the form of a valuation that hasn't materialized in liquid form yet.
- deleted 7y ago
  [deleted]
- ec109685 7y ago
  The same promises of money that their investors paid money to acquire, so it doesn’t seem right to just dismiss the equity value.
  - dheera 7y ago
    Sure, not dismissing it, but it's not the same value. It's not hard cash that the founders/employees can spend, so it's mostly useless in terms of value for research, charity, self-funding new ventures without VCs, investing in other companies, side projects, or whatever else you would do with hard cash. If you're an early employee of Caviar and got $1M in AMZN stock or options? You could sell it for cash. DoorDash stock? It could be $0 in a few years for all you know, and you quite possibly have no avenues to liquidate it for anything now.

by dewitt 7y ago

loceng 7y ago

They make a lot of profit, recycling it buy up and coming startups to maintain market share and the business model.

MegaButts 7y ago
> They make a lot of profit I have always heard food delivery as a business is a great way to lose money. Do you have any examples of companies doing it profitably?
- AmericanChopper 7y ago
  Different market, but Gojek does it profitably. They do delivery, ride hailing, and a bunch of other stuff, and all of their segments are profitable, except ride hailing. They also have a slightly different model, which might not work in other markets. They don’t need to onboard merchants in the same way, because with them the driver pays for the order, and then the customer pays the driver, either in-app or with cash.
  - bduerst 7y ago
    Interesting business model, but Jakarta is insanely dense (largest city in APAC) which is probably why its more profitable. In the U.S. you have urban sprawl and suburbs, which increase variable costs of delivery.
    - AmericanChopper 7y ago
      Jakarta has ridiculous urban sprawl, has worse traffic than any city in the US, and floods for months in the year. I lived there for years, it’s much harder to get around than LA or NY.
      - bduerst 7y ago
        That probably explains why their model has the driver taking on the liability then.
        AmericanChopper 7y ago
        The driver doesn’t take on any liability at all, it’s all backed by the company. I’m not sure why you’re so keen to shit on this business when you don’t seem to know anything about it or the market it operates in.
        bduerst 7y ago
        Relax, I'm not attacking you or the business - you said this: "because with them the driver pays for the order, and then the customer pays the driver" which seems like a liability for the driver. It makes sense in a region that floods regularly.
        AmericanChopper 7y ago
        They just handle the transaction. The system is technically exploitable from a driver perspective. Earlier this year a group of drivers were arrested for defrauding the company with hundreds of fake orders.
- SilasX 7y ago
  Every pizza chain.
  - jonknee 7y ago
    They make money selling pizza (super high margin), not at delivery.
    - SilasX 7y ago
      It's a distinction without a difference. It's not like they lose money by offering the delivery service, so they've found some model where delivering food is profitable, it's just that the model involves a tight coupling with the food producer. It might be more accurate to say that food delivery as a separate business from producing it is hard to profit on.
    - JustSomeNobody 7y ago
      Unless you’re Papa Johns and you tack on a delivery fee that doesn’t go to the driver.
- bardworx 7y ago
  Unit economics on food delivery sucks (if that’s your only business)...too many inefficiencies with travel to/from (time wasted w/empty hands). Food delivery as part of a QSR can be profitable but most businesses don’t track margins efficiently enough to know the difference.
loceng 7y ago
Too late to edit my original comment to clarify: the incumbents are profitable, have enough revenue to recycle into buying up new competition in existing and different markets, keeping the their position and business model alive.

mylons 7y ago

food delivery service is blowing up because it's still extremely inefficient in the USA. you can get _anything_ delivered in Hong Kong for about $1. some hong kongers don't even have kitchens and live like that for years. travis kalanick is investing millions of his own cash into this space.

henryfjordan 7y ago
The density of HK is not comparable to basically anywhere in the US, except maybe just Manhattan. The labour sources are also a lot cheaper. There's room to improve in the US, like making kitchens without the attached restaurant more prevalent, but as long as you have to get in a car to deliver the food, there's going to be the same problems the rideshare industry faces.
- mylons 7y ago
  HK was just an example. it's true for most/all chinese cities.
  - spullara 7y ago
    Most/all Chinese cities are denser with cheaper labor than any US city so the point stands.
    - monomyth 7y ago
      Are you sure about the first point? https://en.wikipedia.org/wiki/List_of_United_States_cities_by_population_density https://en.wikipedia.org/wiki/List_of_United_States_cities_b... Neither Shanghai or Beijing would make top 20 on this list
      - xmprt 7y ago
        Did you even click on one of the "cities" on that page? The size of Guttenberg is 0.196 sq. miles. It's a tiny part of a city in a small state. You're comparing apples to oranges. A more reasonable comparison would be all of New York City or all of Los Angeles to Shanghai which would be more interesting.

4ntonius8lock 7y ago

I'm guessing like most things in the US: investors are looking to consolidate so they can get into monopolistic positions and extract resources from the market once they have it cornered. The risk of legislative intervention into such anti-competitive market manipulations is virtually zero. If they get big enough, next time they steal wages, they won't have to back down. Heck, if they get big enough, they can steal wages, drive the company broke, and then get a bail out to pay the higher ups that are making the decisions that drove the company into the ground in the first place. We then have the gall to blame Adam Smith, who didn't even believe in separation of funding and management (i.e. he didn't believe in joint-stock companies)

rolltiide 7y ago
What are you talking about? Its awesome Intervention? The government only discourages anticompetitive practices. Literally buying a competitor is not one, its subject to approval at some amounts, but is not anticompetitive behavior, as in predictably by the rules. There should be enough role models by now to dissolve whatever egalitarian promise you were fed in elementary school. Why even waste any breath on these completely ineffective set of rules, when you already know the playbook, you spelled it out! Play those cards man, generational wealth is knocking at your door
wpietri 7y ago
I'm not sure why you're getting downvoted. The valuation of quite a number of hot companies doesn't make any sense unless they can extract oligopoly rents. As an example, take Uber. The Economist recently asked whether it can ever make money. [1] And events in the months since don't make it any clearer. [2] I think tech's wave of quasi-monopolies (Google, Facebook, Amazon) gave investors the notion that similarly dominant players could be established in non-tech fields if they were dressed up as technology plays. So we see absurd amounts of cash being poured into things like Uber and WeWork. Unlike the previous players, we also see them going to IPO while they're still losing money. And sadly, I think you're right about regulatory laxness. Antitrust regulation has been out of fashion for a long time. And if we see it come back, it could well be more an authoritarian political tool than any actual attempt to ensure competitive markets. [1] https://www.economist.com/business/2019/04/27/can-uber-ever-make-money https://www.economist.com/business/2019/04/27/can-uber-ever-... [2] https://www.economist.com/business/2019/04/27/can-uber-ever-make-money https://www.economist.com/business/2019/04/27/can-uber-ever-...

dheera 7y ago

It's probably a mostly equity deal, i.e. most of the $410M is not real money. They recently raised $600M and I doubt they'd spend $410M of that on an acquisition. It would be more interesting if we knew how much they actually paid in hard cash; the rest is effectively just promises of money in the form of a valuation that hasn't materialized in liquid form yet.

deleted 7y ago
[deleted]
ec109685 7y ago
The same promises of money that their investors paid money to acquire, so it doesn’t seem right to just dismiss the equity value.
- dheera 7y ago
  Sure, not dismissing it, but it's not the same value. It's not hard cash that the founders/employees can spend, so it's mostly useless in terms of value for research, charity, self-funding new ventures without VCs, investing in other companies, side projects, or whatever else you would do with hard cash. If you're an early employee of Caviar and got $1M in AMZN stock or options? You could sell it for cash. DoorDash stock? It could be $0 in a few years for all you know, and you quite possibly have no avenues to liquidate it for anything now.