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> While neither Uber nor Grubhub turns a profit delivering food, they are nonetheless venture-backed and raking in mountains of cash The author acknowledges th

> While neither Uber nor Grubhub turns a profit delivering food, they are nonetheless venture-backed and raking in mountains of cash The author acknowledges that the delivery services are losing money. And yet, the author is essentially saying that the apps should lose even more money because someone else is willing to fund the apps.

casefields 6y ago
It's a very weird position. Even if I were taking in a trillion in cash, if my expenses are a trillion+1, no would call me a success for long.
- sokoloff 6y ago
  That would entirely depend on your payment terms.
dathinab 6y ago
It's not that simple. First we need to know why they don't turn in a profit. Potential reasons include: - Because they pay to the people delivering (I don't think so). - Because keeping the app running is to expensive, i.e. server costs (I don't think so to). - Because they payed a lot upfront to create the app and are still paying it of (Maybe, still unlikely, this would have been their own mistake and go away after some time). - Because they are spending to much on "external" cost, like advertisements (likely). - Because they know they don't have to yet make profit so they take maximal advantage of venture capital by reinvesting much profits in R&D and similar (somewhat likely) - Because they are selling a service for to little to the end customer, i.e. making losses to "kill of" competition by taking advantage of venture capital (I think that's the main point). The thing is paying people to deliver stuff is expensive just the wage which needs to be payed can noticeable increase the price and doing much advertisement isn't cheap either. So normally I would expect <price in restaurant> + <not small additional delivery cost> Or alternatively <price in restaurant> + <a small bit more> + <constraints like only delivery if destination close to restaurant (max 15min time) and min order amount (20+$) etc.> But what we see is prices nut much higher then restaurant, not limited to close proximity, no or low min amount. So someone has to pay for it, and by using a combination of intransparency and their (perceived) marked power they force a not small amount of the cost they have to operate somewhat profitable onto the restaurants... Which is the actual problem I think.
- ramraj07 6y ago
  They seem to be charging enough to pay delivery drivers on top of their outrageous commission so I don't think that's the real expense. Not like they pay for their insurance or even social security!
  - Jommi 6y ago
    Why would they pay for social security of a contractor?
- kevindong 6y ago
  Does the reason why delivery services aren't profitable actually matter as long as it's not "paper unprofitable" (i.e. they're unprofitable because they pay large sums as licensing fees to a wholly owned subsidiary)? The important part is that they're not profitable. It costs money to run the services and someone has to pay for that. It's in these services' interest (as well as all stakeholders: couriers, consumers, and restaurants) to keep those costs as low as possible. Perhaps the entirety of the cost should be shifted to the end user. Legally mandating caps on commissions would force that shift to happen to some degree. I'm not opposed to such a shift.

casefields 6y ago

It's a very weird position. Even if I were taking in a trillion in cash, if my expenses are a trillion+1, no would call me a success for long.

sokoloff 6y ago
That would entirely depend on your payment terms.

dathinab 6y ago

It's not that simple. First we need to know why they don't turn in a profit. Potential reasons include: - Because they pay to the people delivering (I don't think so). - Because keeping the app running is to expensive, i.e. server costs (I don't think so to). - Because they payed a lot upfront to create the app and are still paying it of (Maybe, still unlikely, this would have been their own mistake and go away after some time). - Because they are spending to much on "external" cost, like advertisements (likely). - Because they know they don't have to yet make profit so they take maximal advantage of venture capital by reinvesting much profits in R&D and similar (somewhat likely) - Because they are selling a service for to little to the end customer, i.e. making losses to "kill of" competition by taking advantage of venture capital (I think that's the main point). The thing is paying people to deliver stuff is expensive just the wage which needs to be payed can noticeable increase the price and doing much advertisement isn't cheap either. So normally I would expect <price in restaurant> + <not small additional delivery cost> Or alternatively <price in restaurant> + <a small bit more> + <constraints like only delivery if destination close to restaurant (max 15min time) and min order amount (20+$) etc.> But what we see is prices nut much higher then restaurant, not limited to close proximity, no or low min amount. So someone has to pay for it, and by using a combination of intransparency and their (perceived) marked power they force a not small amount of the cost they have to operate somewhat profitable onto the restaurants... Which is the actual problem I think.

ramraj07 6y ago
They seem to be charging enough to pay delivery drivers on top of their outrageous commission so I don't think that's the real expense. Not like they pay for their insurance or even social security!
- Jommi 6y ago
  Why would they pay for social security of a contractor?
kevindong 6y ago
Does the reason why delivery services aren't profitable actually matter as long as it's not "paper unprofitable" (i.e. they're unprofitable because they pay large sums as licensing fees to a wholly owned subsidiary)? The important part is that they're not profitable. It costs money to run the services and someone has to pay for that. It's in these services' interest (as well as all stakeholders: couriers, consumers, and restaurants) to keep those costs as low as possible. Perhaps the entirety of the cost should be shifted to the end user. Legally mandating caps on commissions would force that shift to happen to some degree. I'm not opposed to such a shift.