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Apps are doing well because this is another one of those protective moat ideas where once they have established themselves they have no need to innovate further

Apps are doing well because this is another one of those protective moat ideas where once they have established themselves they have no need to innovate further. Sites like grubhub have no physical reason to gouge 20-30% commission on top of charging both sides delivery fees (further on top of guilting customers into tipping more). In the end it's an app serving a few web pages and APIs (these filthy companies don't even deal with the credit card mess). But because they have an insurmountable most (not earned via any sheer technical breakthrough, just through cunningness and being ruthless) they don't need to care if they have too many engineers,whether these engineers are any good, or if their nodejs ec2 instances serve 100 queries a minute. So they just keep it like that. Companies like IBM needed decades to get into such a rot, modern VC funding and cloud computing have just accelerated this phenomenon.

john_minsk 6y ago
I kind of agree, but on the other side - if 20-30% is too much there will be competitors which offer 2-3% and theoretically all restaurants will move there as well as customers to pay 20-30% less. And tbh this should happen. UBER had to spend billions on marketing and getting their model "right". But now it is clear that such platform is essential for modern city. At some point UBER will have to get this money back with ride fees. Next competitor that can replicate UX of UBER, but raises less capital will be very well positioned to offer competitive pricing. And switching between these platforms is much easier compared to something like Facebook/Apple.
- haltingproblem 6y ago
  Good point. But Yes and no ;) Grub-less et.al are as much about ordering and checkout as they are about discovery. I can rank and view all restaurants offering Sushi in my delivery radius. This is what makes them powerful. Uber et.al are a marketplace. You are absolutely right in that they have zero switching costs but they have a two sided pool of supply (drivers) and riders (demand). This is hard to replicate.
  - hrpnk 6y ago
    In Europe takeaway.com took over lots of delivery apps and businesses. In Germany they took over foodora and deliveroo exited the market. takeaway's platform is from a feature and UX point of view not justifying any premiums. You can't tip drivers, which is the most important feature enabling contactless deliveries. There are no new features since years. You can literally filter by cuisine and price; nothing else, not even a map with restaurants nearby, search by dish, etc. People order there because it's the only choice, but everyone agrees the page is just awful.
  - Jommi 6y ago
    How exactly is that different? There is an argument to be made, that if I just want a pizza, then my major decision-maker will be price.
  - hakfoo 6y ago
    I'm curious if they are actually a major discovery destination. I suspect most customers are either starting looking for a restaurant they know by name, or one near them to ensure maximum freshness, using Google Maps or Yelp or the like. Only when they've already chosen a restaurant do we transition into the delivery app flow. I'm sure a lot of money is being spent for chain restaurants to advertise "order via Postmates" or "exclusively on GrubHub"-- again bypassing them as a discovery system.
nerfhammer 6y ago
But aren't there like 2 dozen competing apps trying to do this? Shouldn't that drive prices down? Or is actually legitimately expensive to provide this service? We've been told that evil VCs subsidize service to run at below cost to drive competitors out of business. Uber is often accused of this. Why aren't we seeing that phenomenon here? And Uber is literally one of the competitors.
- Jommi 6y ago
  I would not be surprised if the US market had some level of collusion going on. It just doesn't make sense to me that they aren't currently competing on price. There are some other possible reasons tho, like food actually not being as "commodity"-like as we think it is (like rides are)
  - nerfhammer 6y ago
    That would surprise me. It's unlikely a dozen apps would be able to coordinate like that. The thing about cartels is the first defector can cut prices and capture marketshare, which is what we're supposed to believe evil VC funded cutthroat startups are inclined to do. Raising prices to increase profit but reduce revenue growth is the exact opposite of that. The other hypothesis is that delivery is simply expensive. The driver has to drive to the pickup place, find parking, stand in line potentially for awhile, drive to the delivery, park again, walk to the delivery location to drop off the item. Most of those things an ordinary uber fare would not have to deal with.
    - ethbro 6y ago
      Or, this is more like TicketMaster and less like a free market.
      - esyir 6y ago
        The concert case single monopoly that controls both part of the source as well as basically all sales is now comparable to the pile of separate delivery services that compete against each other. A claim that all of these have formed a cartel requires strong evidence.
Jommi 6y ago
I don't think you really understand how software works. No software has a "physical reason" to ask for money once they are done. It's really a terrible argument that you seem to try and turn into a quip against delivery apps. Your moat argument is the same that had people invest in uber 10 years ago, which we are seeing is failing in regions like EU where Uber is getting lambasted.
- fragmede 6y ago
  If you'd invented in Uber 10 years ago, you'd be rich. Let's say you paid $5 (though it's probably closer to $0.01 if you got in on their seed round in Sept 2010). With 250k shares, even at the "abysmal" price of $45/share, that's still a cool $10 million, before taxes. As a seed investor, you liquidated on the day of the IPO and what happens to Uber no longer particularly matters to you - you've already made a giant pile of money. It's interesting as a point of curiosity. Like updates on a friend/acquaintance's cat. Of course, you'd have to be rich in order to have done that in the first place (an "accredited investor" as defined by the SEC), and this ignores the other investments you made in 2010 that went bust. Later investors got screwed by the poor IPO performance, especially those that bought, hard, into the "moat" argument. Hell, softbank is possibly underwater on its investment.

john_minsk 6y ago

I kind of agree, but on the other side - if 20-30% is too much there will be competitors which offer 2-3% and theoretically all restaurants will move there as well as customers to pay 20-30% less. And tbh this should happen. UBER had to spend billions on marketing and getting their model "right". But now it is clear that such platform is essential for modern city. At some point UBER will have to get this money back with ride fees. Next competitor that can replicate UX of UBER, but raises less capital will be very well positioned to offer competitive pricing. And switching between these platforms is much easier compared to something like Facebook/Apple.

haltingproblem 6y ago
Good point. But Yes and no ;) Grub-less et.al are as much about ordering and checkout as they are about discovery. I can rank and view all restaurants offering Sushi in my delivery radius. This is what makes them powerful. Uber et.al are a marketplace. You are absolutely right in that they have zero switching costs but they have a two sided pool of supply (drivers) and riders (demand). This is hard to replicate.
- hrpnk 6y ago
  In Europe takeaway.com took over lots of delivery apps and businesses. In Germany they took over foodora and deliveroo exited the market. takeaway's platform is from a feature and UX point of view not justifying any premiums. You can't tip drivers, which is the most important feature enabling contactless deliveries. There are no new features since years. You can literally filter by cuisine and price; nothing else, not even a map with restaurants nearby, search by dish, etc. People order there because it's the only choice, but everyone agrees the page is just awful.
- Jommi 6y ago
  How exactly is that different? There is an argument to be made, that if I just want a pizza, then my major decision-maker will be price.
- hakfoo 6y ago
  I'm curious if they are actually a major discovery destination. I suspect most customers are either starting looking for a restaurant they know by name, or one near them to ensure maximum freshness, using Google Maps or Yelp or the like. Only when they've already chosen a restaurant do we transition into the delivery app flow. I'm sure a lot of money is being spent for chain restaurants to advertise "order via Postmates" or "exclusively on GrubHub"-- again bypassing them as a discovery system.

nerfhammer 6y ago

But aren't there like 2 dozen competing apps trying to do this? Shouldn't that drive prices down? Or is actually legitimately expensive to provide this service? We've been told that evil VCs subsidize service to run at below cost to drive competitors out of business. Uber is often accused of this. Why aren't we seeing that phenomenon here? And Uber is literally one of the competitors.

Jommi 6y ago
I would not be surprised if the US market had some level of collusion going on. It just doesn't make sense to me that they aren't currently competing on price. There are some other possible reasons tho, like food actually not being as "commodity"-like as we think it is (like rides are)
- nerfhammer 6y ago
  That would surprise me. It's unlikely a dozen apps would be able to coordinate like that. The thing about cartels is the first defector can cut prices and capture marketshare, which is what we're supposed to believe evil VC funded cutthroat startups are inclined to do. Raising prices to increase profit but reduce revenue growth is the exact opposite of that. The other hypothesis is that delivery is simply expensive. The driver has to drive to the pickup place, find parking, stand in line potentially for awhile, drive to the delivery, park again, walk to the delivery location to drop off the item. Most of those things an ordinary uber fare would not have to deal with.
  - ethbro 6y ago
    Or, this is more like TicketMaster and less like a free market.
    - esyir 6y ago
      The concert case single monopoly that controls both part of the source as well as basically all sales is now comparable to the pile of separate delivery services that compete against each other. A claim that all of these have formed a cartel requires strong evidence.

Jommi 6y ago

I don't think you really understand how software works. No software has a "physical reason" to ask for money once they are done. It's really a terrible argument that you seem to try and turn into a quip against delivery apps. Your moat argument is the same that had people invest in uber 10 years ago, which we are seeing is failing in regions like EU where Uber is getting lambasted.

fragmede 6y ago
If you'd invented in Uber 10 years ago, you'd be rich. Let's say you paid $5 (though it's probably closer to $0.01 if you got in on their seed round in Sept 2010). With 250k shares, even at the "abysmal" price of $45/share, that's still a cool $10 million, before taxes. As a seed investor, you liquidated on the day of the IPO and what happens to Uber no longer particularly matters to you - you've already made a giant pile of money. It's interesting as a point of curiosity. Like updates on a friend/acquaintance's cat. Of course, you'd have to be rich in order to have done that in the first place (an "accredited investor" as defined by the SEC), and this ignores the other investments you made in 2010 that went bust. Later investors got screwed by the poor IPO performance, especially those that bought, hard, into the "moat" argument. Hell, softbank is possibly underwater on its investment.