7 ms·

The data from this filing doesn't seem to back this sensationalized sentiment up at all. In the first 3 quarters of 2020, Doordash has $131 million loss on $1.

by cactus2093 6y ago

The data from this filing doesn't seem to back this sensationalized sentiment up at all. In the first 3 quarters of 2020, Doordash has $131 million loss on $1.9 billion revenue, and they spend $610 million on sales & marketing alone. So if they cut their sales & marketing budget 21% without doing anything else they'd be breaking even. This seems like a healthy business that is using available VC money to grow faster rather than an inherently a money-losing business model.

karpierz 6y ago
Are the subsidies a part of "sales & marketing"? I remember the Uber IPO doing some thing similar, as the subsidies were "promotions".
- JAlexoid 6y ago
  Subsidies and promotions generally fall under marketing. generally in business management practices, not necessarily in financial reporting.
  - xmprt 6y ago
    We're talking about financial reporting right now so the statement in your comment is pretty misleading.
- rockinghigh 6y ago
  There are two ways to lower price. Via a promotion, it falls under "Sales & Marketing". If you just show a lower price without any indication of sale/promotions/coupon, it does not.
PretzelFisch 6y ago
The question is, does the decrease in marketing spend increase or decrease the los.
- everythingswan 6y ago
  There was an interesting section in Risk Factors, on pages 39 - 40. >> Our marketing efforts currently include referrals, affiliate programs, free or discount trials, partnerships, display advertising, television, billboards, radio, video, direct mail, social media, email, podcasts, hiring and classified advertisement websites, mobile “push” communications, search engine optimization, and keyword search campaigns. Our marketing initiatives may become increasingly expensive and generating a meaningful return on these initiatives may be difficult. I think you implied that marketing is expensive for them and I think you're right. And I think the commodity job that DD does is pretty dangerous since there isn't a lot of brand power to be had. I could be wrong there since I only order delivery once every few months.
- cactus2093 6y ago
  True it depends on what their churn looks like and how long it takes to pay back customer acquisition costs. But if they have some amount of organic growth that is close to or higher than their rate of churn (which is not too crazy an assumption) then they could cut marketing spend and they would grow slower but not start shrinking.
Akababa 6y ago
A large proportion, if not the majority of my doordash orders include some sort of promotion. They're everywhere and at this point I almost have an expectation that doordash will always have a promotion that lets me order at a discount. I think that these effective consumer subsidies are included in their "sales and marketing" budget.
- cactus2093 6y ago
  ah, ok that might be true. I was thinking most promotions go to first-time users but maybe that's not the case.
- pbreit 6y ago
  Pretty much every item I buy at Safeway is "discounted". Promos and discounts are a core component of many (not all!) businesses.
  - ghaff 6y ago
    Safeway is sort of extreme. Many grocery chains do have some sort of loyalty card discount. But Safeway has huge discounts all over the place to the point where I make a point of slipping a loyalty card in my travel folder when I go somewhre that Safeways are common.
    - Lammy 6y ago
      > slipping a loyalty card in my travel folder Serious suggestion: try (your area code)-867-5309 and it will probably work.
      - kylebenzle 6y ago
        people are so strangely pliant about these loyalty programs.
        ghaff 6y ago
        Safeway discounts on many items can be 25-50% off. Normally I don't but some stores make it quite expensive not to use them.
ww520 6y ago
One data point. Doordash gives an annual $60 credit to Chase's credit card members for using it services. I used it to order food but I picked them up myself since I was usually on the way to somewhere. When the credit exhausted, I stopped using Doordash and ordered directly from the local restaurants.
criddell 6y ago
I worry a little that their plan is to get big enough that restaurants need them then squeeze restaurants for that shortfall.
- lotsofpulp 6y ago
  Restaurants are, by and large, already low margin businesses, so I’d like to see what they manage to squeeze.
  - criddell 6y ago
    Restaurant margins are fat compared to DoorDash's. :)
dexterdog 6y ago
So you're assuming that the marketing has zero effect on the revenue. If that's the case why not cut it to zero? While you're at it you could probably sue the marketing department for defrauding the company. /s
- austhrow743 6y ago
  It’s a rapidly growing company.
- deleted 6y ago
  [deleted]
xtiansimon 6y ago
How does the recent Caviar merger with DoorDash factor into the assessment?
puranjay 6y ago
I wouldn't value this company based on 2020 numbers at all. Almost no chance that pandemic numbers hold post-pandemic
laksdjfkasljdf 6y ago
> 3 quarters of 2020 So they can barely be profitable (assuming they don't die overnight if they reduce marketing spending) during the out-of-this-world perfect scenario for their business caused by the social isolation? ...notice that the article didn't even bring the "perfect" situation 2020 brought them to also be able to squeeze the restaurants for insane margins. Did you forget any disclaimer about being involved in the deal? because that was a stretch to paint it in a good color.
robomartin 6y ago
> if they cut their sales & marketing budget 21% without doing anything else they'd be breaking even Not at all. If they cut this budget by 21% they would likely lose even more money. Business isn't a game where your competitors are like posts buried into the ground that can't move. All of these companies are battling for the same slices of pizza. If one backs off the others take more slices. As a related thought: This is one of the things that lots of people don't understand about outsourcing and the migration of manufacturing to China. One of the narratives is that companies are greedy and they went to China to lower their costs and take advantage of consumers. That couldn't be farther from the truth, which, in reality, tragic. In any given industry there as a first mover who thought they could grab greater market share if they could lower their COGS by manufacturing in China and beat their competitors in pricing. What they did not foresee is that they triggered a chain reaction: After their move every single competitor was forced to move manufacturing to China because it was impossible to compete given the regulatory and labor constraints in places like the US and Europe. And so, one after the other, they all followed each other off the cliff. Very soon they all found themselves manufacturing in China. They also woke up to having to sell their products at about the same prices, which means their margins were now really slim. Years later, the factories where they all made their products decided they would now sell direct in the US and Europe and eliminate the foreign middle-men from the equation. And that's what you call being in a pickle. Food delivery is an arms race. They are burning cash like it's free. I have no clue how it will all shake out. I don't think the math supports a business that isn't subsidized by money that is willing to burn in huge piles quarter after quarter. Much like the migration of manufacturing to China, if one competitor turns-up marketing campaigns the others are forced to burn even more cash for even more negative returns. Somehow we live in a world where this is called "investing". What do I know?
PopeDotNinja 6y ago
If they spend less on marketing and their business shrinks as a result, they could have potentially never be profitable.

karpierz 6y ago

Are the subsidies a part of "sales & marketing"? I remember the Uber IPO doing some thing similar, as the subsidies were "promotions".

JAlexoid 6y ago
Subsidies and promotions generally fall under marketing. generally in business management practices, not necessarily in financial reporting.
- xmprt 6y ago
  We're talking about financial reporting right now so the statement in your comment is pretty misleading.
rockinghigh 6y ago
There are two ways to lower price. Via a promotion, it falls under "Sales & Marketing". If you just show a lower price without any indication of sale/promotions/coupon, it does not.

PretzelFisch 6y ago

The question is, does the decrease in marketing spend increase or decrease the los.

everythingswan 6y ago
There was an interesting section in Risk Factors, on pages 39 - 40. >> Our marketing efforts currently include referrals, affiliate programs, free or discount trials, partnerships, display advertising, television, billboards, radio, video, direct mail, social media, email, podcasts, hiring and classified advertisement websites, mobile “push” communications, search engine optimization, and keyword search campaigns. Our marketing initiatives may become increasingly expensive and generating a meaningful return on these initiatives may be difficult. I think you implied that marketing is expensive for them and I think you're right. And I think the commodity job that DD does is pretty dangerous since there isn't a lot of brand power to be had. I could be wrong there since I only order delivery once every few months.
cactus2093 6y ago
True it depends on what their churn looks like and how long it takes to pay back customer acquisition costs. But if they have some amount of organic growth that is close to or higher than their rate of churn (which is not too crazy an assumption) then they could cut marketing spend and they would grow slower but not start shrinking.

Akababa 6y ago

A large proportion, if not the majority of my doordash orders include some sort of promotion. They're everywhere and at this point I almost have an expectation that doordash will always have a promotion that lets me order at a discount. I think that these effective consumer subsidies are included in their "sales and marketing" budget.

cactus2093 6y ago
ah, ok that might be true. I was thinking most promotions go to first-time users but maybe that's not the case.
pbreit 6y ago
Pretty much every item I buy at Safeway is "discounted". Promos and discounts are a core component of many (not all!) businesses.
- ghaff 6y ago
  Safeway is sort of extreme. Many grocery chains do have some sort of loyalty card discount. But Safeway has huge discounts all over the place to the point where I make a point of slipping a loyalty card in my travel folder when I go somewhre that Safeways are common.
  - Lammy 6y ago
    > slipping a loyalty card in my travel folder Serious suggestion: try (your area code)-867-5309 and it will probably work.
    - kylebenzle 6y ago
      people are so strangely pliant about these loyalty programs.
      - ghaff 6y ago
        Safeway discounts on many items can be 25-50% off. Normally I don't but some stores make it quite expensive not to use them.

ww520 6y ago

One data point. Doordash gives an annual $60 credit to Chase's credit card members for using it services. I used it to order food but I picked them up myself since I was usually on the way to somewhere. When the credit exhausted, I stopped using Doordash and ordered directly from the local restaurants.

criddell 6y ago

I worry a little that their plan is to get big enough that restaurants need them then squeeze restaurants for that shortfall.

lotsofpulp 6y ago
Restaurants are, by and large, already low margin businesses, so I’d like to see what they manage to squeeze.
- criddell 6y ago
  Restaurant margins are fat compared to DoorDash's. :)

dexterdog 6y ago

So you're assuming that the marketing has zero effect on the revenue. If that's the case why not cut it to zero? While you're at it you could probably sue the marketing department for defrauding the company. /s

austhrow743 6y ago
It’s a rapidly growing company.
deleted 6y ago
[deleted]

xtiansimon 6y ago

How does the recent Caviar merger with DoorDash factor into the assessment?

puranjay 6y ago

I wouldn't value this company based on 2020 numbers at all. Almost no chance that pandemic numbers hold post-pandemic

laksdjfkasljdf 6y ago

> 3 quarters of 2020 So they can barely be profitable (assuming they don't die overnight if they reduce marketing spending) during the out-of-this-world perfect scenario for their business caused by the social isolation? ...notice that the article didn't even bring the "perfect" situation 2020 brought them to also be able to squeeze the restaurants for insane margins. Did you forget any disclaimer about being involved in the deal? because that was a stretch to paint it in a good color.

robomartin 6y ago

> if they cut their sales & marketing budget 21% without doing anything else they'd be breaking even Not at all. If they cut this budget by 21% they would likely lose even more money. Business isn't a game where your competitors are like posts buried into the ground that can't move. All of these companies are battling for the same slices of pizza. If one backs off the others take more slices. As a related thought: This is one of the things that lots of people don't understand about outsourcing and the migration of manufacturing to China. One of the narratives is that companies are greedy and they went to China to lower their costs and take advantage of consumers. That couldn't be farther from the truth, which, in reality, tragic. In any given industry there as a first mover who thought they could grab greater market share if they could lower their COGS by manufacturing in China and beat their competitors in pricing. What they did not foresee is that they triggered a chain reaction: After their move every single competitor was forced to move manufacturing to China because it was impossible to compete given the regulatory and labor constraints in places like the US and Europe. And so, one after the other, they all followed each other off the cliff. Very soon they all found themselves manufacturing in China. They also woke up to having to sell their products at about the same prices, which means their margins were now really slim. Years later, the factories where they all made their products decided they would now sell direct in the US and Europe and eliminate the foreign middle-men from the equation. And that's what you call being in a pickle. Food delivery is an arms race. They are burning cash like it's free. I have no clue how it will all shake out. I don't think the math supports a business that isn't subsidized by money that is willing to burn in huge piles quarter after quarter. Much like the migration of manufacturing to China, if one competitor turns-up marketing campaigns the others are forced to burn even more cash for even more negative returns. Somehow we live in a world where this is called "investing". What do I know?

PopeDotNinja 6y ago

If they spend less on marketing and their business shrinks as a result, they could have potentially never be profitable.