GrubHub just announced disappointing quarterly results and said food delivery is unlikely to ever be profitable on its own.
Three Silicon Valley sharing-economy companies unveiled a measure to exclude many who work for them from being considered benefits-earning employees.
All told, the bottom line was net income of just $1 million versus $22.7 million in the same period a year ago. But GrubHub also made the argument that its value to restaurants lies in its potential as an online advertising partner, and that delivery services are really just a vehicle for generating ad sales.
This should not be reassuring news for DoorDash and Postmates — which have almost half the market for meal delivery — their investors, or their restaurant partners. If GrubHub, which actually is profitable, says that meal delivery isn’t where the money is, where does that leave DoorDash or Postmates? Both are unprofitable and have a sky-high combined valuation of $15 billion, based on rounds of private investment funding this year. Both now must cope with the long odds of going forward withthis year after the botched IPO of WeWork parent We Co.
It doesn’t seem all that far-fetched to imagine these two companies undergoing the same kind of brutal retrenchment that WeWork is facing; reducing advertising spending, cutting coupons and incentives, raising prices and exiting unprofitable markets. Uber Eats, of course, is a slightly different case because it’s part of a much larger operation, theoretically one with more access to capital. Yet it faces similar funding constraints; parent Uber Technologies Inc.
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