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Lyft reports second-quarter earnings after the bell today and Uber tomorrow. Exciting times! Everyone is a public company now!
Fresh off a controversy over its tipping policy, DoorDash is buying competing food delivery platform Caviar. DoorDash said it would acquire Caviar from its current owner, Square, for $410 million in cash and DoorDash preferred stock.
The deal is expected to close at the end of this year, pending the usual regulatory approvals. Square, for its part, may be happy to be rid of Caviar, which it bought for $90 million in 2014. Square CFO Amrita Ahuja told investors in a call on Aug. 1 that “as a delivery platform, Caviar has lower gross margin profile than the remainder of our revenue streams related to subscription and services” and that “ongoing costs associated with Caviar, including fees for couriers and the revenue share with restaurants… have made it the largest component of subscription and services-based cost.”
DoorDash buying Caviar is the latest instance of consolidation in the food delivery industry. Amazon closed its restaurant delivery service in the US and UK and invested $575 million in London-based Deliveroo. Just Eat, also based in London, plans to merge with Takeaway.com, a European competitor that previously bought the German operations of Delivery Hero. Spanish food delivery startup Glovo is talking with Deliveroo and Uber. Postmates has explored a sale to DoorDash or Uber as an alternative to going public.
Consolidation is to be expected. The service of having food brought to you from a restaurant is a commodity, even if the food isn’t. If you want a burger for dinner in half an hour, do you care more about the company that handles your delivery or that it arrives quickly and for a reasonable price? The people who deliver for DoorDash can quite literally be the same as the couriers on Postmates or Uber Eats. The world never needed dozens of food delivery companies, but for a while food delivery was hot and venture capitalists poured money into it, so we got dozens of them anyway.
One way food delivery services can stand out in a crowded playing field is with their delivery offerings. The shared rental kitchens (see also: dark, ghost, cloud) that Uber Eats and Deliveroo are experimenting with are one attempt to create a more unique food experience. If you can get popular restaurants to work exclusively with you, or incubate new brands with trendy delivery-only menus, maybe customers will seek out your service to order from those places. Food is the new content.
Differentiation is part of why Caviar appeals to DoorDash. It says this in the second line of a press release on the acquisition: “DoorDash’s acquisition of Caviar creates a highly differentiated company with a unique brand and wide-ranging selection” (emphasis mine).
While DoorDash spent the past year expanding aggressively with that good ol’ Softbank money, Caviar has always bet on exclusivity. Caviar markets itself as “an easy way to order food from the best local restaurants.” It regularly emails users about eateries and dishes that are “only on Caviar.” The value proposition is right there in the company name, Caviar, a food so synonymous with class and refinement that when Sylvia Plath consumed an entire bowl of the stuff by herself at a luncheon, as her character Esther Greenwood also does in The Bell Jar, a shocked observer at the table concluded that Plath must be “more sophisticated than me.”
In a jam.
Uber and Lyft used to talk a lot about taking cars off the road. The companies advertised their shared rides services—UberPool and Lyft Line—not just as cheap alternatives to private rides but as a social good, a way to reduce carbon emissions and street congestion by putting more people in fewer cars. “By taking Lyft, you can help your community reduce traffic and take cars off the road,” Lyft said in a 2016 blog post.
Starting around late 2017, a handful of academic studies popped up suggesting that instead of reducing congestion, ride-hail services were making it worse—encouraging people to book rides rather than walk, bike, or take public transit. “Studies are increasingly clear: Uber, Lyft congest cities,” said the Associated Press.
Studies since then have been clearer. A May 2018 report declared Uber and Lyft responsible for more than half of the increase in congestion in San Francisco from 2010 to 2016, a claim echoed several months later in a report from the county transportation authority. (Lyft and Uber disputed the findings.) A July 2018 report from transportation consultant Bruce Shaller claimed “transportation network companies” (TNCs) like Uber and Lyft put 2.6 new vehicle miles on the road for every mile of personal car travel they removed. (Lyft disputed the report and Uber dismissed it as “fundamentally flawed.”)
Anyway here is something Uber’s head of transportation policy wrote on Monday:
…TNCs are likely contributing to an increase in congestion
The full line is, “The research shows that despite tremendous growth over the past decade, TNC use still pales in comparison to all other traffic, and although TNCs are likely contributing to an increase in congestion, its scale is dwarfed by that of private cars and commercial traffic.” It refers to a report Uber and Lyft commissioned from transportation consultant Fehr & Peers to study their contribution to “vehicle miles traveled” (VMT) in six major US cities. The report notably omits New York City, where ride-hail drivers now outnumber yellow cabs more than 5:1. A memo on the findings from Fehr emphasizes that Uber and Lyft are a small fraction of VMT compared to private cars and commercial vehicles, but are a factor nevertheless.
Perhaps due to this admission, Uber and Lyft have pivoted from flatly claiming they reduce congestion to backing a transit policy that actually would. Congestion pricing—the practice of taxing motorists to travel in busy areas during busy times—is gaining momentum in a number of US cities, with vocal support from Uber and Lyft. New York agreed to congestion pricing in the fiscal 2020 budget, a plan Uber spent at least $1 million lobbying for. It was the first US city to do so. Traffic-clogged Los Angeles and Seattle are also researching the policy. Congestion pricing was long deemed politically unviable in the car-loving US, but has proved effective in global cities such as London and Stockholm.
Widespread congestion pricing would mean more fees for Uber and Lyft, but it would also probably mean more riders. The companies are pushing plans that impose higher surcharges on private or single-occupancy vehicles than shared rides, like the ones they sell. The congestion fees on hired rides in New York City, for example, are $2.75 on a non-yellow cab private ride, $2.50 on a yellow cab ride, and $0.75 on a shared trip. If shared ride providers got a comparable fee break compared to taxes on privately owned vehicles, that could convince more people to forgo their personal cars for a service like Uber or, preferably, a bike or public transit.
They may not be as eco-friendly as scooter companies would have you believe:
Researchers at North Carolina State University decided to conduct a “life-cycle assessment” that tallied up the emissions from making, shipping, charging, collecting, and disposing of scooters after one of them noticed that a Lime receipt stated, “Your ride was carbon free.”
The study concludes that dockless scooters generally produce more greenhouse-gas emissions per passenger mile than a standard diesel bus with high ridership, an electric moped, an electric bicycle, a bicycle—or, of course, a walk.
The researchers find most emissions associated with shared electric scooters are related to their materials and manufacturing process, and the impact of transporting scooters to recharge them. “The results prove to be highly sensitive to e-scooter lifetime,” write the researchers, who assumed lifetimes of 6 months to 2 years for a Xiaomi M365 scooter, a generous assumption considering the average scooter in Louisville, Kentucky, lasted roughly 30 days this time last year.
The good news is that if you believe this study—Lime disputed it as “based on assumptions”—then scooter companies’ corporate goals should be firmly aligned with their environmental ones. Short-lived scooters aren’t just bad for the environment; they’re bad for business. Scooter unicorn Bird lost nearly $100 million in the first quarter of 2019, a loss CEO Travis VanderZanden chalked up to the cost of repairing and replacing old retail scooters. Bird is chasing a more durable scooter and has debuted two in-house models. VanderZanden claims one of them, the Bird Zero, has an average lifetime of 13 months, despite the fact that the device was only announced in October 2018, roughly 10 months ago.
The other main way the researchers suggest scooter companies can reduce emissions from the service is with a better charging approach. This, also, isn’t just an environmental goal but an operational one. The first shared scooters that hit the streets had built in batteries, meaning to recharge them the entire device had to be plugged in. Companies paid freelancers to round scooters up by the dozen and charge them in their homes and garages. Some companies are now testing scooters with batteries that can be swapped out. In theory this means that instead of having an army of freelancers hunting for depleted scooters, you could have a couple people drive a planned route with vans of freshly charged batteries, which would probably be cheaper and almost certainly be more efficient.
Phoning it in.
Here is a crazy story from Vice on a devious new tactic by Yelp and Grubhub to squeeze more money out of restaurants:
Even though restaurants are capable of taking orders directly—after all, both numbers are routed to the same place—Yelp is pushing customers to Grubhub-owned phone numbers in order to facilitate what Grubhub calls a “referral fee” of between 15 percent and 20 percent of the order total
Reporter Adrianne Jeffries spoke to multiple restaurant owners who weren’t aware of what Yelp and Grubhub were doing. One of them, Mohammad Zaman of Afghan Kabab and Grill House in Brooklyn, insisted the alternative phone number in Yelp was a mistake until seeing a call placed to it ring at his restaurant.
Restaurants have always had a tense relationship with food delivery platforms, which eat away at their thin margins. While food delivery services can increase restaurant orders, these companies are fundamentally middlemen between the customer and the food provider, with commissions that can reach as high as 30%. Restaurants have other reasons to mistrust delivery services. DoorDash in its early days angered some restaurants by listing their menus on its site and marking up menu prices without getting permission from the restaurants first. Competitor Postmates also made deliveries from some restaurants without first signing them on to its service. Creating shadow numbers for restaurants to extract more fees may be a dubious business tactic, but in the world of online food delivery it’s also not surprising.
This time last year.
How JPMorgan wooed WeWork. Uber struggling to secure long-term license in London. Laid-off Uber employees find new jobs with crowdsourced spreadsheet. Airbnb acquires Urbandoor to boost extended corporate stays. Lyft pulls e-bikes after some catch fire. Driverless shuttles start service in Brooklyn Navy Yard. Travis Kalanick’s Cloud Kitchens eyes Chicago. Rebel Foods raises $125 million for delivery-only restaurants. Recogni raises $25 million for AV technologies. Deliveroo acquires software studio Cultivate. On-demand worker platform Jobble gets $11 million. DoorDash asks couriers for input on new pay model. Lime partners with digital bank N26 on 50%-off deal. Airbnb, Miami Beach disagree on settlement details. Uber and Lyft drivers block bike lanes in New York City. London shops selling e-scooters don’t know they’re illegal to ride. Munich fears drunk scooting during Oktoberfest. Audi plans electric scooter-skateboard hybrid. Regus hopes WeWork IPO will level the playing field. Silicon Valley’s Latest Unicorn Is Run by a 22-Year Old.
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