| To: Glenn Petersen who wrote (873) | 5/26/2022 8:26:01 PM | | From: Sun Tzu | | | | | Perhaps I am too cynical, but I don't see companies as preferring to lower their valuation rather than issue stocks to their employees (out concern for the employees and the shareholders, of course <g>). What I think happened is that the market has tanked and they need money to survive. VC funds have dried up and they can't get a better valuation from them. So everyone, including the VCs, are cutting their losses and doing an IPO at a price that the market can take. Many of the no earnings stocks have dropped 65% - 80% off their IPO. So going from 40 to 24 is still better than that and allows the VC and the execs to cash out before it drops even more or they have to remain private for a few more years. |
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| To: Glenn Petersen who wrote (873) | 5/26/2022 8:37:49 PM | | From: Sun Tzu | | | | One of last year's hottest IPOs was NuBank (NU). Three years ago Warren Buffett invested in them at private equity equivalent of ~$5.50. They went public at 9 and hit over 12 in their first day. This week they hit $3.32, or almost one-fourth of their opening day's high price. And personally I think there is an even chance that they hit low $2 later this year.
My point is that valuations have tanked. And no company goes public or raises funds under present conditions unless they absolutely need the money. *Needing* the money is a problem. I am happy to invest in companies that *want* money, but I'm very reluctant to invest in those who need money. Those IPOs often go belly up. |
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| To: Glenn Petersen who wrote (871) | 5/26/2022 8:41:57 PM | | From: Sun Tzu | | | | | What would prevent the bank from taking reckless chances with the private capital? When they don't have money, then they have to choose carefully. But mixing other people's money with their own trading and cap market ops, this is the crossing the streams that I would want to avoid. |
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| From: Glenn Petersen | 5/29/2022 9:03:00 PM | | | | | | Nothing could slow inDriver’s rise from Siberian startup to global Uber competitor. Then Russia invaded Ukraine
InDriver's unique haggling feature has seen it expand from its roots in Yakutia to markets around the world.
By LEONID RAGOZIN
Rest of World
24 MAY 2022 • YAKUTSK, RUSSIA
Photography by Yuri Kozyrev/NOOR for Rest of World / Yakutsk is the capital of the remote Russian republic of Sakha, also known as Yakutia, in Siberia.
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On February 22, 2022, driver Yegor Tallayev zipped through the industrial suburbs of Yakutsk, the capital of the remote Russian republic of Sakha. Also known as Yakutia, the area is home to the coldest permanently inhabited place on Earth, and, at just -24 degrees Celsius, it was a comparatively balmy day. Tallayev took a right turn at a fork and headed downhill, until we were driving directly on the icy surface of the Lena, one of the world’s longest rivers.
The ice road looked like a normal two-lane highway, complete with road signs, and was divided by a snowy patch with a couple of u-turn pockets. Along the 16 kilometer route to the opposite river bank, we spotted laborers in orange jackets mending the road by pumping water from an ice hole onto the surface, where it froze in no time: during Yakutian winters, you can throw water into the air and watch it freeze solid before it hits the ground.
Tallayev sped up. The frozen river, he explained, was outside of the jurisdiction of the regular traffic cops. In any case, he said, “We have no accidents here.”
Up the high bank of the river and through a village, we reached our destination: Nizhny Bestyakh railway station, the ultimate end of the line, built in 2011 to connect Yakutsk with Russia’s railway network. From here, it takes several days by train to get to the next large Russian city in either direction. For the right fare, Tallayev will take passengers on the multi-day trip by car. From time to time, he will even collect three or four passengers and drive to Heihe, a Chinese border city 1,800 kilometers away, which Russians can enter without a visa. He charges around 5,000 rubles (about $80) per passenger for such a trip, which takes around 40 hours of driving.
Tallayev is a driver with inDriver, a ride-hailing app developed in Yakutsk in 2012. The app connects riders with drivers, similar to Uber or Yandex Go, Russia’s most popular taxi app. But inDriver was very much designed for Yakutia: Its main point of difference is that it allows riders and drivers to haggle over prices. It also accommodates long journeys and accepts payments only in cash.
Yegor Tallayev drives Rest of World’s reporter and photographer along the ice road of the Lena river.
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What was good for Yakutia, however, turned out to be good for many other parts of the world too. Over the last decade, inDriver has expanded into countries as disparate as Brazil, Botswana, and Indonesia. It has ramped up its global expansion in the past few years and is now available in 42 countries, with its official headquarters in California. According to Data.ai, it was the world’s second most frequently downloaded ride-hailing app after Uber in 2021–2022.
In 2021, inDriver announced that it had achieved unicorn status, with a valuation of $1.23 billion following a funding round of $150 million earlier that year, and seemed set to continue its rollout into new locations around the world, including plans to expand into Australia.
In February, Rest of World traveled to Yakutsk to visit the company’s flagship office and speak to some of its team about its ongoing expansion. It seemed that nothing could hold back the company’s rise from a local Russian service to a truly global rideshare competitor. Then, less than an hour after Aleksandr Pavlov, inDriver’s chief mobile hub officer, spoke with Rest of World about the company’s future plans, the news broke: Russia had invaded Ukraine.
Yakutsk is commonly known as the coldest city in the world, where temperatures can drop as low as -64.4 degrees Celsius.
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Even before the invasion, Russia’s tech sector was straining to keep talent in the country, fighting against a brain drain that was partly a result of increasing authoritarianism and economic stagnation. With a global battle for talent, engineers could easily be persuaded by offers to work in other countries. In early 2021, the Russian government put the deficit of IT experts between 500 thousand and 1 million.
A decade ago, when inDriver first came on the scene, things looked more optimistic. There was an explosion of app technology in all spheres of life, especially ride-hailing and car-sharing services, with market leader Yandex beginning to transition rapidly into the realm of autonomous cars and delivery rovers.
It was against this backdrop that Aleksandr Pavlov, 33, first conceived the idea of inDriver, which is rooted in the unique environment of Yakutia. A territory more than eight times the size of Germany, the region is covered in swathes of taiga forest and Arctic tundra. It is home to just under a million people, half of whom, including Pavlov, are Yakuts — an indigenous group that speaks a Turkic language. An autonomous republic within Russia, it is under Russian jurisdiction but also has its own constitution. Russian and Yakut are both recognized as official languages. It is Russia, but not quite.
Born in 1989 in the village of Mayagas, a three-hour drive from Yakutsk, Pavlov studied radio physics and electronics at the city’s North-Eastern Federal University, alternating his studies with stints as a concrete worker on construction sites. It was around this time that he began to get frustrated with transport options in Yakutia. In Soviet times, there was a bus service that stopped in Mayagas, and you could even fly from there to Yakutsk. But in the 1990s, after the collapse of the Soviet Union, one of the only options for getting to most small places around Yakutia — some of which are over 1,000 kilometers from the capital — was by car. To make matters worse, the local taxi companies kept raising prices. He noticed that they would bump up fares for the New Year’s holiday but never drop them afterward. So, one day in 2012, Pavlov decided to create an alternative. He set up a group on Russia’s most popular social network, VKontakte, with the aim of bringing drivers and passengers together in a peer-to-peer arrangement.
Initially, the group was just a list of drivers, many of whom were Pavlov’s personal friends, and their phone numbers. Passengers would call the drivers and bargain over the price for their journey. Within a few months, Pavlov said, the listed drivers were swamped with calls, as the number of users in the group soared to 50,000 — in a city with a total population of 280,000 at the time. People started leaving comments with their phone number, routes, and suggested prices, so that drivers, listed or non-listed, could phone them if they were available to make the journey.
Aleksandr Pavlov, chief mobile hub officer for inDriver.
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Early in 2013, Pavlov received a message from entrepreneur Arsen Tomsky, best known at the time as the owner of the local news portal Ykt.Ru, which served as a go-to website for regional and national news as well as updates on local events, leisure, and travel. Tomsky offered to buy the group Pavlov had built for the equivalent of $10,000. Initially, Pavlov refused. But, in the spring of 2013, he received draft notice from the Russian army. All male Russian citizens aged 18–27 must complete a one-year term of service, which meant he had to figure out what to do with the VKontakte group while he was away. He accepted Tomsky’s offer.
In the end, Pavlov broke his arm and wasn’t drafted. Instead, he took up electrician gigs. Some months later, Tomsky offered him a job with his software company, Sinet, to work on growing the company that would emerge as inDriver. “I thought for like five seconds, and, three hours later, I was in his office on the fourth floor of this building,” Pavlov told Rest of World in a meeting room inside inDriver’s Yakutsk office, where corridors are painted in psychedelic colors and cubicles are themed after pop culture.
“The Yakutsk taxi companies elevated prices in a cartel agreement, and those 20-year-old students came up with a response that restored justice.”
Pavlov was hired to manage a group of app developers who had already devised a prototype Android app to replace the VKontakte group; inDriver was officially founded in 2013. At the time, ride-sharing apps were just beginning to conquer Russia and the rest of the world. In early 2013, Uber was operational in 35 cities globally and had begun its meteoric rise on the American market (by the end of 2013, it had expanded into 60 cities worldwide). Russia’s tech giant Yandex launched its ride-hailing service, Yandex Taxi (which later became known as Yandex Go), in 2011.
Tomsky, now based in California, framed the founding of inDriver as an attempt to fight injustice. “The Yakutsk taxi companies elevated prices in a cartel agreement, and those 20-year-old students came up with a response that restored justice,” he said over a video call.
Tomsky claims that inDriver’s model isn’t just more fair to riders but also to the drivers who work on the platform. While ride-hailing platforms like Uber can take more than 25% of a passenger’s payment and use algorithmically deduced surge pricing, inDriver’s commission averages at 9.5% around the world. In its native Yakutsk, drivers get a privileged rate and pay only 6% commission to the platform.
But the platform’s defining difference is the haggling model. Unlike Uber and Yandex Go, which deduce fares based on factors including distance, travel time, and demand, inDriver users propose a price and settle it with their individual driver, just as they did a decade ago on the VKontakte group, or as people in Yakutia would when they flagged down cars in the street even before that. (In many locations, the app will suggest a starting point for negotiations.)
When I ordered a ride from a hotel in Yakutsk to the train station, I typed in my suggested price: 1,800 rubles ($26 at the time). Within seconds, several drivers responded through the app by making a higher bid or agreeing with my offer. I opted for a spacious vehicle and a driver with a top rating who was happy to make the trip for 2,000 rubles. I could have tried to bring the price down, but, with the cold biting at my fingers, I pressed “order.”
People wait by the side of the road in Yakutsk.
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InDriver has become part of Yakutian culture. Inside Cinema Lena, which specializes in showing locally produced “Sakhawood” films, accountant Anastasia Oskina told Rest of World that she uses the app to travel around the city on a daily basis. She also takes advantage of its courier feature, which she said was especially handy in an emergency: she sent her mother a spare key when she locked herself out of her apartment; she sent her husband his ID when he left it at home. Her boss, Georgy Nikolayev, who had just recovered from Covid-19 when we met, said his friends used the service to send him his favorite local delicacy — horsemeat pies — while he was ill. Pavlov said that, during Covid restrictions, when airline prices soared, people started using inDriver to go to Vladivostok, a trip that takes several days, just to spend time by the sea. “If you order a cab to Vladivostok now, you can depart next evening,” he said.
But less than a year after its founding, inDriver set its sights on markets further afield. In early 2014, the platform expanded outside Yakutia for the first time to Yuzhno-Sakhalinsk, the capital of Russia’s Sakhalin Island, just north of Japan in the Pacific Ocean. Pavlov said Sakhalin was chosen because — just like Yakutia — it was a large, cold, isolated and sparsely populated place with a similar issue of rising prices from local taxi companies.
Pavlov remembers his trip to Yuzhno-Sakhalinsk to set up the service. He came to the island alone, with only a vague idea of where to start. He headed straight to the bus station where taxi drivers tended to congregate and spent a day chatting with them. “These were the inveterate cabby types — cigarette in the mouth, walkie-talkie, radio blaring chanson [a Russian-language music genre often associated with prison culture],” he recalled. Almost none of them had a smartphone.
He placed vacancy ads for drivers on a local news portal, listing smartphone ownership as a requirement, and started receiving calls. He spent the following weeks in his hotel room, instructing drivers how to install and use the app. InDriver placed targeted ads on social media to attract passengers. After a couple of months, Yuzhno-Sakhalinsk had over 1,000 active users.
That same year, Tomsky went to Kazakhstan and realized that it was a lot like Yakutia before inDriver — people hailing unmarked cabs in the street or using phone taxi services. InDriver successfully expanded there, too, marking its first international market.
“First-time passengers immediately react to the fact that it is them who are offering the price. It immediately creates a ‘Wow’ effect.”
After Kazakhstan came Mexico, in 2018, starting with the industrial city of Saltillo in the northeast. It was the first country outside the former Soviet Union in which inDriver successfully launched its service, and Prokopy Fedorov, deputy vice president for ride-hailing services, recalls working hard to spread the word. “We were hiring radio cars — you know, in Mexico, they have those cars with megaphones blasting adverts,” he told Rest of World in a meeting at inDriver’s Moscow office, a stylish glassy business tower overlooking a historical church.
Mexico was swiftly followed by most other countries in Latin America, including Brazil and Chile. In 2019, Fedorov, who had led the Mexico expansion, moved on to launch the app in several cities in India. Meanwhile, other teams were pouring out of Yakutsk into East Asian and African markets.
According to inDriver’s senior vice president, Joshua Tulgan, the app performs best in mid-sized cities. For example, in the Colombian cities of Cúcuta and Bucaramanga, its share is two to three times bigger than that of Uber and other apps. But in the country’s largest cities, like Bogotá and Cali, Uber dominates.
Today, Kazakhstan ranks as inDriver’s biggest market in terms of share (with the app accounting for 50% of ride-hailing and 80% of intercity transactions); Mexico is the largest market in terms of total trips.
The secret to the company’s success, Fedorov contends, is the haggling feature: “First-time passengers immediately react to the fact that it is them who are offering the price. It immediately creates a ‘Wow’ effect.”
Aleksandra Gavrilyeva negotiates a fare with a driver on inDriver’s app.
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Attitudes toward haggling are a key indicator that a country will take off, Fedorov explained. The app has been very well received in a country like Pakistan, where haggling is part of everyday life. But inDriver’s market research shows that it wouldn’t work quite as well in South Korea or Japan, where haggling is not a societal norm.
Ryman Sneed, who is 39 and lives in Mexico City, discovered the inDriver app about six months ago, after a friend recommended it. She said that now she uses it frequently instead of Uber. “If I have cash, then I’ll be more prone to use inDriver, just because it’s always cheaper,” she told Rest of World. She usually offers about 10 pesos over the app’s suggested price for a trip in order to get a driver faster. She said she preferred some aspects of Uber, such as the option to pay by card and greater standardization of vehicles, “but then I go with inDriver because, for me, I’d rather pay less and have a somewhat less comfortable ride — it’s negligible for me.”
InDriver made two attempts to launch in places where haggling is not part of the culture: Moscow and New York, at the end of 2018. In both places, the company decided to stress another selling point: middle- and long-distance journeys. In Moscow’s case, this mostly means trips to one of the city’s four airports. In New York, inDriver also tried to introduce credit card payments for the first time. It was a failure, largely due to a high volume of card fraud the company was not prepared for. But back in Yakutsk, Pavlov insisted that inDriver would return to the city.
“Drivers are being turned into semi-robots with [the companies] aiming to eventually replace them with real robots when pilotless vehicles take stage.”
Drivers told Rest of World they had mixed opinions of the app. Hector Herrera, who drives in Puebla, said that he used inDriver because it didn’t require him to have such expensive insurance as other platforms (asked about its policies, inDriver said it respects each country’s regulations, including with regard to insurance). The main problem, he said, was that fewer people had heard of inDriver than competitors such as Uber: “It needs a little marketing.” He was ambivalent on the haggling feature — “sometimes I like it, and sometimes no,” he said. With inDriver’s haggling feature, he’s noticed that he can ask for only 15 or 20 pesos more than what a rider offers (inDriver says there are different settings in different cities, with drivers able to propose prices based on a customer’s original offer). Even though he doesn’t drive for Uber, Herrera said he cross-checks the prices occasionally and has noticed that he could be making around 40 more pesos per ride for Uber during high-demand hours.
Habib, a driver in Lagos who asked to be identified by only his first name, out of concern for his job, said that the app’s reputation was growing in Nigeria, where it is the third most popular ride-hailing service among drivers. “InDriver is good, especially for customers who want the cheapest options,” he said. InDriver isn’t his first choice of app, but he uses it in the evening when he wants to stop driving for the day and needs a passenger whose destination is close to his neighborhood.
He, too, had complaints about fares. “InDriver’s suggested amounts to passengers used to be higher,” he said. “Now, as they’ve gained some ground with commuting passengers, they’re lowering prices.” Habib also said that, after the passenger agrees to a fare upfront, inDriver prices do not adjust for unexpected changes in conditions such as heavy traffic. Across multiple groups on Facebook, drivers recently complained that inDriver fares have become too low and called for a boycott until prices increase. Others don’t have that luxury. “Many of the drivers on inDriver have been blocked from Uber and Bolt, and that’s why the app still has drivers,” Habib said.
Tomsky insists that other apps don’t give drivers the freedom to choose where they go and at what price; they simply impose the trips on drivers and may punish them by reducing their ratings if they refuse. “Drivers are being turned into semi-robots with [the companies] aiming to eventually replace them with real robots when pilotless vehicles take stage,” he said.
With inDriver, a driver knows the destination before accepting the journey and has a say about the price. “In that sense, our system turns them into small-scale businessmen.”
By the time of publication, inDriver had around 1.5 million drivers across 42 countries, with plans to expand into more locations, including Australia. I went to Yakutsk to get a sense of the company’s trajectory to date and how this once-local platform, created by members of an indigenous community in a remote corner of Eurasia, was growing into a global phenomenon. Despite all of the ominous signs in the lead-up to the invasion of Ukraine, I could not bring myself to imagine that, while I was there, Russia would take such action that would reverberate around the world and result in huge repercussions for the country itself, including for its tech workers.
On the morning of February 24, just hours before the attack started, I met Pavlov in the Yakutsk office, in a meeting room fitted with a large plasma screen. The monitor showed the number of transactions conducted using the inDriver app during the current day, month, and year. At the top was the overall number of transactions since the app was launched: over 1.6 billion.
After our morning meeting, the news came in: Russia had launched its invasion. The invasion began at 5 a.m. Kyiv time, but because of the seven-hour time difference with Yakutsk, news popped up on cell phones across the city at 12 noon. The journalists from Tomsky’s news portal, Ykt.Ru, which shared workspace with inDriver, went into overdrive reporting the shocking news of Russian missiles targeting Kyiv and troops pouring across the border.
Yakutia felt eons away from the conflict zone in Eastern Europe, both geographically and culturally. But local residents appeared extremely worried, particularly about army reservists who were being drafted to the front from Yakut-majority villages.
I had been scheduled to speak with Tomsky over video call, but in light of the news, inDriver postponed the interview. As airlines began to cancel flights and news outlets were abuzz with rumors of expected martial law, I cut my planned trip short and set about finding a way to leave Russia. I took an overnight train from Moscow to St. Petersburg and then an early morning bus into Estonia, hastily erasing data from my computer and phone, since I had heard that Russian border guards were reportedly checking gadgets for anti-war material. Other people were making their way out of Russia, fearful of closed borders, mass mobilization, and other threats of martial law (which, in the end, did not come into effect).
Since the start of the invasion, Russia has seen many tech workers flee the country, heading to cities such as Belgrade and Istanbul, to find new jobs or work remotely. Some have been motivated to leave by increasing repression and censorship, which has had a particular impact on internet companies, while others fear they may end up being conscripted if they stay. By the end of March, Russia’s once-growing tech sector had lost up to 70,000 workers, according to the Russian Association for Electronic Communications — equivalent to over 4% of the entire workforce.
Two months after my visit to Yakutia, speaking over video call from California, Tomsky was emphatic about his position on the war. “I should unequivocally state that I don’t support this war; it is evil,” he said. In March, he was forced to close Ykt.Ru, the news portal, because of a new law adopted by the Russian Parliament that threatened 15 years in jail for people who spread “false information” about the war or even used the word “war,” rather than “special military operation,” a euphemism used by the Kremlin. On March 3, he posted on Facebook that inDriver would donate $100,000 to Ukrainian refugees and added the same amount from his own pocket.
“I should unequivocally state that I don’t support this war, it is evil.”
As for inDriver, the impact of the conflict is limited, Tomsky told Rest of World. “Since 2018, we are an American company supported by top American investment funds,” he said. “Russia’s share in our businesses has fallen down to 7% in GMV [gross merchandise value]; it is not a large market for us.”
Still, his greatest concern is for inDriver’s Russia-based staffers. “For many years, I’ve been trying to create jobs in my native Yakutsk and support the local economy, but this is now impossible. So we are giving people an option of relocating,” he said. He would not provide precise figures on employees leaving Russia but said that “only a few will be left by year’s end.” A large number of employees from Moscow and Yakutsk are moving to Kazakhstan, he said, while others will join an expanding office in Cyprus. “Many employees are keen to go because they are frightened, disoriented, and/or don’t support [the war]. So, in many ways, it is our joint line of action,” he said.
Meanwhile, Tomsky said, the company is planning to expand its business beyond ride-hailing into other enterprises, such as food delivery, which is at the test and market research stage. It’s also continuing with expansion into new markets. On April 6, Tomsky announced a launch in Lebanon. A few weeks later, the app went live in Jamaica.
That month, Tomsky posted a selfie to Instagram with dozens of staffers in their Almaty, Kazakhstan office, where many of his Russian employees have relocated. He also posted photos to his Telegram channel of employees kitesurfing and rock climbing at a team-building event in Sri Lanka. Each photo was evidence of continued global expansion. The only backdrop missing, it seemed, was Yakutsk.
Leonid Ragozin is a freelance journalist based in Riga.
Nothing could slow inDriver’s rise from Siberian startup to global Uber competitor. Then Russia invaded Ukraine - Rest of World |
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| From: Glenn Petersen | 6/24/2022 5:09:08 AM | | | | | | How Facebook became working-class Mexico’s favorite food delivery app
The platform has emerged as a hack around Uber Eats and Rappi's high fees.
By Leo Schwartz
Rest of World
23 June 2022 • Xochimilco, Mexico
Photography by Leo Schwartz/Rest of World
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Breaking into Mexico City’s street food scene is no easy feat, so Jordi Berbera decided to open a pizza stand during the pandemic. But he quickly realized how cramped the operation would be, and he only managed to prepare individual pizzas — not the ambitious menu of pasta and salads he had planned. So, he decided to move the operation into his girlfriend’s father’s house nearby and convert his operation to a “dark kitchen,” also known as a “ghost kitchen” — a restaurant that focuses entirely on delivery.
Dark kitchens emerged with the growth of apps like Uber Eats and the Colombian app Rappi — food delivery platforms that changed how we interact with restaurants. But instead of using those services, Berbera and his girlfriend, Zaira Mejía, have turned to selling their food on Facebook groups, which have emerged as a low-cost alternative to conventional delivery services.
Even though they list their restaurant on Rappi, Berbera and Mejía estimate that they receive only one order through the app for every ten orders they get from the Facebook groups they’re on.
Much of Mexico City’s food scene is built around affordability. That means selling on platforms like Rappi and Uber Eats, which can charge commissions of around 30%, forcing food establishments to drive up their prices. In 2021, the restaurant management platform Waiterio found that profit margins for restaurants in Mexico were around 20%. That number shrank during Covid-19, when over 10,000 restaurants in Mexico City closed and delivery platforms were forced to temporarily lower their commissions.
Berbera and other Mexico City restaurateurs who spoke to Rest of World said that Facebook offers them a hack around the delivery apps, all without having to pay a single centavo. The private neighborhood Facebook group Berbera posts in has a half dozen daily listings for tacos, tortas, and seasonal foods like rosca de reyes, often accompanied by a WhatsApp number and the offer of free home delivery within a certain radius. They complete orders on their trusty moped, which they bought specifically to handle demand from Facebook.
“People use Facebook because it’s cheaper,” Mejía told Rest of World. “You can find everything,” Berbera added.
Berbera compared Rappi to a shopping mall — there’s a good chance you already know what you want to buy and what stores you’re going to. Facebook is more casual, intimate, and neighborhood-focused. You stroll around, checking out different stalls. “It’s like going to the park,” he said.
And it’s a well-attended park: One private group Rest of World joined had nearly 11,500 members, with people selling everything from food to clothes and chatting about the goings-on of the neighborhood.
Mark Zuckerberg, the head of Facebook’s parent company Meta, has previously encouraged the reinvention of the social platform as a digital marketplace. Groups have emerged for everything from selling parrots in Bangladesh to matchmaking in Pakistan.
Jordi Berbera and Zaira Mejía run their pizza delivery business out of a residential kitchen.Berbera and Mejía’s Pizza Pizza Pizza runs out of the neighborhood of Xochimilco, best known for a maze of canals populated by colorful boats popular with tourists — the Venice of Mexico City, just with more micheladas and mariachis. Beyond the piers of the embarcaderos, Xochimilco is largely a working-class area, and while Starbucks and Shake Shack have come to infiltrate wealthier parts of Mexico City, Xochimilco’s streets are still dominated by open-air restaurants and street food stalls selling tlacoyos and carnitas.
“Everyone in this city eats out,” said Tiana Bakic Hayden, an anthropologist at the College of Mexico. “There are very fancy places where you can spend $100 per head, and then you can eat on the street for 18 pesos [around $1] for four tacos.”
This economic stratification is reflected in how delivery apps operate in the city. “My sense is that while [delivery apps] had quite a big impact in the more central neighborhoods, I don’t think they’ve had very much of an impact on pretty big swathes of the city,” Hayden said. “They only serve certain tiers and certain cities.”
When Berbera and Mejía first started operating out of her dad’s house, Facebook was key to their early success. After the first couple of times that they uploaded photos of their pizza to the neighborhood group, they were bombarded by 18 messages from people asking for the menu.
“People use Facebook because it’s cheaper. You can find everything.”
Their Facebook postings became so popular that they suspect it even led Rappi to reach out. But despite the relative ease of onboarding, the economics didn’t work out. Rappi eats around 30% of every order, Berbera estimated, meaning they had to raise their prices for every item and would still lose money.
Neither Meta nor Rappi responded to requests for comment from Rest of World.
Gad Allon, an operations management expert and professor at Wharton, said that because of labor costs, food delivery platforms are built for high-priced orders. If a customer is paying $30 for a meal, then a few extra dollars for delivery fees may not seem like that much. The calculus changes for a $3 meal. “For a food stand, it definitely doesn’t make sense,” he told Rest of World. “There’s no question.”
Alberto Caricio runs a small restaurant called Elotlan a few blocks away from Berbera and Mejía’s home, serving classics like sopes and gorditas fried on a steaming comal. Elotlan honors culinary traditions from the neighboring state of Puebla, with every dish built on a foundation of white and blue nixtamalized maize dough.
Just 21, Caricio has already opened three locations of Elotlan. While foot traffic comprises most of his sales during the day, he said that delivery is key to his business and that about 80% of his orders come from Facebook at night. He’s currently active on four different neighborhood groups, posting regular photos of cheese-drenched tortillas.
Xochimilco’s concentration of affordable food options creates competition to keep costs low. “It’s [a] fragile market,” Verónica Crossa Niell, an urban studies professor at the College of Mexico, told Rest of World. “If somebody is going to charge 25% more for my comida rápida, I’ll just go to the next vendor.”
Alberto Caricio’s newest branch of Elotlan in the Xochimilco neighborhood of Mexico City. One of Caricio’s restaurants also sells on Didi Food, the Chinese delivery platform active in Mexico City, but it hasn’t driven much referral. Like Berbera, Caricio has to raise his prices on Didi to recoup the commissions he pays to the platform, which likely drives away customers. He estimated that Didi only comprises about 5% of his sales. “It’s necessary to post on Facebook to get clients and have constant sales,” he said.
Rest of World visited the new branch of Elotlan the week it opened. Thanks to Facebook, Elotlan was also receiving delivery orders, and an employee hopped on a bike with a to-go bag to make a delivery around Xochimilco every 20 minutes or so.
Sandra Mendoza, who lives a few blocks away, came by to check out the new storefront. As a self-described connoisseur of the neighborhood’s culinary scene, she was curious about the new addition. Rest of World asked if she had ever ordered delivery through Rappi or Didi.
“No,” she laughed. “I’m very Mexican.”
Daniel Colunga, the general director for Uber Eats in Mexico, said that the platform tries to attract restaurants by offering them access to data and tools like promotions and discounts. “I call this professionalization,” he told Rest of World, though he accepted that it has been difficult to balance accessibility and commission rates in parts of Mexico City. Uber Eats entered the country in 2016, and today Mexico City represents around 40% of its market revenue. The company said it has doubled the number of restaurants on the platform since 2020.
Still, other factors are keeping diners off platforms like Uber Eats, such as an emphasis on credit or debit cards and a smartphone.
Alexander Rojas González, one of the owners of the restaurant Xochingón, said that while his restaurant is on both Didi and Rappi, most of their delivery orders come from Facebook. But, González said, that’s not the only reason why Facebook is more popular. “The type of people in this area use cash much more than cards or bank transfers,” he said, “and few of the platforms accept payment in cash. Facebook is much easier.”
There’s another added bonus, of course. “We’re addicted to being on Facebook,” Berbera told Rest of World. He might as well benefit by selling a pizza or two.
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| From: Glenn Petersen | 6/30/2022 5:21:07 AM | | | | | | Just Eat Says Grubhub Sale Still Possible as Shares Slide
Dutch company Just Eat Takeaway.com tumbles after comments on strategic review
By Heather Haddon
Wall Street Journal
Updated June 29, 2022 3:32 pm ET
Shares of Just Eat Takeaway.com TKWY 1.89%? N.V. hit an all-time low Wednesday after the head of its U.S. division said a sale wasn’t a definite outcome for the company’s Grubhub online food business, which Just Eat is reviewing.
Grubhub Chief Executive Adam DeWitt said at The Wall Street Journal Global Food Forum on Tuesday that company parent Just Eat hopes to find a strategic partner to invest in the U.S. online ordering company, and that a sale was possible but not imminent.
On Wednesday, Netherlands-based Just Eat said the company continues to review options for Grubhub.
“Management is currently, together with its advisers, actively exploring the introduction of a strategic partnership and/or the sale of Grubhub, in whole or in part,” Just Eat said.
Just Eat and Grubhub have held recent discussions with potential buyers and strategic partners, and the talks are ongoing, according to a person familiar with the talks.
Just Eat’s U.S. shares declined 16.2% Wednesday.
British-based Just Eat and Dutch firm Takeaway.com combined their online food delivery companies in 2019, creating one of the biggest global providers of online restaurant ordering. The combined company said it would buy Grubhub in 2020, closing on the $7.3 billion deal last year.
Food delivery companies are contending with a shift in the online ordering landscape as consumers become more comfortable dining out at this stage in the Covid-19 pandemic. Just Eat said in April that it would consider a full sale of Grubhub a year after closing on the acquisition, as an activist investor has pressed the company to focus on its European markets.
In some of his first public remarks about the company since Just Eat’s statement on the strategic process in April, Mr. DeWitt said Tuesday that Just Eat was focused on finding a way to help its U.S. division grow, rather than a certain sale.
“They did not say they were definitely selling, they said they were entertaining calls,” he said at the Journal event.
Berenberg Capital Markets LLC also initiated coverage of Just Eat’s stock with a “sell” rating Wednesday, writing that any sale of Grubhub would likely disappoint investors as the company may need to devote proceeds from a possible sale to prop up its broader business. Just Eat faces steep competition in many markets, dragging down its more profitable ones, Berenberg analysts wrote.
Just Eat said Wednesday that the company had a strong reserve of cash to finance its business plan and it has told investors it expects its profitability to improve.
Write to Heather Haddon at heather.haddon@wsj.com
Appeared in the June 30, 2022, print edition as 'Shares of Grubhub Parent Tumble'.
Just Eat Says Grubhub Sale Still Possible as Shares Slide - WSJ |
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| From: Glenn Petersen | 7/6/2022 2:25:30 PM | | | | | | Amazon takes stake in Grubhub, adds food delivery perks to Prime
Published Wed, Jul 6 20229:03 AM EDT
Updated 2 Min Ago
Annie Palmer @annierpalmer
CNBC.com
Key Points
- Amazon on Wednesday struck a deal with Grubhub to add food delivery perks to its Prime membership program.
- As part of the agreement, Amazon has the option to acquire a 2% stake in Grubhub.
- Just Eat Takeaway.com, Grubhub's parent company, continues to explore a sale of the U.S. fooddelivery platform.
Amazon on Wednesday agreed to take a stake in Grubhub as part of a deal that will also give members of its Prime subscription program a one-year membership to the food delivery service.
The partnership gives Amazon the option to take a 2% stake in Grubhub, the U.S. subsidiary of Just Eat Takeaway.com, the European food giant said. Amazon will be able to increase its total stake to 15% of Grubhub depending on certain performance factors, such as the number of new customers added.
News of the deal sent shares of delivery platforms lower. Uber's stock fell more than 3%, and shares o DoorDash plunged as much as 9%.
Amazon is sweetening the perks of its Prime program, which counts 200 million-plus members and already includes some food-related benefits such as grocery discounts at Whole Foods. Prime members will now be able to forgo delivery fees on some Grubhub orders and access other benefits of Grubhub's loyalty program at no extra cost.
"The value of a Prime membership continues to grow with this offer," said Jamil Ghani, vice president of Amazon Prime, in a statement.
The agreement comes as Netherlands-based Just Eat is exploring a sale of Grubhub amid pressure from investors to improve its business. Just Eat's stock is down more than 60% this year.
Amazon had previously experimented with adding food delivery perks to Prime. In September, it announced a tie-up with European delivery company Deliveroo that gave Prime members in the U.K. and Ireland access to Deliveroo Plus for one year. Amazon took a stake in Deliveroo in 2019.
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| To: Glenn Petersen who wrote (881) | 7/9/2022 3:11:43 PM | | From: Glenn Petersen | | | | Amazon Could Turn Grubhub Into a Tastier Meal
A deal that offers Amazon Prime members takeout with no delivery fees will help the struggling app to keep its advertising costs down—and hopefully entice a buyer
By Carol Ryan
Wall Street Journal
July 6, 2022 9:45 am ET
Amazon AMZN -0.68%? is the kind of dining partner that should help Grubhub attract looks from the rest of the room.
On Wednesday, Grubhub’s Amsterdam-based owner Just Eat Takeaway.com TKWY 0.71%? said it has signed a deal to offer Amazon Prime members in the U.S. a free one-year trial of its Grubhub+ membership scheme. Diners can order online food takeout with no delivery fees, a service that would normally cost $9.99 a month. JET’s stock rose 21% in early trading, though it is still down two-thirds this year.
Grubhub has been losing market share in the U.S. for some time. It has gone from being the number one online food takeout app to holding a paltry 14% market share, behind DoorDash with 59% and Uber Eats with 27%, according to Bank of America.
Teaming up with Amazon is a smart way for Grubhub to tackle this problem without spending too much cash. In return for access to its millions of Prime subscribers, the tech giant will receive warrants for 2% of Grubhub’s equity, and an additional 13% if performance targets are met. JET thinks the partnership, which doesn’t involve any sharing of logistics, will boost Grubhub’s earnings from next year.
The alternative for Grubhub would be an expensive, cash burning ad campaign at a time when investors are already worried about losses. And the partnership gives the company access to diners at home. Before the pandemic, Grubhub was more reliant on orders from office employees than its rivals, a business that has not fully recovered due to the shift to remote working.
A similar deal between Amazon and London-listed takeout app Deliveroo was successful. After offering Amazon’s U.K. Prime members unlimited free delivery, subscriptions for Deliveroo’s loyalty programme in that market quadrupled year-over-year by March 2022, UBS notes. The U.S. tech company previously took a 16% stake in the British startup.
Ideally, JET would sell Grubhub outright. Activist investor Cat Rock Capital suggested last November that Amazon, Walmart or Instacart could buy the business. But valuation is a sticking point: A year after JET’s $4.3 billion all-share takeover of Grubhub closed, analysts at Berenberg think the U.S. brand would only fetch around $1 billion. Grubhub’s founder and former chief executive Matt Maloney may be teaming up with private equity firms for an offer in that ballpark, according to recent media reports. A takeover by one of Grubhub’s big U.S. rivals, who might be able to find synergies to justify paying more, is unlikely due to antitrust rules.
The partnership probably isn’t a prelude to a full takeover by Amazon, at least if Deliveroo’s experience is anything to go by: The U.S. tech company was happy to let its stake be diluted in the startup’s initial public offering last year. But if access to Amazon’s huge U.S. consumer base helps Grubhub to improve sales, that is still positive for famished shareholders.
Write to Carol Ryan at carol.ryan@wsj.com
Appeared in the July 7, 2022, print edition as 'Amazon Could Make Grubhub Tastier'.
Amazon Could Turn Grubhub Into a Tastier Meal - WSJ |
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| From: Glenn Petersen | 7/20/2022 5:45:52 PM | | | | | | Grubhub Hustles to Catch Up in Business It Once Led
Deal providing access to Amazon’s Prime members gives delivery company new ammunition against DoorDash, Uber
By Heather Haddon
Wall Street Journal
July 17, 2022 9:03 am ET
Food-delivery apps like Grubhub gained popularity during the pandemic, but expansion has slowed.PHOTO: JUTHARAT PINYODOONYACHET FOR THE WALL STREET JOURNAL
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Grubhub recently offered New Yorkers a deal that the online food-ordering company hoped many couldn’t refuse: free lunch.
The May promotion, which promised $15 worth of free food to people who ordered through Grubhub’s app, overwhelmed Grubhub’s system, with as many as 6,000 takeout and delivery orders coming in each minute at the peak of the promotion.
Once the market leader in online restaurant food ordering in the U.S., Grubhub now lags behind DoorDash Inc. DASH 1.11%? and Uber UBER 4.94%? Technologies Inc.’s Eats division. In an urgent push to expand its user base, third-ranking Grubhub is striking deals and promotions as it faces uncertain standing with its parent company, Just Eat Takeaway.com NV, TKWY -1.88%? which is considering selling Grubhub about a year after acquiring it.
This month, Grubhub struck a deal with Amazon.com Inc. to link part of Grubhub’s food-ordering service with the e-commerce giant’s Prime program, which has more than 200 million members.
The company is also signing agreements with big chains to deliver their food, including one with Chili’s parent Brinker International Inc. and a global delivery deal signed between Just Eat and McDonald’s Corp. earlier this year.
During the free-lunch promotion in New York, Adam DeWitt, Grubhub’s chief executive officer, said 200,000 new diners downloaded Grubhub’s app for the first time, and it processed 400,000 orders that day.
Still, challenges for Grubhub and the broader food-delivery business remain. Consumers flocked to food-delivery apps when the pandemic hit. Now, though the food-delivery business continues to grow, expansion has slowed dramatically from the pandemic-driven boom.
Grubhub rival DoorDash has also faced pressure from investors.PHOTO: WM. GLASHEEN/USA TODAY NETWORK-WISCONSIN/REUTERS
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Order sizes tend to be larger but transactions are fewer, analysts and restaurant operators said. Wall Street analysts said it remains unclear whether food-delivery companies can turn consistent profits in the postpandemic period, especially in an economic downturn.
Just Eat said it expects negative margins on its earnings after expenses this year, and told investors last fall that regulatory fee caps on food-delivery businesses like Grubhub in the U.S. had drained tens of millions of dollars in profits.
Just Eat’s shares are down roughly 83% since it closed its $7.3 billion acquisition of Grubhub in June 2021. Just Eat told investors in March that it expects its profit margins to improve later this year, and that it is fighting the local fee caps, which limit how much apps can charge restaurants in commissions to handle their orders.
Grubhub isn’t alone in facing pressure. DoorDash’s shares have fallen 52% this year. Investors recently pressed Uber’s CEO about how the food-delivery business may fare in a potential economic downturn. Both companies increased their delivery revenue in the latest quarter, though the pace of growth fell sharply from a year ago.
Grubhub, founded in 2004, initially focused on advertising restaurant menus online, while restaurant operators largely used their own couriers to deliver food. That model made money for the company for years, and Grubhub launched an IPO in 2014.
When DoorDash and Uber Eats debuted food-delivery businesses beginning in late 2013, charging fees to restaurants for delivering their food to customers, Grubhub was skeptical. Executives of the company believed the rivals would quickly run out of cash, and co-founder and former CEO Matt Maloney said he viewed food delivery as a “crummy business.”
Japan’s SoftBank Group Corp. backed both Uber and DoorDash, pushing the companies to focus on gaining market share over turning immediate profits. Those efforts pressured other rivals, including Grubhub.
As DoorDash and Uber Eats expanded, Grubhub formed a unit, initially dubbed Project Reindeer, to study launching its own food-delivery operation. Grubhub moved ahead on delivery, but executives were split on the strategy, according to people familiar with the discussions. Some executives cautioned that delivery would eat into the company’s profitability and distract from its online marketing business, the people said.
Meanwhile, DoorDash and Uber Eats were investing heavily in free-delivery promotions aimed at building their user bases, and signing up more restaurants to offer the users on their apps. DoorDash and Uber Eats launched monthly subscription programs as an incentive for users to order through their apps. Grubhub executives hesitated, worried about profitability, but eventually followed the move, the people said.
Grubhub and other apps also found themselves in the crosshairs of local politicians. Dozens of municipalities passed local rules limiting how much the apps could charge restaurants to handle their delivery orders after the pandemic hit, to try to help struggling local businesses survive the health crisis. Many of those have expired, and the apps are fighting to modify those remaining in cities such as New York and San Francisco.
Last year, Chicago filed lawsuits against Grubhub and DoorDash, accusing the companies of engaging in “deceptive practices to prey on its affiliated restaurants.” Both companies have denied the allegations. The city specifically accused Grubhub of misrepresenting a campaign it advertised as helping restaurants to survive the pandemic after it first hit, accusations the company denies.
In June 2020, Grubhub agreed to sell itself to Dutch food-delivery firm Just Eat Takeaway. The CEOs of both companies said at the time that they valued their online marketing business more than food delivery.
Months after the deal closed in 2021, activist investor Cat Rock Capital Management LP, the third-largest investor in Just Eat with ties to other major investors, began pushing the company to sell Grubhub. The firm said that buying Grubhub, which lags behind competitors, strayed from Just Eat’s core strategy of running market-leading delivery companies in European countries.
In April, less than a year after the deal closed, Just Eat CEO Jitse Groen said the company was exploring a strategic partner or the partial or full sale of Grubhub. Both industry players and private-equity firms have had discussions with Just Eat, according to people familiar with the discussions.
Just Eat has said its deal with Amazon includes the option of Amazon taking a 2% stake in Grubhub, and that the stake could increase based on the number of orders and customers the partnership generates.
Around two million new users have signed up for the Grubhub+ subscription delivery service since the Amazon deal, people familiar with the matter said, representing more than double the total number of Grubhub+ members last reported by the company. States that typically aren’t Grubhub’s strongest, including California, Texas and Florida, reported jumps in members during Amazon’s Prime Day event earlier this week, some of the people said.
Grubhub leaders say the company is more focused than it has been in years. The company has shed unprofitable delivery markets in U.S. suburbs to focus on major cities and its executives said they believe the market could still grow by billions of dollars.
Preetika Rana contributed to this article.
Write to Heather Haddon at heather.haddon@wsj.com
Grubhub Hustles to Catch Up in Business It Once Led - WSJ |
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