NEW YORK: GrubHub Inc is gobbling up its smaller competitors, but trading them in for much, much larger ones.
On Thursday, the company said it would buy Eat24 from Yelp Inc for US$288mil in cash, well over twice the US$134mil Yelp paid for the smaller food delivery company when Yelp bought it in February 2015. GrubHub and Yelp are also agreeing to a five-year partnership that will see Yelp integrating GrubHub ordering into its own restaurant listings. When someone places a GrubHub order through Yelp, GrubHub will pay a “partnership fee”, which the company considers a marketing expense.
The move mirrors a deal that GrubHub announced with Groupon earlier this week, when it bought Groupon’s ordering platform, OrderUp, which operated in 27 cities, focused mostly on college campuses. In June, the Chicago-based company also bought Foodler, a Boston-based online delivery service. Terms for those deals weren’t released.
For Yelp and GrubHub, the partnership means access to more people placing orders, says Matthew Maloney, GrubHub’s CEO. “The Groupon deal is similar in form but nowhere near in size and scale to this deal,” he says. “It’s going to be huge for both companies.”
Eat24 has about 40,000 restaurants on its platform, compared with some 55,000 for GrubHub. Because many restaurants use both platforms, the combined entity will have about 75,000 restaurants. The companies say there is far less overlap when it comes to users. Eat24 handled about 50,000 orders daily, about 16% of the volume on GrubHub’s platform.
For Yelp, the deal marks a shift in its strategy on how to integrate ordering into its platform. Since late 2013, the San Francisco-based company has been trying to handle transactions, in addition to being a listing service that made money just from advertising. By selling off its ordering platform and partnering with GrubHub, it’s effectively acknowledging that someone else can do that task better. “It allowed us to do what we do best, which was build the Yelp app,” said Jeremy Stoppelman, Yelp’s CEO. — Bloomberg