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You've probably seen this ad, though maybe not by choice. GrubHub was the biggest delivery app. 70% market share. They had total dominance, but now that's less than 10%. It had a $2 billion IPO, then it was acquired for 7.3 billion, but then sold off for less than onetenth of that. No one is using GrubHub. What the heck happened? Delivery apps like Door Dash and Uber Eatats launched around 2013 and 2014, but GrubHub was actually a decade earlier, and it really was the first to solve the delivery problem. Imagine a world about 20 years ago with no Door Dash, no GrubHub, no food delivery apps at all. If you wanted a takeout, you had to dig through a stack of paper menus, call a restaurant, make your order, and
sometimes read out your card details. Two developers, Matt Maloney and Mike Evans, were sick of this. We were frustrated by the lack of dinner options, as well as the pain in the ass of calling restaurants and reading our credit cards. At the time, we were working on geographic lookup searches for rental real estate. That's when I heard the screeching wheels in my head. Why wasn't there something like this for food delivery? So, they started GrubHub, an online menu, but they needed restaurants. The two went door to door across Chicago, collecting paper menus and building a database. But there was a problem. Around this time in 2004, websites weren't that great, and many restaurants already tried having one,
some spending thousands, and it usually didn't pay off. Matt and Mike's price point, $140 for 6 months placement, wasn't that appealing. So, they tried something else. We said, "What if we take a 10% commission on whatever we sell for you?" Restaurants love that. The change worked, but there were two problems. First, no one wanted to invest. It was a weird business model with a weirder revenue model. The other problem was awareness. Luckily, Matt and Mike knew how to reach their market because they knew Chicago. People leave work right before dinner and are hungry and susceptible to GrubHub's marketing. So, they advertised at the bustling Chicago transit hubs. Plus, there were
other perks. We noticed that the person managing the outdoor ads was really bad at taking them down, so we knew that if we bought a month of space, we'd get five. Grub quickly took off in Chicago. orders began flooding in. They expanded to San Francisco with their own bootstrapped funding. Within two years, they won the University of Chicago Booth New Venture Challenge. In 2007, they raised their series A$ 1.1 million. By 2010, GrubHub was operating in 14 cities on just $3 million in outside capital. And then came the real investment, 31 million. That was nothing compared to what was coming. Though first yet another problem was exploding, but they weren't alone.
Other delivery websites were appearing and one in particular was seamless. They were doing the same thing, but with a firm grip on one of the most lucrative markets, New York. A dense urban population, thousands of restaurants, the delivery app Dream. The companies were similar. We were solving the same problems but in different geographies. Seamless consistently made very smart decisions both with product and marketing. If GrubHub could just get maybe 10% of New York's delivery market, the commission revenue would be huge. Though, it would be a tough battle. So, GrubHub did something else. In 2013, GrubHub and Seamless merged. GrubHub was doing a really good job nationwide, but
Seamless had incredible brand awareness in New York. It's like a religion there. By keeping both brands, we didn't have to spend money to promote Seamless in markets outside of New York or to promote GrubHub inside New York. Best of both worlds, right? GrubHub was on a roll and that momentum carried them to an IPO in 2014, a $2 billion valuation which raised 200 million. Everything was going great for now. In the background, two different competitors prepared for war. Grapub might have paved the way for food delivery, but these new apps were going to be different. Let's say you've got a contact form on your site. Someone fills it in. You want it to ping you on Slack, save their details somewhere, send them a
confirmation. Normally that means spinning up a server, faffing about with endpoints, sorting out hosting. A bit much for a contact form, isn't it? I use make for this kind of thing, and this video is sponsored by them. Set up a web hook, connect it to Slack, a Google sheet, and a Gmail for a confirmation email. Now, make does it automatically. Done. Took about 5 minutes to set up. Make is great for automation from a simple backend like this to pretty advanced automations. They call it the make grid. You can see the whole thing laid out. If it breaks, you look at the canvas and spot the problem in about 3
seconds. No hunting through logs. You've got over 3,000 apps to connect and many, many templates you can start using immediately. Connect leading Facebook ads with Google Sheets. Have Telegram files automatically uploaded to Google Drive, auto reply to Instagram comments, or set up an automated AI analysis of Google Analytics. You can even build full AI agents directly on the same canvas. If it breaks, you look at the canvas and spot the problem in about 3 seconds. No hunting through logs. Click the link in the description for a free month of Pro. 10,000 operations included. Thank you to Make for sponsoring this video. In 2013 and 2014, both Door Dash and Uber went live. And
unlike GrubHub, they offered something extra. Delivery, their own network of delivery drivers. GrubHub originally was just an online menu or more a marketplace for restaurants. It was up to those restaurants to handle delivery. If they didn't, too bad. And this model left a huge gap in the market. Unlike GrubHub, Door Dash delivered from almost any restaurant, even those that had never offered a delivery before. They handled the logistics, organization, scheduling, payment, and everything else. The drivers just came to the restaurant, so any momand- pop business could suddenly deliver. Door Dash built its own network of drivers known as Dashers. In fact, the founders delivered
the first 200 orders themselves just to figure out the logistics. Door Dash and Uber immediately had way more options for customers, but it also came at a cost which Matt and Mike were very aware of. To make it work, it was a sort of lose-lose scenario. A small cut of commission for restaurants, low pay for drivers, and they somehow had to figure out how to make all of this profitable. Matt Maloney didn't like this. Even though they said they were profitable, Matt called them liars. People are going to look around and say, "Oh crap, I can only do this for 12 months, even if I just raised a h 100red million because
every incremental transaction is negative." Matt hated this business model. You have to recruit people, you have to train them, you have to get them on a schedule. And by the way, you have to do it without telling them what to do because of the legal implications. The logistics business is crummy. It has bad margins. The only thing that matters here is volume of orders. To be fair, he's not wrong. These companies were losing lots of money and their margins were awful. They were soaking up billions. In 2016, Uber lost 2.8 billion, then 4.5 billion in 2017, and the losses continued for years. GrubHub, on the other hand, was very profitable, but now they had to change something or
they'd be left behind. Investors saw the writing on the wall. If they didn't adapt, they'd be dead. So, in early 2015, Grapab acquired two delivery companies, Dining In and Restaurants on the Run. Grapub had to adjust its financial approach from making great profit to just staying afloat to keep up with Door Dash and Uber Eats. I'm running my delivery based business with the explicit goal to break even. That's not fun for me. And normally, I'd say that's the dumbest business you could ever be in. Why run a break even business? That's a pain in the butt. Grubhub's marketplace margins were as high as 35%. But not anymore. Plus, to stay profitable, GrubHub did two things.
Charge the customer or charge the restaurant. GrubHub is doing both. Grabbing an additional 10% from each order and tacking on a customer delivery fee of around $2. That's barely enough to cover the costs in an ideal scenario. and why Maloney thinks Door Dash and Postmates which have to make those numbers work at a fraction of GrubHub scale have no hope of ever reaching profitability. But unfortunately, even if this might have been responsible and smart, it would cost them. These companies weren't even really focused on profitability at least anytime soon. They were focused on scale and growth. After 2016, Guapub began losing market share while Door Dash and Uber Eatats grew rapidly. Uber Eatats in dense urban
cities and Door Dash in suburbs and in particular California. But not all hope was lost. Grapub was still massive and had attracted a different type of customer. Grubhub was shrinking, but we're still growing. We're trying to get to 1 million subscribers. So, please help us out and click the subscribe button. Grub's dominance fell from nearly 70% of market share at its peak to around 34% by 2018 and just 10% by 2021. Smaller than Uber Eats, way behind Door Dash.
The tables were turned, which brings us back to Uber. In May 2020, Uber approached Grubhuba with an offer. There was a time last year when VC was investing in this in private markets and they really loved this whole theme. They like it much less now. Um, they don't like it in part of Uber either. So, I'm not really sure about what sort of scenarios. I haven't given it a whole heck of a lot of thought where you put some combinations together and the two pieces together are worth more than what they are right now. We've seen a lot. But something unexpected happened. Another company jumped in. Not Door Dash, but a company called Just Eat Takeaway, a European giant. Why all the
sudden interest in GrubHub? Simple. This was early 2020. The pandemic had hit. Home delivery was at an all-time high. GrubHub's revenue jumped from 1.3 billion in 2019 to over 2 billion in 2020, then to 2.3 billion in 2021. GrubHub users also grew from 22 million to 31 million. Just Eat was looking to break into the US market during the pandemic. In June 2020, it struck a $7.3 billion allsto. Unfortunately for Just Eat, they had just bought the peak and were about to sell the bottom. In the meantime though, internal tension was rising. The deal closed in June 2021 and the leadership clashed over strategy, particularly
between Matt Maloney and Just Eat Takeaway CEO Jity Groin. They couldn't agree on where Grubhub should go. So 4 months later, Maloney was gone. And now Grubhub had bigger problems. As the pandemic ended, restaurants reopened, bringing down the inflated delivery numbers. Grubhub's decline accelerated. They were already at 18% market share in 2020 and it only got worse. The pandemic really established the winners and losers of delivery. No one wanted to use GrubHub. Investors realized Just Eat vastly overpaid for GrubHub. Catrock Capital, a Just Eat investor, publicly urged shareholders to push back against Just Eat's leadership. We believe the bulk of the value destruction occurred
because just eat management gave investors a misleading financial outlook in advance of the two grubup shareholder votes leading to two massive profit downgrades in 2021 and shattering investor trust in management. For context, Catrock owns 14.8 million shares in Just Eat. It was bad and they weren't wrong to be angry. In early 2021, Jet disclosed that its profit had disappeared and its IBIDA was expected to be a loss of 64 million to 85 million. Catrock said even worse, Just Eat was doing fantastic, but Grubhub was doing so badly it was dragging Just Eat down with it. Grub's value collapsed, forcing a $3.1 billion write down. By late 2024, the gap was clear. Door Dash held 47% of long-term customers. Uber
Eatats had 29%. GrubHub was left with just 11%. And now Just Eat was trying to get rid of GrubHub, but it wasn't easy. As profit margins disappeared, debt climbed past 500 million. Just Eat spent more than 2 years searching for a buyer. Eventually, an offer came in 2024 from Wonder Group for just $650 million, down from their original $7.3 billion deal. And because of the debt, Justine Takeaway walked away with a mere $50 million. So why did GrubHub lose? In my opinion, GrubHub lost because they were right. Door Dash lost money on every single order from founding until 2024. Matt correctly identified that delivery was a race to the bottom. Door Dash and Uber Eatats were burning hundreds of
millions subsidizing cheap deliveries and low fees to grab market share. These companies were effectively paying customers to use them. While GrubHub tried to stay disciplined and maintain margins, the same or similar restaurant, but on one app it's $4 cheaper. Of course, customers will use it. By the time Door Dash and Uber Eatats were actually thinking about profit, they'd already won. And that really is the sad part. I actually have respect for Matt out of all of this. Delivery apps aren't the most noble business. And at least he tried to make it work the right way and made it clear he didn't like the new low margin business. The way most of them work, everyone loses. Low delivery pay,
high restaurant commissions, and even the companies weren't even making money. Unfortunately, markets don't always go where the best margins are. Grab definitely deserved all of this for that terrible ad, though. Weirdly enough, all that effort to take ground by Uber might not even be enough. Uber is now profitable, but this company needed tens of billions to get there. And investors aren't even that impressed with the results. Was all of this even worth it? Click here to learn the rest of the story. But until then, I'm Hari, and I'll see you guys on the next one.
