GrubHub and Seamless Merger Complete

by Adam on August 10, 2013

Earlier this year, GrubHub and Seamless announced a merger that would make them the largest provider of online restaurant marketing services in the country. I stop short of saying deliver because, contrary to popular belief, neither Seamless nor GrubHub provides delivery as a service. Needless to say, the opportunity in the restaurant marketing space is a large one, and today, they announced the completion of their merger. You can read more about the news here:

http://www.bizjournals.com/chicago/news/2013/08/09/grubhub-and-seamless-complete-merger.html

The online ordering space around restaurants has grown considerably in recent years, with Seamless and GrubHub commanding sizable respective swaths of the market. There have also been a number of regional players that have sprung up to fill in on a smiler scale, including Foodler in Boston, as well as specialty providers that delivery consumables other than food (most specifically alcohol).

The opportunity in digital marketing for restaurants has seen ups and downs since the rise of OpenTable. Initially these services were billed as a way to generate more revenue and expand a restaurant’s client-base through myriad services that allow for online ordering, restaurant reservations and more. But, with the increase in ubiquity of online-related services, the proliferation of devices to enable digital use, and the continued growth of related services, more often than not restaurants are backed into a corner where they feel obliged to use such services, not so much to increase business, but to maintain business as usual.

This is most especially prevalent in the restaurant space primarily because with digital marketing services, the opportunity for exclusive arrangements are quite rare. So, in addition to Seamless and GrubHub, there are countless other service providers that offer online delivery from restaurants, sometimes the same restaurants as those listed on other sites. The same is true for the online reservation space, and there have been many OpenTable look-alikes that have come along over the years, though none that have captured the attention of both diners and restaurants in quite the same way OpenTable has. And, with all of these competing services, restaurants have almost no reason not to sign up with new services that might bring them new business, but once they do (if these companies grow in popularity), restaurants have no way to retain those customers if they ever leave.

The merger between the two companies also points to a potential trend in M&A activity in the foodtech space with larger companies. While there’s a ton of innovation in this arena right now, there is also a relative lack of support from large acquirers that can fund liquidity in the space. But, that trend is beginning to change, and if the path to exits becomes clearer for food startups, it bodes well for the potential for further innovation and investment.

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