Postmates joins DoorDash and Caviar in letting you make a group food order

DoorDash has offered group orders on the web since at least 2015 and on its app since 2017, and Caviar (now owned by DoorDash) offers group …

Let’s be honest, anytime can be lunchtime. But the next time 10:58AM rolls around and you and your friends are too lazy busy to scrounge up some lunch, you’ll be able to use Postmates to make a group food order for delivery or pickup. Postmates says it’s rolling out group ordering over the next few days on its app (after downloading the latest update) or on its website.

Postmates’ latest iOS app update describing group ordering
Screenshot: Jay Peters / The Verge

Before you rush to impress your friends with your solution for lunch, know that other food ordering services already have the feature. DoorDash has offered group orders on the web since at least 2015 and on its app since 2017, and Caviar (now owned by DoorDash) offers group orders on a desktop web browser. And for companies that need convenient ways to feed lots of employees, Grubhub and Seamless (which merged in 2013) as well as Caviar offer programs designed just for that.

Postmates’ group orders should work just like they do with DoorDash or Caviar. One person sends an invite link to order participants and can set a spending limit so that someone can’t put too many appetizers on your tab. Once everyone has picked their food, the person who started the order can make any final edits before placing it.

Image: Postmates

It’s somewhat surprising to see that more food delivery services don’t already have this feature. Postmates does have another group-ish option, Postmates Party, which lets you order food as part of a large, anonymous group to avoid delivery fees, but Parties are short-term deals at select restaurants, not a meal of your choice with your friends.

Grubhub lets you split the bill with friends using Venmo, but you still have to pass your phone around to everyone so they can pick their meals. And Grubhub, Seamless, and Caviar have the aforementioned programs for offices to order meals, but those aren’t something everyone can use. Postmates isn’t the first company to offer group ordering, but it shouldn’t be the last, either.

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Square’s Earnings: Disappointment or Buying Opportunity?

You have DoorDash, Grubhub, and a few others. The deal partners them with DoorDash. They’re integrated into DoorDash’s platform. Square’s …

Since posting disappointing guidance and announcing an unexpected sale of its Caviar foodservice platform along with its second-quarter earnings results, Square(NYSE:SQ) has lost more than 20% of its value. In this Industry Focus: Financials clip, host Jason Moser and contributor Matt Frankel, CFP, discuss what long-term investors should pay attention to.

To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. A full transcript follows the video.

This video was recorded on Aug. 5, 2019.

Jason Moser: Speaking of the market penalizing performance here, let’s jump into our first story of the week here with Square’s earnings. Square earnings came out late last week. To say that the market has punished the stock, I think, is probably an understatement. It does seem like it wasn’t very happy, perhaps more so with the guidance than anything else. What was your takeaway on the quarter? It seemed like it was a good quarter. What are your takeaways?

Matt Frankel: Yeah, 46%, year-over-year growth in adjusted revenue. Cash app really stood out as something that was impressive. They’ve taken the Cash app from $1 million in quarterly revenue to $135 in quarterly revenue excluding Bitcoin over just a three-year period. Even the most optimistic analysts were expecting about $100 million in revenue by 2020. Square’s Cash app has destroyed expectations.

The big thing that I think is throwing a wrench in the market is the surprise that Square is getting rid of Caviar. Caviar is a successful foodservice platform. There’s a good case to be made for and against why they might have done that. People who are critical of the deal say they’re getting out of a rapidly growing market. They sold it for $410 million, which sounds impressive, given that they bought it for $90 million; but remember, they bought it for $90 million in stock, which at the current price is actually worth a lot more than $410 million. So, you could say that they’re selling at a loss. You can make that case. But on the other hand, Square got into the foodservice business to get their payment processing platform in a whole new industry. And it was successful. About $1 out of every $4 that Square processes right now is foodservice, so it’s been a success. But competition in this space is tremendous. You have DoorDash, Grubhub, and a few others. The deal partners them with DoorDash. They’re integrated into DoorDash’s platform. Square’s thinking, “Why limit ourselves to our own platform when we can integrate our payment processing system into everybody’s?” Square Caviar was kind of proof concept, is the way I’m looking at it. They could definitely get a wider reach by partnering with bigger players in the space.

So, I’m not too concerned about it. Generally, I think the quarter was exactly what I wanted to see. To be perfectly honest, the Caviar sale did take me by surprise. Not that I think it’s necessarily a bad move or a good move, but it was surprising. It adds uncertainty and surprise, which the market doesn’t like in general.

Moser: The Caviar deal, I was actually pretty happy to see that. To me, Caviar has always been the one part of the business that didn’t quite fit in with the rest of it. They stated, it’s the low-margin part of the business, anyway. It was the low-margin revenue driver for the company. I think it was something that was a bit outside of the things where they were really trying to focus. Selling this thing to DoorDash will allow them the opportunity to continue to participate in this space, but perhaps more from a support role as opposed to dealing with the logistics that come with food deliveries. I don’t know, for me, I was very happy to see that. It seemed to me like, the one thing that stood out in the call, an analyst made the point that they beat on the high end of guidance for the quarter, and that was great. And typically, when they do that, then you see them guide up. And they didn’t guide up this time. But now, the reason why they didn’t guide up was because of this sale of Caviar. They will be reaffirming guidance here shortly, as soon as that transaction closes later on this year. You can expect an update to guidance here soon. Again, I don’t buy or sell stock based on guidance anyway. I don’t know, it seems to me to be a very short-term reaction to some noise from the market. And then you’ve got this, I guess there’s a double downgrade today on the stock which is playing out to the tune of another 6% or 7%, it looks like.

Frankel: Yeah, and the fact that the overall stock market’s down a bit in the past weeks. This earnings doesn’t really help.

Moser: Point worth noting.

Frankel: This definitely narrows Square’s focus. Like you said, Caviar was definitely not in their main wheelhouse. It served its purpose. Like I said, bringing more payment processing volume. But it’s not something they need to focus considerable resources on going forward. You mentioned it was a lower-margin business. They’re focused on their small business ecosystem and their individual ecosystem with the Cash app and all that. This allows them to focus on the two key areas of the business.

Moser: Before we move onto our next story, I’ll close with one interesting factoid here for you, Matt. Last quarter, when Square was preparing to announce earnings, the night before, the shares closed at $73 and change. The day after they reported earnings, the stock closed at $67 and change. Over the subsequent days, we saw it hit $62 and change. All of this was based on the same idea in regard to guidance. My point ultimately is that we know this is a volatile stock. It is a business that’s building its way toward meaningful profitability. But it’s going to take some time. It is going to be more volatile than other names. But it is still a good business. We’ve seen this happen before. I don’t know about you, I think you’d agree with me — I didn’t see any red flags in this quarter that made me think, “Uh-oh, I’m not sure if I should be owning this stock at this point.”

Frankel: No. I don’t own Square because I thought they were going to be the leaders food delivery. That could be the only potential red flag. But that’s not why I own the stock. All things being equal, if a company lowers guidance and nothing changes in my long-term thesis, that’s a buying opportunity in my mind.

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Uber CEO reveals they considered buying food delivery app Caviar before rival DoorDash did

Uber CEO Dara Khosrowshahi told CNBC on Friday that the ride-hailing, freight, and delivery giant considered a deal with on-demand food delivery …

Uber CEO Dara Khosrowshahi told CNBC on Friday that the ride-hailing, freight and delivery giant considered a deal with on-demand food delivery service Caviar but decided to pass.

“We took a look at Caviar. It’s a great brand,” Khosrowshahi said in a “Squawk on the Street ” interview, as Uber shares were sinking after disappointing second-quarter results. “It wasn’t the right deal for us.”

Khosrowshahi said Uber’s food delivery service, Uber Eats, will focus on organic growth rather than acquisitions.

On Aug 1, Square announced an agreement to sell Caviar to Uber Eats’ formidable rival DoorDash for $410 million. Square had bought Caviar for just over $44 million in 2014. The Caviar service specializes in premium restaurants.

While declining to comment further on Caviar, Khosrowshahi did say that he sees food delivery as a real battle this year and next. “The Eats market continues to be very competitive.”

Khosrowshahi said that if Uber were to seek any acquisitions, he’s not worried. “We’re Uber, everyone wants to talk to us.”

After the Wall Street close Thursday, Uber posted a much wider-than-expected second-quarter loss of $4.72 per share. Revenue of $3.17 billion was also missed analyst estimates.

Uber’s core ride-hailing business saw better-than-expected gross bookings for the quarter, while the newer Uber Eats unit’s gross bookings fell short of forecasts.

“So with rides, I say the competitive environment is stable and getting better,” Khosrowshahi said during Friday’s CNBC interview. “We see a lot of competition with Eats,” he reiterated.

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Why Square Just Sold Caviar to DoorDash

Fast forward to Square’s recent second-quarter earnings report, and the company just announced that it would sell Caviar to DoorDash for $410 …

Five years ago Square (NYSE: SQ) bought food delivery service Caviar for $44.3 million. At the time, Square CEO Jack Dorsey declared that “Caviar’s curated, seamless delivery experience is exactly the kind of service we want to provide buyers and sellers.”

Fast forward to Square’s recent second-quarter earnings report, and the company just announced that it would sell Caviar to DoorDash for $410 million. The sale nets Square a nice profit, but why is it divesting this once-promising business?

A courier delivers food.A courier delivers food.
A courier delivers food.

Caviar was destined to disappear

Square initially bought Caviar to expand its ecosystem beyond digital payments. That ecosystem — which now includes the e-commerce services platform Weebly, its Square Capital lending arm, Instant Deposit services for sellers, its Cash App, and more — locks in merchants and consumers.

But Caviar never gained much ground in the crowded food delivery market. Four services — DoorDash, Grubhub (NYSE: GRUB), Uber (NYSE: UBER) Eats, and Postmates — controlled 94% of the U.S. food delivery market in June, according to Second Measure.

Everyone else, including Caviar and Amazon‘s (NASDAQ: AMZN) recently shuttered meal delivery platform, clashed over the remaining sliver. If even Amazon failed to gain ground with the support of Whole Foods and its e-commerce ecosystem, it seemed unlikely that Caviar could succeed. Selling Caviar could also help Square sidestep the recent PR debacles regarding tips, hidden fees, and misbehaving couriers which have plagued the market leaders.

But what about Zesty and Square for Restaurants?

Square’s retreat from the meal delivery market is reasonable, but the company has sent investors mixed signals over the past few years. In 2016 Bloomberg claimed that Square was in talks to sell Caviar to Grubhub, Uber, or Yelp. But in 2018 the company seemed to double down on Caviar by acquiring corporate catering start-up Zesty and launching Square for Restaurants.

Prepared meals on a table.Prepared meals on a table.
Prepared meals on a table.

Square integrated Zesty’s assets into Caviar for Teams, which expanded the service into the corporate catering market. Square for Restaurants, which bundled Caviar with its other payment and analytics services, targeted similar all-in-one platforms like Grubhub.

It’s unclear if Square will retain Zesty’s services or transfer them over to DoorDash. However, Square plans to keep running Square for Restaurants, which is already integrated with Caviar, DoorDash, and Postmates. During the conference call, Dorsey noted that Square for Restaurants and Square for Retail were both attracting “a number of larger sellers.”

Square is selling Caviar to DoorDash for a mix of cash and preferred DoorDash shares. So as an investor, Square can still profit from DoorDash’s growth, while eliminating its exposure to the low-margin food delivery market. Caviar and DoorDash are already integrated into the Cash App, so DoorDash’s expansion could also support Cash’s market growth.

Is this good news for Square’s investors?

During the conference call, CFO Amrita Ahuja noted that Caviar had a “lower gross margin profile” than its other subscription and services, with courier fees and revenue-sharing deals with restaurants accounting for the “largest component” of the unit’s costs.

Ahuja noted that Caviar was the second largest component of its subscription and services revenue, which rose 87% annually to $251 million during the second quarter. The Cash App generated the most revenue, and Square Capital ranked third. Ahuja stated that Square would update its guidance after closing the deal.

Removing Caviar from that mix will temporarily throttle Square’s subscription and services revenue growth, but improve the unit’s profitability. Dorsey noted that the sale would enable Square to make additional investments and strengthen its core payments business, which could widen its moat against rivals like PayPal.

All things considered, Square’s decision to sell Caviar was a smart move. The company reaped a handsome profit from the deal, divested a lower-margin business, gained a stake in a high-growth start-up, and freed up more cash for investments in its core payment services.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Leo Sun owns shares of Amazon, Grubhub, and Square. The Motley Fool owns shares of and recommends Amazon, PayPal Holdings, and Square. The Motley Fool has the following options: short October 2019 $97 calls on PayPal Holdings and short September 2019 $70 puts on Square. The Motley Fool recommends Grubhub, Uber Technologies, and Yelp. The Motley Fool has a disclosure policy.

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DoorDash’s Caviar deal isn’t just another M&A pickup – it’s a shift into a new market

DoorDash ($DOORDASH) is taking its business model of delivering for the biggest restaurant chains in the US and bringing it to smaller organizations …

DoorDash ($DOORDASH) is taking its business model of delivering for the biggest restaurant chains in the US and bringing it to smaller organizations with its Caviar acquisition, which it made Thursday August 1 from payment company Square ($NYSE:SQ).

The market isn’t in love with the move for Square, and its shares dropped more than 10% at Friday’s market open, which also followed the payment company’s earnings, and included disappointing forward-looking projections. But investors in DoorDash should be estatic, judging by what the alternative data says about each company – and how it highlights a new path toward growth for DoorDash.

Caviar isn’t just another ordinary food delivery company and DoorDash’s deal also positions it before a completely different kind of market, with precisely the same service. Why else would a company with a footprint so much bigger than its $410 million target spend to buy into areas in which it already has operations? Our map below (use the key in the top-righthand portion of the map to switch between Caviar cities and DoorDash towns) illustrates the scale of the two companies.

Next, zoom in on locations like New York City, and Philadelphia. Caviar operates in about 220 different jurisdictions – but DoorDash operates in more than 4,000, according to alternative data gathered from each and tracked by Thinknum. The difference in scale, measured against how many business partners Caviar and DoorDash have independently, also illustrates the difference between their business models.

As early as it’s launch, Caviar’s average order size was $80, the company told TechCrunch – that’s because it partnered with higher-priced restaurants, including Momofuku. But DoorDash’s ordinary order size is likely a bit lower, thanks to the fact it partners with larger companies that tend to produce less expensive meals – like McDonalds ($NYSE:MCD). DoorDash also has partnerships with chain restaurants including Mickey D’s, Starbucks, Taco Bell, KFC and Dunkin’ – to name just a handful of many. Consider the map above before you check out the chart below – DoorDash is partner with 7,900 businesses, according to its alternative data; but Caviar, as the chart below shows, has more than 6,400 partners. It is because Caviar isn’t partner to many bigger establishments – just smaller restaurants, which is a part of the market DoorDash didn’t support, until this morning.

What does it mean? It means that, when people are looking for a reasonably-priced meal from a reliable chain at a low cost, DoorDash has them covered. And, when you’re loaded with cash and up for having a fancy meal delivered, it means DoorDash also has you covered. At a time when more Americans are leaning into delivery, and younger consumers are opting out of automobile ownership, DoorDash is positioning itself before consumers as one-stop menu for all things breakfast, lunch, and dinner.

Our final chart tracks a key metric potential IPO investors in DoorDash will find intriguing – the company nearly doubled its headcount in 2019 alone, according to its LinkedIn ($NASDAQ:MSFT) Employee Headcount tracking. The company has not reportedly taken steps to file an S-1, but at this rate of growth trajectory, it may not make sense to wait much longer.

About the Data:

Thinknum tracks companies using information they post online – jobs, social and web traffic, product sales and app ratings – and creates data sets that measure factors like hiring, revenue and foot traffic. Data sets may not be fully comprehensive (they only account for what is available on the web), but they can be used to gauge performance factors like staffing and sales.

Further Reading:

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